Bad Brokers

According to FINRA, The Oak Ridge Financial Services Group, Inc. (CRD #42941), based in Golden Valley, Minnesota, was censured, fined $270,000, and ordered to pay $68,857.69 plus interest in restitution to customers. The firm consented to these sanctions without admitting or denying the findings. FI...

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According to FINRA, The Oak Ridge Financial Services Group, Inc. (CRD #42941), based in Golden Valley, Minnesota, was censured, fined $270,000, and ordered to pay $68,857.69 plus interest in restitution to customers. The firm consented to these sanctions without admitting or denying the findings. FINRA found that the firm charged unfair prices in corporate bond transactions. The firm relied solely on inter-dealer quotes to determine the prevailing market price and failed to consider when a contemporaneous inter-dealer transaction or institutional customer transaction price was available. By failing to correctly assess the prevailing market price, the firm caused customers to pay more than they should have or receive less than they should have, resulting in customer harm of $50,294.94. In addition, for other corporate bond transactions where the firm did use the correct prevailing market price, it imposed mark-ups or mark-downs that were unfair to customers. These charges were not fair and reasonable compared to contemporaneous mark-ups and mark-downs of similar bonds when considering all relevant factors, including the type of security, market availability, the price of the security, and the size of the transaction. This resulted in additional customer harm of $18,562.75. FINRA also found that the firm's supervisory system was not reasonably designed to achieve compliance with fair pricing rules. The firm's written supervisory procedures did not include any process for determining the prevailing market price and unreasonably gave representatives unilateral discretion to set mark-ups or mark-downs at or below five percent, even though that level was not always fair. Supervisory review thresholds were set at unreasonably high levels, meaning most corporate bond trades were automatically bulk-approved without supervisor review. Furthermore, supervisory reviews only considered the mark-up portion attributable to the representative, not other portions such as those attributable to the firm's trading desk. The firm has since implemented revised procedures. For investors who trade corporate bonds, this case highlights the importance of understanding how pricing works in the bond market. Unlike stocks, bonds often trade with mark-ups or mark-downs rather than commissions. Investors should ask about the prices being charged and compare them to prevailing market rates.

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According to FINRA, Cambridge International Securities, LLC (CRD #39137), based in Westport, Connecticut, was censured, fined $200,000, and required to certify remediation of identified issues. The firm consented to these sanctions without admitting or denying the findings. FINRA found that the firm...

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According to FINRA, Cambridge International Securities, LLC (CRD #39137), based in Westport, Connecticut, was censured, fined $200,000, and required to certify remediation of identified issues. The firm consented to these sanctions without admitting or denying the findings. FINRA found that the firm failed to establish, maintain, and enforce a supervisory system reasonably designed to supervise its foreign associates (FAs). The firm's written supervisory procedures lacked reasonable guidance on how to assess whether FAs' securities activities exceeded the bounds of their registration. The firm did not reasonably monitor FAs' activities to determine the location of their customers and counterparties, and did not consistently require FAs to complete annual compliance certifications, outside business activity disclosure forms, or written disclosure of private securities transactions. The firm also failed to respond to red flags in emails indicating that one of its FAs was facilitating securities transactions with broker-dealers and investors in the United States. FINRA found that the firm failed to preserve electronic communications when it allowed an FA to use a personal email account for firm business. The firm did not assign the FA a firm email address or require that his business communications be retained by the firm. The firm was aware he was using his personal email for business, as the FA copied firm principals on some communications, but it failed to preserve these records as required. Furthermore, the firm improperly permitted the FA to engage in securities activities with persons in the United States without the required registration. His activities included discussing transactions, exchanging paperwork, and facilitating a private secondary securities transaction between two U.S. institutional investors for which both the FA and the firm earned a commission. When the firm became aware of this activity, it failed to restrict the FA's activities or register him appropriately. The firm has since terminated the FA's registration. For investors, this case highlights the risks that can arise when firms fail to properly supervise foreign associates. Inadequate oversight of cross-border activities can expose investors to individuals who may be operating outside the bounds of their registration and regulatory protections.

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According to FINRA, Merrill Lynch, Pierce, Fenner & Smith Incorporated (CRD #7691), based in New York, New York, was censured and fined $2,000,000 for multiple trade reporting failures involving TRACE-eligible securities and municipal securities. The firm consented to these sanctions without admitti...

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According to FINRA, Merrill Lynch, Pierce, Fenner & Smith Incorporated (CRD #7691), based in New York, New York, was censured and fined $2,000,000 for multiple trade reporting failures involving TRACE-eligible securities and municipal securities. The firm consented to these sanctions without admitting or denying the findings. FINRA found that Merrill Lynch failed to accurately report execution times for certain primary market transactions in TRACE-eligible securities. The misreporting occurred because the firm failed to include a field for execution time for market-linked primary market transactions when they became TRACE reportable. The firm's systems misclassified each transaction's processing time as the execution time, resulting in inaccurate reports to TRACE. FINRA also found that the firm failed to report certain allocations of TRACE-eligible securities to client accounts as separate transactions. Instead of reporting each customer allocation individually, the firm reported block transactions as single transactions. Additionally, the firm failed to include the No Remuneration (NR) indicator for transactions in U.S. Treasury securities that did not include transaction-based compensation, because the firm incorrectly concluded the NR indicator was not required for Treasury transactions. FINRA further found that the firm reported municipal securities transactions to the Real-time Transaction Reporting System (RTRS) that it should not have reported. These were transactions executed by a third-party dealer for which Merrill Lynch acted only as custodian. The over-reporting occurred because the firm failed to code its systems to suppress reporting for such transactions. The firm's supervisory system was found to be inadequate for achieving compliance with both TRACE and MSRB reporting rules. The firm lacked reasonable supervisory reviews and written procedures relating to over-reporting, under-reporting, accuracy of execution times, and NR indicators. The firm subsequently corrected these issues and reported them to FINRA. For investors, accurate trade reporting is the foundation of market transparency. TRACE and RTRS data are used by regulators, market participants, and investors to evaluate bond pricing and market activity. When a firm as large as Merrill Lynch fails to accurately report transactions, it can distort the data that the entire market relies upon for fair and efficient pricing of fixed income securities.

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According to FINRA, TD Securities (USA) LLC (CRD #18476), based in New York, New York, was censured and fined $6,000,000 for spoofing in U.S. Treasury securities. The firm consented to these sanctions without admitting or denying the findings. FINRA found that the firm engaged in spoofing through a ...

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According to FINRA, TD Securities (USA) LLC (CRD #18476), based in New York, New York, was censured and fined $6,000,000 for spoofing in U.S. Treasury securities. The firm consented to these sanctions without admitting or denying the findings. FINRA found that the firm engaged in spoofing through a former trader who worked on, and later became head of, its U.S. Treasury trading desk. Spoofing is a manipulative trading practice where a trader places orders they intend to cancel before execution in order to create a false impression of supply or demand and induce other market participants to trade at artificial prices. The trader placed non-bona fide orders in U.S. Treasury securities to induce executions in the same benchmark, other benchmarks, and U.S. Treasury futures contracts. This activity occurred on the secondary market where institutional and other participants trade through electronic platforms. The trader used the firm's trading systems and traded for the benefit of the firm's proprietary and customer accounts. FINRA also found that the firm failed to establish and maintain a supervisory system reasonably designed to detect and prevent spoofing. Although the firm prohibited spoofing, it had no written supervisory procedures addressing the practice and no surveillance systems to detect whether its traders were engaging in spoofing in U.S. Treasury securities. The firm was aware that it was not capturing order data for U.S. Treasury securities, which would be needed to effectively supervise trading activity. Business line supervisors were not required to review for spoofing, and neither the firm nor the trader's supervisor could access or review orders that the trader entered and canceled before execution. The firm also failed to investigate potential spoofing after the trader triggered an internal surveillance alert and after an external trading platform inquired about the trader's activity. Only after multiple inquiries from trading platforms did the firm suspend, investigate, and ultimately terminate the trader. For investors, spoofing is a serious form of market manipulation that undermines the integrity of the U.S. Treasury market, which is the largest and most liquid government securities market in the world. Artificial prices caused by spoofing can harm investors and institutions that rely on Treasury securities for safe investment and hedging purposes.

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According to FINRA, SpeedTrader, Inc., formerly known as Mint Global Markets, Inc. (CRD #107403), based in Katonah, New York, was censured and required to retain an independent consultant to conduct a comprehensive review of the firm's compliance with its best execution obligations, supervisory obli...

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According to FINRA, SpeedTrader, Inc., formerly known as Mint Global Markets, Inc. (CRD #107403), based in Katonah, New York, was censured and required to retain an independent consultant to conduct a comprehensive review of the firm's compliance with its best execution obligations, supervisory obligations, and anti-money laundering (AML) obligations. In light of the firm's financial status, FINRA did not impose a monetary fine. The firm consented to these sanctions without admitting or denying the findings. FINRA found that SpeedTrader failed to comply with its best execution obligations. The firm's reviews for execution quality were initially limited to a manual bi-weekly review of just 10 randomly selected executions, checking only whether the price was inferior to the National Best Bid or Offer (NBBO). Even after automating this review to cover all executions, the firm continued to limit its analysis to price disimprovement. Later expansions to include price improvement, execution speed, and execution size still did not consider the likelihood of execution of limit orders, transaction costs, customer needs, or payment for order flow arrangements. The firm also failed to review the impact that its net trading arrangements with other broker-dealers had on execution quality, despite routing approximately 100 million shares annually through these arrangements. FINRA also found that the firm's supervisory system was not reasonably designed to achieve compliance with best execution requirements. The firm's Rule 606 reports failed to disclose material aspects of its relationships with markets to which it routed orders. Additionally, FINRA found that the firm failed to establish a written AML program reasonably designed to detect suspicious activity and did not investigate red flags of potentially manipulative trading. Furthermore, the firm willfully violated Exchange Act Section 17(a)(1) and Rule 17a-14 by falsely responding "No" to the question on its Form CRS concerning legal or disciplinary history, despite having 16 regulatory actions disclosed on its Form BD. The firm later updated its Form CRS but did not file it with the SEC for another seven months. For investors, this case is a reminder to verify a firm's disciplinary history through FINRA BrokerCheck and to understand how your broker routes and executes your trades.

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According to FINRA, Waldon Fenster (CRD #7678526), formerly based in Downers Grove, Illinois, was barred from association with any FINRA member firm in all capacities effective September 5, 2024. The bar was imposed through an Acceptance, Waiver, and Consent (AWC) agreement after Fenster refused to ...

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According to FINRA, Waldon Fenster (CRD #7678526), formerly based in Downers Grove, Illinois, was barred from association with any FINRA member firm in all capacities effective September 5, 2024. The bar was imposed through an Acceptance, Waiver, and Consent (AWC) agreement after Fenster refused to appear for on-the-record testimony requested by FINRA. The testimony was sought in connection with an investigation that originated from a complaint alleging that Fenster had committed fraud. Without admitting or denying the findings, Fenster consented to the sanction and to the entry of findings that he refused to cooperate with FINRA's investigation. FINRA Rule 8210 requires associated persons to cooperate with FINRA investigations, including appearing for testimony when requested. This rule is one of the most critical tools FINRA has to protect investors, as it enables the regulator to investigate potential misconduct and take appropriate action. When an individual refuses to comply with a Rule 8210 request, FINRA treats it as a serious violation that typically results in the most severe sanction available -- a permanent bar from the securities industry. The reasoning is straightforward: if a person will not cooperate with regulators, there is no way for FINRA to fulfill its investor protection mandate, and that person cannot be trusted to operate in the securities industry. For investors, this case underscores the importance of checking the background of any financial professional before entrusting them with your money. FINRA's BrokerCheck tool (available at brokercheck.finra.org) allows anyone to look up a broker's registration history, disciplinary record, and any customer complaints. The fact that the investigation into Fenster originated from a fraud complaint highlights how investor reports play a vital role in triggering regulatory action. If you suspect misconduct by a broker, filing a complaint with FINRA can lead to an investigation that may protect you and other investors from further harm. Fenster's bar from the industry means he is permanently prohibited from working in any capacity with a FINRA-registered firm, providing a measure of protection for the investing public going forward.

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According to FINRA, Roy Kevin Williams (CRD #843607), formerly based in Westfield, Indiana, was barred from association with any FINRA member firm in all capacities effective September 5, 2024. The bar was imposed through an Acceptance, Waiver, and Consent (AWC) agreement after Williams refused to c...

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According to FINRA, Roy Kevin Williams (CRD #843607), formerly based in Westfield, Indiana, was barred from association with any FINRA member firm in all capacities effective September 5, 2024. The bar was imposed through an Acceptance, Waiver, and Consent (AWC) agreement after Williams refused to continue cooperating with FINRA's investigation. The investigation originated from a Uniform Termination Notice for Securities Industry Registration (Form U5) submitted by his member firm. The Form U5 disclosed that Williams had been discharged for obtaining loans from firm clients and making misrepresentations regarding client loans on annual certifications. Without admitting or denying the findings, Williams consented to the sanction and to the entry of findings. Although Williams initially cooperated with FINRA's investigation, he ultimately ceased doing so, leading to the bar. Obtaining loans from clients is a serious violation of industry rules. FINRA and most broker-dealer firms strictly prohibit brokers from borrowing money from customers because such arrangements create inherent conflicts of interest and can lead to financial exploitation of vulnerable investors. When a broker borrows from a client, the professional relationship is compromised, and the broker may prioritize their own financial interests over the client's investment objectives. Additionally, making misrepresentations on annual compliance certifications compounds the misconduct, as these certifications exist to ensure that brokers are following firm policies and industry regulations. Falsifying these documents undermines the compliance framework designed to protect investors. For investors, this case serves as an important reminder to be wary of any financial professional who asks to borrow money. Legitimate broker-client relationships do not involve personal loans, and such requests should be reported to the firm's compliance department and to FINRA immediately. Investors should also regularly review their account statements and confirm that all transactions and activities in their accounts are authorized. FINRA's BrokerCheck tool is a valuable resource for researching the background of any broker, including any history of terminations, complaints, or regulatory actions. Williams's permanent bar from the industry ensures that he can no longer work with any FINRA-registered firm, protecting future investors from potential harm.

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According to FINRA, Ashlee Nicole Godfrey (CRD #5889108), formerly based in Rocky Face, Georgia, was barred from association with any FINRA member firm in all capacities effective September 9, 2024. The bar was imposed through an Acceptance, Waiver, and Consent (AWC) agreement after Godfrey refused ...

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According to FINRA, Ashlee Nicole Godfrey (CRD #5889108), formerly based in Rocky Face, Georgia, was barred from association with any FINRA member firm in all capacities effective September 9, 2024. The bar was imposed through an Acceptance, Waiver, and Consent (AWC) agreement after Godfrey refused to provide on-the-record testimony requested by FINRA. The testimony was sought in connection with an investigation into misstatements Godfrey made to a customer of her member firm using an unapproved communication platform. Specifically, the findings stated that Godfrey misrepresented to the customer that certain preferred securities were insured. Without admitting or denying the findings, Godfrey consented to the sanction and to the entry of findings. This case raises two significant regulatory concerns. First, Godfrey's use of an unapproved communication platform to interact with customers violates FINRA rules requiring that all business-related communications be conducted through approved and supervised channels. Broker-dealer firms are required to maintain records of communications with customers, and the use of unapproved platforms such as personal text messaging or social media apps undermines the ability of compliance departments to monitor for misconduct. Second, misrepresenting that preferred securities were insured is a serious violation. Preferred securities, while they may offer certain advantages such as fixed dividends, carry investment risks including credit risk, interest rate risk, and the risk of loss of principal. Telling a customer that these securities are insured gives a false sense of security and could lead investors to take on more risk than they realize or intend. For investors, this case highlights the importance of verifying any claims made by a broker, particularly regarding the safety or insurance status of an investment. No investment in securities is guaranteed unless explicitly backed by a government program such as FDIC insurance for bank deposits, and even then, FDIC insurance does not cover investment products sold through banks. If a broker tells you an investment is "insured" or "guaranteed," ask for documentation and verify the claim independently. Godfrey's permanent bar ensures she can no longer operate in the securities industry, protecting investors from further potential misrepresentations.

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According to FINRA, Michael Charles Grande (CRD #1219255), formerly based in Fort Lauderdale, Florida, was barred from association with any FINRA member firm in all capacities effective September 9, 2024. The bar became final through an Office of Hearing Officers (OHO) decision after Grande failed t...

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According to FINRA, Michael Charles Grande (CRD #1219255), formerly based in Fort Lauderdale, Florida, was barred from association with any FINRA member firm in all capacities effective September 9, 2024. The bar became final through an Office of Hearing Officers (OHO) decision after Grande failed to provide information requested by FINRA pursuant to FINRA Rule 8210 in connection with its investigation into his recommendations to customers to engage in short-term mutual fund trading. The findings stated that during a call with FINRA staff, Grande stated that he did not have access to the paperwork related to the customers identified in the request and that he could not recall certain information. FINRA staff explained that Grande was required to submit a written response. Grande stated that he needed time to think about how he was going to respond but ultimately never responded to the requests and never requested an extension of time. Short-term mutual fund trading, sometimes called mutual fund switching, is a practice where a broker recommends that customers frequently buy and sell mutual fund shares. This practice is generally harmful to investors because mutual funds are designed to be long-term investments, and frequent trading generates unnecessary sales charges, redemption fees, and tax consequences that erode investment returns. When a broker recommends this type of trading, it often serves the broker's interests through increased commissions rather than the investor's financial goals. FINRA Rule 8210 is a foundational tool in FINRA's regulatory framework, requiring individuals associated with member firms to cooperate with investigations by providing documents, information, and testimony. Failure to comply with Rule 8210 is treated as an independent and serious violation that typically results in a bar from the industry, regardless of the underlying conduct being investigated. The rationale is that FINRA cannot protect investors if it cannot investigate potential misconduct. For investors, this case is a reminder to be cautious about frequent trading recommendations in mutual funds. If your broker is recommending that you frequently switch between mutual funds, seek a second opinion, as you may be paying unnecessary fees. Grande's permanent bar from the industry prevents him from working in any capacity with a FINRA-registered firm.

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According to FINRA, Tracy Marie Longstreet (CRD #1768525), formerly based in Houston, Texas, was barred from association with any FINRA member firm in all capacities effective September 11, 2024. The bar was imposed through an Acceptance, Waiver, and Consent (AWC) agreement after Longstreet refused ...

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According to FINRA, Tracy Marie Longstreet (CRD #1768525), formerly based in Houston, Texas, was barred from association with any FINRA member firm in all capacities effective September 11, 2024. The bar was imposed through an Acceptance, Waiver, and Consent (AWC) agreement after Longstreet refused to provide documents and information requested by FINRA in connection with its investigation. The investigation was initiated based upon an arbitration filing disclosed in a Form U5 submitted by her former member firm. The Form U5 amendment disclosed that a customer had filed an arbitration against the firm alleging misconduct involving his accounts and that his Individual Retirement Account (IRA) beneficiaries were improperly changed to personally benefit Longstreet's family and or friends. Without admitting or denying the findings, Longstreet consented to the sanction and to the entry of findings. The allegations underlying this case are particularly concerning. Improperly changing IRA beneficiaries is a form of financial exploitation that can have devastating consequences for the rightful heirs of a customer's retirement savings. IRA beneficiary designations determine who receives the account assets upon the account holder's death, and unauthorized changes can divert potentially significant sums away from the intended beneficiaries, such as spouses, children, or other family members. When a broker manipulates these designations for personal benefit or the benefit of their associates, it represents a fundamental betrayal of the trust placed in financial professionals. FINRA rules and securities regulations are designed to prevent exactly this type of conduct by requiring brokers to act in their clients' best interests. For investors, this case highlights the importance of regularly reviewing your IRA and other account beneficiary designations to ensure they reflect your wishes. You should confirm beneficiary designations directly with the custodian and be alert to any unauthorized changes. If you suspect that a financial professional has tampered with your account beneficiaries or engaged in any other form of misconduct, report it immediately to FINRA and consider consulting with an attorney who specializes in securities matters. Longstreet's permanent bar from the industry ensures she can no longer work in any capacity with a FINRA-registered firm, protecting future investors from similar potential misconduct.

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