Bad Brokers

According to FINRA, OCP Capital, LLC was censured and fined $75,000 for maintaining inaccurate books and records and allowing an unregistered individual to perform principal functions.

The firm misclassified its majority owner's personal expenses as business expenses. The owner charged at least $...

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According to FINRA, OCP Capital, LLC was censured and fined $75,000 for maintaining inaccurate books and records and allowing an unregistered individual to perform principal functions.

The firm misclassified its majority owner's personal expenses as business expenses. The owner charged at least $28,428 of personal expenses to a business credit card, and despite firm procedures, the firm paid these expenses and misclassified them as business expenses rather than compensation to the owner. This caused the firm's general ledger to overstate business expenses and understate compensation, leading to inaccurate FOCUS reports.

The firm also allowed an unregistered individual to perform functions requiring a principal registration. This individual was engaged in management and supervision of firm employees, involved with finances, corresponded with firm personnel regarding expense, commission payment, revenue, tax, and net capital issues, and was involved in employment decisions and securities business affairs.

Additionally, the firm failed to preserve all business-related emails. The firm allowed the individual to use an outside email account to conduct securities-related business without providing a firm email address. The individual's firm-related emails were only retained when other firm personnel were copied on them.

Investors rely on accurate firm financial reporting to assess the stability and reliability of broker-dealers. This case demonstrates the importance of proper books and records maintenance and ensuring that individuals performing principal functions are appropriately registered and supervised.

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According to FINRA, LPL Financial LLC was censured, fined $3,000,000, and ordered to pay $100,000 plus interest in restitution to customers for failing to reasonably supervise the transmittal of customer funds, which allowed two registered representatives to convert approximately $2.4 million of cus...

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According to FINRA, LPL Financial LLC was censured, fined $3,000,000, and ordered to pay $100,000 plus interest in restitution to customers for failing to reasonably supervise the transmittal of customer funds, which allowed two registered representatives to convert approximately $2.4 million of customer funds.

One representative converted funds from nine customers, five of whom were seniors, by convincing them to issue checks from their brokerage accounts payable to an entity he controlled, purportedly for investment purposes. Instead, the representative used the funds for personal and business expenses, totaling approximately $550,000. A second representative converted funds from four customers, three of whom were seniors, by convincing them to wire money to an outside business he controlled. This representative misappropriated approximately $675,000 and also electronically forged a senior customer's signature on a wire transfer form to transfer approximately $1.2 million for his own real estate purchase.

FINRA found that the firm did not have a reasonable supervisory system to review transmittals of customer funds to third parties. The firm used an automated tool programmed to only review the second line of the check recipient's address, missing checks with addresses on other lines. The firm also did not have a system to review transmittals from unrelated customer accounts made payable to the same third party.

The firm also failed to have a supervisory system reasonably designed to detect possible instances of signature forgery or falsification. The firm did not regularly review certificates of completion from electronic signatures or compare them to known customer information. Investors, especially seniors, must be protected from conversion of their funds. This case highlights the critical importance of robust supervisory systems to prevent and detect fraud.

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According to FINRA, Concorde Investment Services, LLC was censured, fined $175,000, and ordered to pay disgorgement of $58,278 plus interest for acting in contravention of Section 5 of the Securities Act by selling unregistered securities without an applicable exemption.

The firm sold three priva...

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According to FINRA, Concorde Investment Services, LLC was censured, fined $175,000, and ordered to pay disgorgement of $58,278 plus interest for acting in contravention of Section 5 of the Securities Act by selling unregistered securities without an applicable exemption.

The firm sold three private placement offerings claiming exemption from registration under Rule 506(b) of Regulation D, without having established substantive relationships with prospective investors prior to its participation in those offerings or otherwise demonstrating the absence of a general solicitation. The sales totaled approximately $5.5 million, and the firm received $58,278 in commissions.

FINRA found that the firm's supervisory system, including its written supervisory procedures, was not reasonably designed to achieve compliance with the Securities Act and FINRA rules related to general solicitation of private placement offerings. The firm's surveillance system was not reasonably designed to detect improper general solicitations. Firm representatives sent mass emails marketing the offerings to hundreds of recipients, which were red flags of potential general solicitation, yet the firm approved the content without verifying that it had pre-existing, substantive relationships with all recipients.

Investors should understand that Rule 506(b) private placements are restricted to investors with whom the issuer or broker-dealer has a pre-existing, substantive relationship, and general solicitation is prohibited. This restriction helps ensure that only sophisticated investors who understand the risks are solicited for these unregistered offerings. When firms violate these rules, they may expose unsuitable investors to high-risk investments.

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According to FINRA, Brad Michael Jacobson was barred from association with any FINRA member in all capacities for failing to provide information and documents requested by FINRA in connection with its investigation concerning alleged conversion of customer funds and participation in an unapproved ou...

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According to FINRA, Brad Michael Jacobson was barred from association with any FINRA member in all capacities for failing to provide information and documents requested by FINRA in connection with its investigation concerning alleged conversion of customer funds and participation in an unapproved outside business activity.

FINRA's investigation originated from a review of a Form U5 filed by Jacobson's member firm. In the Form U5, the firm reported that it terminated Jacobson because he engaged in an unapproved outside business activity and submitted a service request to obtain a debit card issued for himself drawn on a client's business account.

When broker-dealers or registered representatives refuse to cooperate with FINRA investigations, it undermines the regulatory process designed to protect investors. FINRA's ability to investigate potential misconduct depends on the cooperation of industry participants. A bar from the industry is an appropriate sanction for those who refuse to participate in the investigative process, as it demonstrates a lack of fitness to work in the securities industry.

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According to FINRA, Helen Grace Caldwell was barred from association with any FINRA member in all capacities for declining to provide on-the-record testimony requested by FINRA in connection with an investigation into Forms U5 filed by her former member firms.

One of Caldwell's former firms submi...

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According to FINRA, Helen Grace Caldwell was barred from association with any FINRA member in all capacities for declining to provide on-the-record testimony requested by FINRA in connection with an investigation into Forms U5 filed by her former member firms.

One of Caldwell's former firms submitted an amended Form U5 disclosing that it was reviewing whether she had adequately disclosed outside business activities and solicited firm clients to invest in her film production business. The firm later filed another amended Form U5 disclosing that its internal review concluded that Caldwell did not adequately disclose her outside business activity and was soliciting firm clients to invest in it, several of whom subsequently made investments. Another firm filed a Form U5 disclosing that Caldwell had been discharged following an internal review concerning the accuracy of disclosures she made and her compliance with the firm's Outside Activities and Outside Investment Policy.

Registered representatives are required to disclose outside business activities to their firms so the firms can supervise these activities and prevent conflicts of interest or unsuitable investments. When representatives solicit firm clients to invest in their outside businesses without proper disclosure and approval, it creates serious conflicts of interest and potential for abuse. Caldwell's refusal to testify about these matters resulted in a bar from the industry.

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According to FINRA, Surage Kamal Roshan Perera was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA in connection with its investigation into allegations that he had defrauded a customer while associated with a memb...

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According to FINRA, Surage Kamal Roshan Perera was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA in connection with its investigation into allegations that he had defrauded a customer while associated with a member firm.

FINRA's investigative authority is essential to protecting investors. When registered representatives refuse to cooperate with investigations into serious allegations such as customer fraud, it prevents FINRA from determining the facts and taking appropriate action. A refusal to testify in an investigation is itself a violation that warrants expulsion from the industry, as it demonstrates unfitness to serve in a position of trust with customer assets.

Investors should be aware that registered representatives are required to cooperate with regulatory investigations. Those who refuse to do so face automatic bars from the industry, regardless of the underlying allegations. This policy ensures that only individuals willing to be held accountable for their conduct can work in the securities industry.

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According to FINRA, Ronald Joseph Sagasser was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested by FINRA in connection with its investigation of circumstances surrounding his termination from his member firm.

The firm file...

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According to FINRA, Ronald Joseph Sagasser was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested by FINRA in connection with its investigation of circumstances surrounding his termination from his member firm.

The firm filed a Form U5 stating that it had discharged Sagasser for creating and signing a promissory note with an insurance client that included him making payments to that client, creating and distributing a consolidated statement (not company-issued) to these same clients, violating suspension instructions, and providing inaccurate information during the firm's investigation.

These allegations suggest serious misconduct including creating unauthorized documents and misleading clients. When individuals refuse to provide information about such serious allegations, they prevent regulators from protecting investors and maintaining market integrity. The automatic bar for non-cooperation ensures that individuals who are unwilling to be transparent about their conduct cannot continue to work with customer assets.

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According to FINRA, Thomas Phillip Simpson was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested by FINRA in connection with its investigation of circumstances surrounding his termination from his member firm.

Simpson's fir...

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According to FINRA, Thomas Phillip Simpson was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested by FINRA in connection with its investigation of circumstances surrounding his termination from his member firm.

Simpson's firm filed a Form U5 disclosing that it had terminated his registration after he failed to conduct insurance business in accordance with published policies, rules and manuals. While the underlying conduct involved insurance business, registered representatives are required to comply with all firm policies and cooperate with regulatory investigations regardless of the nature of the underlying allegations.

This case demonstrates that cooperation with FINRA is mandatory for all individuals registered in the securities industry. Those who refuse to provide information when requested face automatic expulsion from the industry, which protects investors from individuals who lack the integrity and transparency required to serve in positions of trust.

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According to FINRA, David Alan Snavely was barred from association with any FINRA member in all capacities for refusing to provide information and documents requested by FINRA in connection with its review of an amended Form U5 disclosing that his member firm had discharged him in connection with al...

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According to FINRA, David Alan Snavely was barred from association with any FINRA member in all capacities for refusing to provide information and documents requested by FINRA in connection with its review of an amended Form U5 disclosing that his member firm had discharged him in connection with allegations that he sold unsuitable annuities as part of replacement transactions.

Annuity suitability is a critical investor protection concern, particularly for seniors who are often the target of unsuitable annuity sales. Annuity replacement transactions, where an existing annuity is exchanged for a new one, can result in surrender charges, new surrender periods, and additional commissions for the representative, often without corresponding benefits to the customer.

When representatives refuse to cooperate with investigations into unsuitable annuity sales, it suggests they may have something to hide and prevents FINRA from determining whether investors were harmed. The bar sanction ensures that individuals unwilling to be held accountable for their sales practices cannot continue to work with investors.

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According to FINRA, David Richard Geake was barred from association with any FINRA member in all capacities for participating in a private securities transaction by soliciting elderly investors to pledge approximately $15 million of securities as collateral to guarantee a $2.5 million loan on behalf...

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According to FINRA, David Richard Geake was barred from association with any FINRA member in all capacities for participating in a private securities transaction by soliciting elderly investors to pledge approximately $15 million of securities as collateral to guarantee a $2.5 million loan on behalf of a startup company without providing written notice to his member firm.

Geake personally invested $100,000 in the company and was also a member of its Board of Directors. He assured an elderly couple that their risk of investment loss was minimal and structured the transaction, facilitating the paperwork on their behalf. The pledge of securities as collateral for the loan was an offer of a security, and the couple received shares of the company's common stock in exchange for their guarantee.

The company fully defaulted on the bank loan and closed its business, and the bank called for the loan to be paid in full. As a result, the couple were required to repay the entire $2.5 million bank loan with interest. Although neither investor were firm customers, the firm's policies prohibited registered representatives from engaging in any private securities transaction without prior express written permission.

Geake also incorrectly attested to the firm on multiple annual compliance questionnaires that he had not participated in any private securities transactions. This case illustrates the dangers of private securities transactions, particularly when they involve elderly investors and representatives who have conflicts of interest through their own investments and board positions. The couple's loss of $2.5 million demonstrates the severe harm that can result when representatives bypass firm supervision.

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