Bad Brokers

According to FINRA, Kiffin Scott Anderson was fined $5,000 and suspended from association with any FINRA member in all capacities for one month for falsifying customer signatures on account transfer forms.

Anderson re-used, with prior permission, customer signature pages on a total of ten account...

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According to FINRA, Kiffin Scott Anderson was fined $5,000 and suspended from association with any FINRA member in all capacities for one month for falsifying customer signatures on account transfer forms.

Anderson re-used, with prior permission, customer signature pages on a total of ten account transfer authorization forms on behalf of six customers, two of whom were seniors. While Anderson had permission from the customers, the policies and procedures of his member firm prohibited re-using a client signature or the signature page of a form to execute multiple transactions or requests, regardless of the customer's knowledge or consent.

Anderson also falsely attested in a compliance questionnaire that he had not signed or affixed another person's signature on a document, which includes photocopying, cutting, and pasting signatures. This false attestation is a separate violation that compounds the misconduct.

Even though Anderson had customer permission, re-using signatures creates risks of fraud and makes it difficult to verify that each specific transaction was authorized. Firms prohibit this practice to maintain clear documentation of customer authorization for each transaction. This case demonstrates that representatives must follow firm procedures even when they believe the customer has consented to the shortcut.

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According to FINRA, Timothy Royce Bush was assessed a deferred fine of $2,500 and suspended from association with any FINRA member in all capacities for two months for maintaining an outside investment account without his member firm's approval.

Bush had sought the firm's approval to maintain an ...

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According to FINRA, Timothy Royce Bush was assessed a deferred fine of $2,500 and suspended from association with any FINRA member in all capacities for two months for maintaining an outside investment account without his member firm's approval.

Bush had sought the firm's approval to maintain an outside investment account he held at another financial institution. Although his firm denied Bush's request and instructed him to close the account or move it to an approved financial institution, Bush maintained and transacted in the account for over four additional years. In addition, Bush falsely attested on annual compliance questionnaires that all of his outside investment accounts were held at custodians approved by the firm.

Firms require representatives to maintain accounts at approved institutions so they can monitor trading activity and detect potential conflicts of interest, insider trading, or other misconduct. When representatives maintain secret accounts at unapproved institutions, they prevent their firms from conducting this important oversight.

This case demonstrates the importance of complying with firm policies regarding outside accounts. Even though Bush's trading may have been legitimate, his willful violation of firm policy and false attestations on compliance questionnaires warranted disciplinary action.

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According to FINRA, Joseph Civiletti was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for two months for failing to notify his member firm that he had received compensation for his disclosed outside business activity, acting in contraventi...

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According to FINRA, Joseph Civiletti was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for two months for failing to notify his member firm that he had received compensation for his disclosed outside business activity, acting in contravention of the firm's policy and the limitations it placed on the activity.

While associated with the firm, Civiletti agreed to serve as power of attorney for his mother and father. He disclosed the power of attorney relationship to the firm and stated that he would receive no compensation. The firm approved the relationship as an outside business activity on that basis. Subsequently, Civiletti transferred a total of $30,000 from his parents' firm accounts to his own accounts at the firm. When questioned, Civiletti admitted that the payments were intended to serve as compensation for power of attorney activities he performed on behalf of his parents.

Civiletti also submitted a compliance questionnaire attesting that his outside business activity disclosure remained truthful and complete, which was false. This case illustrates the conflict of interest that arises when representatives serve as power of attorney for their customers, particularly when they receive compensation for that role. Firms must carefully supervise these arrangements to protect vulnerable customers, especially seniors, from potential abuse.

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According to FINRA, Christopher F. Harrington Jr. was assessed a deferred fine of $11,500 and suspended from association with any FINRA member in all capacities for nine months for recommending transactions in a customer's account that inflated his own compensation and caused the customer to incur u...

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According to FINRA, Christopher F. Harrington Jr. was assessed a deferred fine of $11,500 and suspended from association with any FINRA member in all capacities for nine months for recommending transactions in a customer's account that inflated his own compensation and caused the customer to incur unnecessary fees and costs, without a reasonable basis to believe the transactions were suitable.

The customer was 48 years old when he started investing with Harrington and depended on the investment assets for the rest of his life because he was no longer able to work after a disabling accident. Harrington recommended purchases and sales that generated commissions and fees that could easily have been avoided. For example, Harrington recommended the purchase of approximately $1.4 million in market-linked investments (MLIs), received a fee, then shortly thereafter moved these MLIs to another account, resulting in another fee. Harrington also recommended selling approximately $550,000 of MLIs and using the proceeds to purchase other securities in a way that caused the customer to incur approximately $7,550 in total commissions.

Harrington also engaged in short-term trading in securities typically intended to be held long-term, including Unit Investment Trusts (UITs) and master limited partnerships (MLPs), generating additional unwarranted fees. The timing and manner of execution of these transactions had no purpose other than to increase Harrington's fees.

This case demonstrates the serious harm that can result when representatives prioritize their own compensation over their customers' best interests, particularly when the customer is vulnerable due to disability and dependent on investment assets for life.

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According to FINRA, John James Hoidas was assessed a deferred fine of $40,000 and suspended from association with any FINRA member in all capacities for 18 months for making unsuitable recommendations in speculative alternative investments to customers, borrowing $10,000 from a customer without firm...

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According to FINRA, John James Hoidas was assessed a deferred fine of $40,000 and suspended from association with any FINRA member in all capacities for 18 months for making unsuitable recommendations in speculative alternative investments to customers, borrowing $10,000 from a customer without firm approval, and causing two firms to maintain incomplete books and records.

Hoidas made unsuitable recommendations in speculative alternative investments that were inconsistent with his customers' investment profiles. He also borrowed $10,000 from one of his firm customers without providing prior written notice or obtaining written approval from the firm. After Hoidas failed to repay the loan, the customer complained to the firm, which ultimately reached a settlement.

Additionally, while registered through one firm, Hoidas communicated with customers regarding securities-related business through text messages using his personal phone. Because the firm had not approved text messaging as a permissible electronic communications channel, it did not capture or maintain Hoidas' text message communications as required. While registered through another firm, Hoidas entered into a commission-sharing agreement with another representative that was not disclosed to or approved by the firm, causing the firm to fail to comply with its recordkeeping obligations.

This case involves multiple serious violations including unsuitable recommendations, borrowing from customers, and causing recordkeeping failures. These violations demonstrate a pattern of disregard for investor protection rules and firm policies.

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According to FINRA, Ariya Pejouhesh was fined $10,000 and suspended from association with any FINRA member in all capacities for one month for improperly directing and allowing his intern at his member firm to complete 14 hours of continuing education (CE) courses related to his Certified Financial ...

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According to FINRA, Ariya Pejouhesh was fined $10,000 and suspended from association with any FINRA member in all capacities for one month for improperly directing and allowing his intern at his member firm to complete 14 hours of continuing education (CE) courses related to his Certified Financial Planner (CFP) designation, rather than completing them himself.

Pejouhesh's CFP certification had been deemed relinquished due to, among other things, his failure to complete required continuing education. Instead of completing the CE courses himself, Pejouhesh had his intern complete them on his behalf. This conduct undermines the entire purpose of continuing education requirements, which is to ensure that financial professionals maintain current knowledge of industry developments, regulations, and best practices.

Continuing education is not merely a bureaucratic requirement—it ensures that representatives have the knowledge necessary to properly advise customers. When representatives circumvent CE requirements by having others complete courses on their behalf, they may lack important knowledge needed to serve their customers' best interests. This case demonstrates that FINRA takes seriously the integrity of continuing education requirements.

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According to FINRA, James Tri Truong was fined $5,000 and suspended from association with any FINRA member in all capacities for four months for willfully failing to timely amend his Form U4 to disclose that he had been charged with a felony.

While Truong was associated with a member firm, the Di...

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According to FINRA, James Tri Truong was fined $5,000 and suspended from association with any FINRA member in all capacities for four months for willfully failing to timely amend his Form U4 to disclose that he had been charged with a felony.

While Truong was associated with a member firm, the District Attorney of the County of Santa Clara (California) filed a felony complaint against him with the Superior Court. Truong became aware of the felony charge and was required to amend his Form U4 within 30 days to disclose the charge; however, he did not disclose it on his Form U4 until months later. In addition, Truong falsely stated on an annual compliance questionnaire that he had no arrests that had not been disclosed to the firm.

Form U4 disclosure requirements exist so that firms and investors can make informed decisions about whether to employ or work with a registered representative. Felony charges are particularly important disclosures because they may indicate unfitness for a position of trust handling customer assets. Truong's willful failure to timely disclose the felony charge and his false attestation on the compliance questionnaire demonstrate a lack of candor that warranted significant disciplinary action.

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According to FINRA, Nicholas James Tocco was fined $10,000, suspended from association with any FINRA member in any principal capacity for 12 months, and required to requalify by examination as a general securities principal.

As his member firm's Anti-Money Laundering (AML) Compliance Officer, To...

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According to FINRA, Nicholas James Tocco was fined $10,000, suspended from association with any FINRA member in any principal capacity for 12 months, and required to requalify by examination as a general securities principal.

As his member firm's Anti-Money Laundering (AML) Compliance Officer, Tocco failed to establish and implement an AML compliance program and Customer Identification Program (CIP) reasonably designed to detect and report suspicious activity and verify customer identities. The procedures were not reasonably tailored to the firm's customer base, which included customers based in a high-risk money laundering jurisdiction.

Tocco failed to detect, investigate, and respond to multiple red flags indicating that issuers actually controlled the customers they referred to the firm for investing in anticipated IPOs. He also failed to investigate red flags presented by customers referred by a U.S.-based issuer's founder who was previously disciplined by the SEC for securities fraud. Tocco failed to take reasonable investigative steps after becoming aware that the issuer directly funded seven referred accounts through wires exceeding $4 million.

The procedures did not describe the frequency or process for reviewing transactions in context of other account activity to determine if transactions were suspicious. The firm failed to facilitate detection of suspicious trading patterns across time or among multiple customers.

Additionally, Tocco failed to establish procedures reasonably designed to achieve compliance with Section 5 of the Securities Act regarding resale of unregistered securities. When customers deposited restricted securities, Tocco did not conduct any independent Rule 144 or Section 5 analysis.

This case demonstrates the critical importance of effective AML programs in preventing money laundering and securities fraud. Principals who fail to establish adequate systems expose investors and markets to serious harm.

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According to FINRA, Murat Kartal was suspended from association with any FINRA member in all capacities for 10 months for unsuitably and excessively trading a senior customer's account. In light of Kartal's financial status, no monetary sanctions were imposed.

Kartal engaged in quantitatively uns...

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According to FINRA, Murat Kartal was suspended from association with any FINRA member in all capacities for 10 months for unsuitably and excessively trading a senior customer's account. In light of Kartal's financial status, no monetary sanctions were imposed.

Kartal engaged in quantitatively unsuitable trading in the senior customer's account resulting in a high turnover rate, high annualized cost-to-equity ratio, and significant losses. Kartal's trading in the customer's account generated total trading costs of $206,667, including $189,446 in commissions, and caused $51,959 in realized losses. The customer routinely followed Kartal's recommendations to engage in high frequency trading, giving Kartal de facto control over the account. The trading was excessive and unsuitable given the customer's age and investment profile.

Excessive trading, also known as churning, occurs when a representative trades a customer's account primarily to generate commissions rather than to benefit the customer. Senior investors are particularly vulnerable to churning because they often rely on their accounts for retirement income and may not have time to recover from losses.

This case demonstrates the serious harm that excessive trading can cause to senior investors. The customer paid over $206,000 in trading costs and suffered significant losses, all to generate commissions for the representative. Investors, particularly seniors, should be alert to unusually frequent trading in their accounts and question whether it serves their interests or the representative's.

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According to FINRA, Daniel M. King was fined $10,000, suspended from association with any FINRA member in all capacities for two months, and ordered to pay $33,374.31 plus interest in restitution to a customer for recommending unsuitable use of margin to effect trades in accounts of two customers wh...

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According to FINRA, Daniel M. King was fined $10,000, suspended from association with any FINRA member in all capacities for two months, and ordered to pay $33,374.31 plus interest in restitution to a customer for recommending unsuitable use of margin to effect trades in accounts of two customers who were not sophisticated investors.

King recommended the use of margin in his customers' accounts to leverage additional buying power while also employing a short-term trading strategy. He frequently recommended that customers buy securities on margin and, after holding the positions for a short time, sell those securities, often incurring realized losses in addition to trading costs and margin interest. The margined positions often experienced price declines, causing margin calls, which were often met by selling securities at a loss.

King's recommendations exposed his customers to significant risk, increased costs, and sizeable losses. He lacked a reasonable basis to believe that using margin in this way was suitable given the customers' investment objectives, financial situation, and needs. Neither customer had prior experience using margin, and both followed King's recommendations. As a result, one customer, a retired repairman, had realized and unrealized trading losses of $22,486.27, and the second customer, an IT account manager, had realized and unrealized trading losses of $58,050.27.

This case illustrates the dangers of margin trading, particularly for unsophisticated investors. Margin amplifies both gains and losses, and when combined with short-term trading, can lead to devastating losses. Representatives must carefully assess whether margin is suitable before recommending it to customers.

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