Bad Brokers

According to FINRA, Alan Mason was fined $5,000, suspended from association with any FINRA member in all capacities for two months, and ordered to pay disgorgement of commissions in the amount of $1,324.38 plus interest.

Mason willfully violated Regulation BI (Regulation Best Interest) by recomme...

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According to FINRA, Alan Mason was fined $5,000, suspended from association with any FINRA member in all capacities for two months, and ordered to pay disgorgement of commissions in the amount of $1,324.38 plus interest.

Mason willfully violated Regulation BI (Regulation Best Interest) by recommending that a retail customer invest at least 20 percent of her liquid net worth in a speculative, unrated debt security that was not in her best interest. The customer had reported a moderate risk tolerance with a liquid net worth between $200,001 and $500,000. Her stated investment objective was growth and income and did not include speculation.

Mason recommended that the customer invest $50,000 in bonds from a third offering of a publicly traded financial services company that focused on providing liquidity to holders of illiquid investments and alternative assets. Mason later recommended that the customer invest an additional $50,000 in a fourth offering of bonds by the same company, earning $1,324.38 in commissions on the second recommendation. Mason's recommendation that the customer invest an additional $50,000 in the bonds was not in her best interest based on her investment profile, including her moderate risk tolerance, in light of the high degree of risk associated with the bonds.

The customer ultimately brought and settled an arbitration claim against the firm relating to her bond investments, indicating that the unsuitable recommendations resulted in losses.

Regulation BI, which went into effect in June 2020, requires broker-dealers and their associated persons to act in the best interest of retail customers when making recommendations. This represents an enhanced standard of care that goes beyond the previous suitability standard. Under Regulation BI, brokers must not place their own interests ahead of the customer's interest.

In this case, Mason recommended a speculative investment that comprised 20 percent or more of the customer's liquid net worth to a customer with a moderate risk tolerance seeking growth and income. This was clearly not in the customer's best interest, regardless of the commissions Mason earned. The disgorgement of commissions ensures that Mason does not profit from the unsuitable recommendation.

Investors should ensure their broker understands their risk tolerance, investment objectives, and financial situation, and should question any recommendations that seem inconsistent with those factors.

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According to FINRA, Joseph Glen Ritter was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for four months.

Ritter willfully filed a false and misleading Form U4 that falsely answered "no" in response to questions about whether he had been...

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According to FINRA, Joseph Glen Ritter was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for four months.

Ritter willfully filed a false and misleading Form U4 that falsely answered "no" in response to questions about whether he had been charged with a felony and whether he had filed a bankruptcy petition within the past 10 years. Ritter knew that the District Attorney of Chester County, Pennsylvania had charged him with a felony offense, and he knew that he had filed a bankruptcy petition with the United States Bankruptcy Court for the District of Delaware.

Form U4 is the uniform application for securities industry registration. It requires applicants and registered persons to disclose criminal charges, bankruptcies, liens, customer complaints, regulatory actions, and other matters relevant to their fitness to work in the industry. These disclosures allow firms to make informed hiring decisions and allow regulators and investors to assess a person's background and potential risks.

The fact that Ritter's false answers were willful—meaning he knew the truth and deliberately provided false information—makes this violation particularly serious. This was not an inadvertent oversight or misunderstanding of the questions. Ritter knew he had been charged with a felony and had filed bankruptcy but chose to answer "no" to both questions.

Felony charges are required to be disclosed because they may indicate unfitness to work in the securities industry, particularly if the charges involve fraud, theft, or other crimes of dishonesty. Bankruptcies must be disclosed because they indicate financial difficulties that could motivate misconduct. By hiding both a felony charge and a bankruptcy, Ritter prevented his firm and regulators from knowing about two significant red flags.

The four-month suspension is substantial, reflecting the seriousness of willfully falsifying Form U4. The deferred fine means Ritter must avoid any further violations or the fine will be imposed. This disciplinary action will appear on Ritter's BrokerCheck record permanently.

Investors should always check BrokerCheck before working with a broker. BrokerCheck shows criminal charges, bankruptcies, customer complaints, and regulatory actions—exactly the types of information Ritter tried to hide.

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According to FINRA, Jackson Boomer was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for 18 months.

Boomer accessed unauthorized materials during his Series 66 examination. Prior to beginning the exam, Boomer attested that he had read an...

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According to FINRA, Jackson Boomer was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for 18 months.

Boomer accessed unauthorized materials during his Series 66 examination. Prior to beginning the exam, Boomer attested that he had read and would abide by the NASAA Qualification Examinations Rules of Conduct, which prohibited the use or attempted use of any personal items, including electronic devices, phones, and personal notes during the examination and required him to store all personal items in the locker provided by the test vendor prior to entering the test room.

During the examination, Boomer had access to a personal note he wrote on his leg during the examination. He also took an unscheduled restroom break during which he had access to a personal cellphone that he had left in the restroom.

The Series 66 examination tests knowledge of state securities regulations and investment adviser regulations. Like all securities industry qualification examinations, it is designed to ensure that registered persons have the minimum knowledge necessary to perform their jobs competently and ethically. The integrity of these examinations depends on all candidates being tested under the same conditions without access to unauthorized materials.

By bringing unauthorized materials into the exam (a note written on his leg) and accessing his phone during a restroom break, Boomer violated the examination rules he had agreed to follow. This conduct demonstrates dishonesty and a willingness to cheat to achieve professional credentials. Even if Boomer passed the exam, the pass was not legitimate because he did not earn it through his own knowledge.

The 18-month suspension is substantial, reflecting the seriousness of examination misconduct. Cheating on qualifying examinations undermines the entire licensing system and the public's confidence that registered persons have the knowledge required to serve investors competently. The securities industry depends on trust, and someone who cheats on an examination has demonstrated a lack of integrity.

Investors should be aware that the licenses their broker holds are supposed to represent genuine knowledge and qualification. Examination misconduct means the broker may lack the knowledge those licenses are supposed to represent. BrokerCheck allows investors to verify a broker's licenses and any disciplinary history.

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According to FINRA, David Wei Wong was named a respondent in a FINRA complaint alleging that he converted and misused $9,430.75 in customer funds.

The complaint alleges that Wong initially converted $3,230.75 from a Roth individual retirement account (IRA) belonging to a customer at his member fi...

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According to FINRA, David Wei Wong was named a respondent in a FINRA complaint alleging that he converted and misused $9,430.75 in customer funds.

The complaint alleges that Wong initially converted $3,230.75 from a Roth individual retirement account (IRA) belonging to a customer at his member firm. The customer was married to a former registered representative at the firm who had passed away. At the time of the customer's husband's death, he and the firm were respondents in two FINRA customer arbitrations related to his sales activities, and Wong was a respondent in one of these arbitrations. Wong allegedly transferred the funds from the customer's account into the firm's bank account without asking her permission or obtaining her approval. The account statement indicated the charge was for a FINRA Arbitration, but the customer did not authorize the transfer and the funds did not belong to Wong or the firm.

The complaint further alleges that Wong converted $6,200 from a trust account established for the benefit of two customers when he transferred the account's funds into the firm's bank account. The customers were the children and heirs to firm customers who had passed away. Wong allegedly directed a clearing firm to take the funds from the trust account without permission or approval from the customers after their attorney wrote a letter to the firm complaining about its handling of the customers' parents' accounts after they passed away. The account statement described the charges as a $5,000 FINRA fine complaint fee and a $1,200 FINRA investigation fee. Neither of the customers authorized the transfer and Wong allegedly knew that the funds did not belong to him or the firm.

Conversion of customer funds is one of the most serious violations in the securities industry. It represents outright theft and a complete breach of the trust that customers place in their brokers. The allegations that Wong took money from customer accounts to pay for arbitration costs or fees related to complaints about the firm is particularly egregious—customers should never be charged for the firm's regulatory or legal costs.

It is important to note that this is a complaint, not a finding of guilt. Wong will have the opportunity to respond to these allegations and defend himself. However, if the allegations are proven, conversion of customer funds typically results in a permanent bar from the industry and potential criminal prosecution.

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According to FINRA, Tavic OShane Lloyd Francis was named a respondent in a FINRA complaint alleging that he failed to provide documents and information requested by FINRA.

The complaint alleges that FINRA was investigating Francis's use of his corporate credit card to pay for personal expenses. W...

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According to FINRA, Tavic OShane Lloyd Francis was named a respondent in a FINRA complaint alleging that he failed to provide documents and information requested by FINRA.

The complaint alleges that FINRA was investigating Francis's use of his corporate credit card to pay for personal expenses. When FINRA requested documents and information in connection with this investigation, Francis allegedly failed to provide them. The complaint alleges that Francis's failure to provide information and documents significantly impeded FINRA's investigation and deprived it of material information regarding his alleged personal use of a corporate credit card.

The use of a corporate credit card for personal expenses is a serious matter. If an employee uses a corporate card for personal expenses and does not reimburse the company, it constitutes theft. Even if the employee eventually reimburses the company, unauthorized personal use violates company policies and may indicate financial difficulties or poor judgment.

For a registered person in the securities industry, the misuse of corporate resources raises concerns about integrity and financial responsibility. Someone who misuses corporate funds may be experiencing financial pressures that could motivate misconduct in dealings with customers, such as unauthorized trading, unsuitable recommendations to generate commissions, or even theft of customer funds.

The alleged failure to cooperate with FINRA's investigation is a separate serious violation. FINRA's ability to protect investors depends on its ability to investigate potential misconduct and obtain information from registered persons. When someone refuses to cooperate, it obstructs the investigation and prevents FINRA from protecting investors.

It is important to note that this is a complaint containing allegations that have not been proven. Francis will have the opportunity to respond and defend himself. However, if the allegations are proven true, the failure to cooperate alone would typically result in a bar from the industry, regardless of the findings on the underlying corporate credit card misuse.

Investors should understand that registered persons have a duty to cooperate with regulatory investigations. A broker who refuses to cooperate with regulators is someone who is unwilling to be held accountable, which is a major red flag.

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According to FINRA, Charles William Wodrich was named a respondent in a FINRA complaint alleging that he failed to produce documents and information and failed to appear for testimony requested by FINRA.

The complaint alleges that FINRA was investigating whether Wodrich had made unsuitable recomm...

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According to FINRA, Charles William Wodrich was named a respondent in a FINRA complaint alleging that he failed to produce documents and information and failed to appear for testimony requested by FINRA.

The complaint alleges that FINRA was investigating whether Wodrich had made unsuitable recommendations and provided misleading information to a senior customer, whether he engaged in discretion without written authorization in that customer's account, and whether he had communicated with customers using a personal email address that was not monitored or retained by his member firm. When FINRA requested documents and information and requested that Wodrich appear for on-the-record testimony, he allegedly failed to comply.

The underlying allegations being investigated are serious. Unsuitable recommendations harm customers by placing them in investments that don't match their investment objectives, risk tolerance, or financial situation. Providing misleading information compounds the harm by deceiving customers about the nature of their investments. Exercising discretion without written authorization—meaning making trades in a customer's account without the customer's specific approval for each trade—violates regulatory requirements designed to protect customers' control over their own accounts.

The allegation about using a personal email address for customer communications is significant because it represents "off-channel" communications that the firm cannot monitor or supervise. When brokers communicate with customers through personal email, text messages, or messaging apps that the firm doesn't monitor, it creates blind spots in the firm's supervision and opportunities for misconduct outside the firm's view.

The involvement of a senior customer makes these allegations particularly concerning. Senior investors may be more vulnerable to unsuitable recommendations and misleading information, and they may have less time to recover from investment losses.

The complaint alleges that Wodrich's failure to provide requested information and testimony impeded FINRA's investigation. This is a separate serious violation that typically results in a bar from the industry regardless of the findings on the underlying misconduct.

This is a complaint, not a final determination. Wodrich will have the opportunity to respond to these allegations. However, investors should be aware that FINRA takes these types of allegations very seriously, particularly when they involve senior customers.

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According to FINRA, Dakota Securities International and Bruce Martin Zipper were sanctioned following a Securities and Exchange Commission decision that became final on October 21, 2024. The firm was expelled from FINRA membership and Zipper was barred from association with any FINRA member in all c...

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According to FINRA, Dakota Securities International and Bruce Martin Zipper were sanctioned following a Securities and Exchange Commission decision that became final on October 21, 2024. The firm was expelled from FINRA membership and Zipper was barred from association with any FINRA member in all capacities.

The SEC sustained findings that Zipper associated with the firm while he was suspended and statutorily disqualified, and the firm permitted this association. Additionally, both the firm and Zipper committed books and records violations by intentionally misidentifying the representative of record for hundreds of trades. The firm willfully violated Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-3 by misidentifying the representative of record for hundreds of transactions in the firm's books and records. The firm also failed to maintain and enforce an adequate supervisory system.

This case highlights the critical importance of accurate recordkeeping in the securities industry. Books and records serve as the backbone of regulatory compliance and investor protection. When firms and brokers falsify these records, they undermine the entire regulatory framework designed to protect investors. The fact that Zipper was allowed to associate with the firm while under suspension is particularly egregious, as it circumvents the disciplinary process meant to protect the public.

Investors should understand that accurate recordkeeping is not merely a technical requirement—it's a fundamental safeguard. When choosing a broker or firm, investors can check disciplinary histories through FINRA's BrokerCheck system. Any history of books and records violations should be considered a serious red flag, as it suggests a willingness to circumvent regulatory requirements. This case demonstrates that FINRA and the SEC take these violations seriously and will impose severe sanctions, including expulsion and lifetime bars, when firms and individuals engage in such misconduct.

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According to FINRA, Investment Network Inc. was suspended from conducting private placement activities for 60 days, censured, and fined $210,000 on October 16, 2024. The firm was also ordered to pay disgorgement of $63,769.60 plus interest. Gary Lee Arnold was fined $10,000 and suspended from acting...

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According to FINRA, Investment Network Inc. was suspended from conducting private placement activities for 60 days, censured, and fined $210,000 on October 16, 2024. The firm was also ordered to pay disgorgement of $63,769.60 plus interest. Gary Lee Arnold was fined $10,000 and suspended from acting in any principal capacity for three months.

The firm willfully violated Regulation Best Interest (Reg BI) by failing to disclose a material conflict of interest. Specifically, the firm misrepresented to investors that it would receive only a 10 percent sales commission from private placement offerings when it had actually agreed to receive an additional 5 percent in selling compensation plus half of any carried interest. The firm never disclosed this additional compensation to the 36 retail customers who invested a total of $2,352,900. In total, the firm received $116,745 in undisclosed commissions.

Additionally, the firm violated Reg BI's Care Obligation by lacking a reasonable basis to recommend the offerings. Prior to recommending and selling the offerings, the firm failed to confirm that the issuer had possession of or access to the pre-IPO shares identified in the offering documents or that the issuer's prices and markups were reasonable. The firm also failed to implement its Customer Identification Program with respect to investors in the offerings.

This case illustrates the importance of full disclosure in securities transactions. When firms hide compensation arrangements from investors, they create inherent conflicts of interest that can compromise the quality of investment advice. Investors should always ask detailed questions about how their broker is being compensated for any investment recommendation. If a broker is evasive or unclear about compensation, that's a major warning sign. The violation of Reg BI's Care Obligation is equally concerning, as it shows the firm recommended investments without doing proper due diligence—putting clients' money at risk without adequate research or understanding of what they were selling.

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According to FINRA, Celadon Financial Group LLC was censured and fined $195,000 on October 31, 2024. Paul Mitchell Waldman was fined $5,000 and suspended from association in any principal capacity for 45 days.

The firm violated Rule 606(a) of Regulation National Market System by publishing quarte...

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According to FINRA, Celadon Financial Group LLC was censured and fined $195,000 on October 31, 2024. Paul Mitchell Waldman was fined $5,000 and suspended from association in any principal capacity for 45 days.

The firm violated Rule 606(a) of Regulation National Market System by publishing quarterly reports that provided inaccurate information about its handling of customers' orders in NMS securities. When the firm's third-party vendor could not accurately process the firm's trade data, the firm provided historical trade data from prior quarters. The firm published the Rule 606 report without correcting the errors, resulting in customers receiving inaccurate information about the firm's routing of non-directed orders.

The firm and Waldman also failed to establish and maintain a supervisory system reasonably designed to achieve compliance with Rule 606. Waldman's review process involved randomly selecting only five trades per quarter for comparison, which was not reasonably designed to supervise the accuracy and completeness of the firm's disclosures given that the firm effected approximately 10,000 transactions in NMS stocks each month.

Additionally, the firm failed to develop and implement a reasonably designed anti-money laundering (AML) program. The firm expanded its business to facilitate liquidation of low-priced securities and became aware of numerous red flags related to approximately 10 customers who wished to deposit and sell low-priced securities. Despite being aware that several customers were the subject of news reports indicating possible criminal, civil, and regulatory violations, the firm executed over 3,600 transactions in low-priced securities for these customers, totaling approximately $299 million and generating approximately $7.9 million in commissions.

This case demonstrates how firms can fail investors through both inadequate supervision and deficient AML programs. Rule 606 reports are meant to provide transparency about how firms handle customer orders, and inaccurate reports deprive investors of critical information. The AML failures are particularly concerning, as they suggest the firm prioritized commission revenue over proper due diligence. Investors should be aware that firms handling low-priced securities have heightened AML obligations, and failure to meet these obligations can expose customers to association with fraudulent schemes.

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According to FINRA, Signet Securities LLC was censured and fined $100,000 on October 3, 2024. The firm was also required to certify that it remediated the identified issues and implemented a reasonably designed supervisory system.

The firm willfully violated Regulation Best Interest by failing to...

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According to FINRA, Signet Securities LLC was censured and fined $100,000 on October 3, 2024. The firm was also required to certify that it remediated the identified issues and implemented a reasonably designed supervisory system.

The firm willfully violated Regulation Best Interest by failing to maintain and enforce written policies and procedures and failing to maintain a supervisory system reasonably designed to achieve compliance with Reg BI's obligation to conduct reasonable due diligence of private placement offerings. The firm recommended sales totaling $140 million to investors in Regulation D private placement offerings, some to accredited retail investors. Despite maintaining written procedures requiring reasonable investigation of the issuer and its management, the firm's due diligence for some private placements was not reasonable. All of the offerings were sold by affiliates of a commercial real estate investment company, and the firm's diligence review was limited to documents provided by the company itself.

The firm also failed to maintain and enforce a supervisory system reasonably designed to achieve compliance with FINRA rules governing outside business activities (OBAs). Registered representatives who were employed by an affiliate of a company became registered with the firm in January 2020. The firm and its principals were aware that the representatives engaged in OBAs with the company and that these activities could create a potential conflict of interest, but the firm did not require written notice of the OBA until September 2021.

Additionally, the firm willfully violated Section 17(a)(1) and Rule 17a-14 of the Exchange Act by failing to deliver a customer relationship summary (Form CRS) to its customers. The firm began delivering Form CRS to new customers but failed to deliver it to any existing customers.

This case illustrates the danger of inadequate due diligence in private placements. When a firm's only source of information about an investment is the issuer itself, there is no independent verification of the offering's legitimacy or suitability. Investors should be skeptical when brokers recommend private placements, particularly when the broker has close relationships with the issuer. The conflict of interest created when representatives work for both the firm and the company whose securities are being sold is a recipe for biased recommendations. Investors should always ask whether their broker has conducted independent due diligence on any private placement and what that diligence entailed.

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