Bad Brokers

According to FINRA, Logan Jeffrey LaPace was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for three months for failing to disclose on his Form U4 that he had been charged with two felonies and that he pled guilty to one of the charges.

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According to FINRA, Logan Jeffrey LaPace was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for three months for failing to disclose on his Form U4 that he had been charged with two felonies and that he pled guilty to one of the charges.

Prior to becoming associated with his member firm, LaPace was charged with a felony in Hillsborough County, Florida, for possession of a controlled substance to which he pled not guilty. The felony charge was later reduced to a misdemeanor and subsequently dismissed. Shortly thereafter, LaPace was charged with another felony in Fulton County, Indiana, for possession of a controlled substance. LaPace pled guilty to the felony charge, with the understanding that he could move for the court to modify the judgment to a misdemeanor on successful completion of probation. His sentence and judgment was ultimately modified to a misdemeanor.

While associated with his firm, LaPace completed and signed an initial Form U4 in which he did not disclose the two felony charges or that he pled guilty to, and was convicted of, one of the felonies. Five months later, the firm filed an amended Form U4 that disclosed the felony charges and provided details concerning the charges, their reduction, and disposition.

Even though the felony charges were later reduced or dismissed, representatives are required to disclose them when they occur. This ensures transparency and allows firms and investors to make informed decisions.

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According to FINRA, Jeremiah Roman was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for four months for personally investing $44,100 in eight agreements with a merchant cash advance company and soliciting a firm customer to invest $150,000...

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According to FINRA, Jeremiah Roman was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for four months for personally investing $44,100 in eight agreements with a merchant cash advance company and soliciting a firm customer to invest $150,000, without providing prior written notice to or obtaining written approval from his member firm.

Roman's agreements with the company provided that he would receive a monthly payment in a specified amount in return for each investment. Roman introduced the customer to the company, provided marketing materials, and facilitated the exchange of information between the customer and the company. He did not disclose his participation in the customer's investments to his firm, even though he was advised by its compliance hotline to disclose his merchant cash advance company-related activities for review.

Furthermore, Roman falsely attested on an annual compliance questionnaire that he had not participated in any private securities transactions that had not been approved by the firm. This case demonstrates the risks of merchant cash advance investments and the importance of firm supervision. When representatives engage in private securities transactions without firm approval, customers lose the protection of firm due diligence and oversight.

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According to FINRA, Steven Marc Brakman was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in all capacities for six months for avoiding losing approximately $43,000 in service compensation by making false entries in his member firm's account management syst...

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According to FINRA, Steven Marc Brakman was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in all capacities for six months for avoiding losing approximately $43,000 in service compensation by making false entries in his member firm's account management system.

Brakman delinked accounts from assigned households with the false justification that the households had experienced a "divorce situation." However, Brakman had no basis to believe that any divorce had occurred. When customers subsequently transferred funds out of these delinked accounts, Brakman avoided a negative impact on his monthly service compensation.

This conduct constitutes fraud against the firm and demonstrates a willingness to manipulate systems for personal financial gain. When representatives make false entries in firm systems, it undermines the integrity of the firm's records and compensation structure. This case shows that representatives who manipulate firm systems to inflate their compensation face serious disciplinary consequences.

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According to FINRA, Robert Spencer Gerstein was assessed a deferred fine of $5,000, suspended from association with any FINRA member in all capacities for six months, and ordered to pay $129,496 plus interest in deferred restitution to customers for engaging in unsuitable short-term trading in secur...

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According to FINRA, Robert Spencer Gerstein was assessed a deferred fine of $5,000, suspended from association with any FINRA member in all capacities for six months, and ordered to pay $129,496 plus interest in deferred restitution to customers for engaging in unsuitable short-term trading in securities intended to be held long-term.

Gerstein recommended and effected unsuitable short-term trades in Class A mutual fund shares in customer accounts, with an average holding period of 198 days. He also recommended short-term trading of other products that his firm considered should be held long-term, including Unit Investment Trusts (UITs) and Market Linked Investments (MLIs). Gerstein did not have a reasonable basis to believe that the recommended transactions, for which he received total compensation of $129,496, were suitable for the customer accounts.

Gerstein also caused his firm to maintain inaccurate books and records by marking as "unsolicited" order tickets for sale transactions in customer accounts when, in fact, he had solicited each transaction. This false marking was likely intended to avoid supervisory scrutiny of the unsuitable trading pattern.

This case demonstrates the harm caused by short-term trading in long-term investments. Class A mutual fund shares typically carry front-end sales charges, making them unsuitable for short-term trading. When representatives engage in such trading, they generate commissions while causing customers to incur unnecessary charges and potentially miss out on long-term investment returns.

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According to FINRA, Gregory Edward Collins was assessed a deferred fine of $12,500 and suspended from association with any FINRA member in all capacities for six months for earning over $150,000 by engaging in outside business activities outside the scope of his relationship with his member firm.

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According to FINRA, Gregory Edward Collins was assessed a deferred fine of $12,500 and suspended from association with any FINRA member in all capacities for six months for earning over $150,000 by engaging in outside business activities outside the scope of his relationship with his member firm.

Collins worked as a lecturer in finance at two universities and at a retail distributor, receiving compensation from all three positions, without disclosing the activities to or getting approval from his firm. In addition, Collins became involved in two other outside business activities before providing notice to his firm and continued after the firm explicitly denied his requests to participate in them.

Collins served as strategic advisor to a hedge fund, providing investment advice and other services, receiving approximately $5,000 each month. He first disclosed this activity to his firm inaccurately and incompletely, describing his role merely as a consultant. Despite the firm denying his request, he continued acting as strategic advisor until the firm initiated an internal investigation. Similarly, Collins created a website to sell online financial education courses. The firm explicitly denied approval, but Collins maintained the website.

Collins also submitted false compliance attestations representing that he had disclosed all outside business activities. As part of his role as strategic advisor, he traded securities on behalf of the hedge fund through its brokerage account at an outside firm without notifying his firm.

This case involves multiple deliberate violations including undisclosed outside business activities, continuing activities after explicit firm denial, false compliance attestations, and trading on behalf of a hedge fund without firm knowledge. The pattern demonstrates serious disregard for firm supervision and investor protection rules.

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According to FINRA, James Floyd Garraway III was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for six months for electronically signing customer names on forms associated with insurance and securities products without customer permission, ...

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According to FINRA, James Floyd Garraway III was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for six months for electronically signing customer names on forms associated with insurance and securities products without customer permission, and signing one document for a customer with the customer's permission.

Although the majority of the forms pertained to insurance products, some of the forms involved securities products and accordingly were required books and records of the firm. As a result, Garraway caused his member firm to maintain inaccurate books and records.

Forging customer signatures, even with the belief that customers would have consented, is a serious violation that undermines the integrity of customer documentation and creates risks of fraud. Firms rely on authentic customer signatures to verify that customers authorized transactions and understood the terms of their investments. When representatives forge signatures, it becomes impossible to verify true customer consent and exposes customers to potential unauthorized transactions.

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According to FINRA, Howard Stuart Rothman was fined $5,000 and suspended from association with any FINRA member in all capacities for six months for misleadingly testifying about the creation of certain exhibits at a FINRA arbitration hearing.

A former member of Rothman's team at a previous firm ...

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According to FINRA, Howard Stuart Rothman was fined $5,000 and suspended from association with any FINRA member in all capacities for six months for misleadingly testifying about the creation of certain exhibits at a FINRA arbitration hearing.

A former member of Rothman's team at a previous firm filed an employment-related arbitration claim with FINRA against Rothman and others stemming from their departure from the firm. During the arbitration hearing, Rothman provided misleading testimony about the creation of certain exhibits, which undermines the integrity of the arbitration process.

FINRA arbitration is an important forum for resolving disputes between investors, registered representatives, and firms. The arbitration process depends on truthful testimony from all participants. When individuals provide misleading testimony, it undermines the ability of arbitrators to reach fair decisions and erodes confidence in the dispute resolution system. This case demonstrates that FINRA will discipline representatives who fail to testify truthfully in arbitration proceedings.

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According to FINRA, Eugene Hyunwook Kim was named in a complaint alleging that he engaged in unethical conduct, acted in bad faith, and misused customer funds in connection with a private placement offering sold by his member firm.

The complaint alleges that Kim proposed to his firm's commitment ...

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According to FINRA, Eugene Hyunwook Kim was named in a complaint alleging that he engaged in unethical conduct, acted in bad faith, and misused customer funds in connection with a private placement offering sold by his member firm.

The complaint alleges that Kim proposed to his firm's commitment committee that the firm initiate a private placement offering through a firm-affiliated fund for shares in a private company at a maximum price-per-share of $9.75. At the time Kim submitted the offering for approval, he had not confirmed a source of shares for the offering at any price. The firm approved the offering, and sales representatives solicited investors who invested a total of $4.055 million.

Prior to closing on escrow, Kim allegedly did not source shares for the offering at any price. However, instead of refunding investors, Kim allegedly initiated the closing of escrow and received a $16,220 commission. During the following months, Kim allegedly actively misled firm principals, representatives, and customers into believing that the fund had purchased shares at the maximum share price.

Ten months after the offering's closing, Kim allegedly purchased a limited number of shares at an average price of $20.22. Even then, over $1 million in investor capital allegedly remained in cash, as Kim was unable to find enough shares to purchase with the customers' investments. Ultimately, Kim's firm allegedly uncovered his misconduct and notified investors that they had not purchased shares at the maximum share price, but instead owned shares at a higher price and some of their funds had not been used to purchase shares at all.

This is an unadjudicated complaint, and Kim has not been found guilty of these allegations. However, the allegations, if true, would represent serious misconduct involving misuse of customer funds and fraudulent misrepresentations. Investors should be cautious about private placement offerings and ensure they understand exactly what they are purchasing and at what price.

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According to FINRA, Luke Michael Johnson was named in a complaint alleging that he made unsuitable recommendations to customers to purchase more than $2.35 million in illiquid alternative investments.

The complaint alleges that Johnson's recommendations to customers to purchase illiquid alternati...

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According to FINRA, Luke Michael Johnson was named in a complaint alleging that he made unsuitable recommendations to customers to purchase more than $2.35 million in illiquid alternative investments.

The complaint alleges that Johnson's recommendations to customers to purchase illiquid alternative investments were unsuitable in light of the customers' investment profiles—including their net worth, liquid net worth, annual income, investment objectives, risk tolerance, and, for senior customers, their ages. Johnson's recommendations also allegedly over-concentrated the customers' liquid net worth in illiquid and high-risk securities. Johnson allegedly earned more than $132,900 in commissions from these recommendations.

The complaint also alleges that Johnson, or his assistants acting at his direction, falsified customers' reported net worth and liquid net worth on his member firm's customer account information forms and the customers' alternative investment documents, compared to the customers' actual net worth and liquid net worth. Johnson or his assistants allegedly also often falsified customers' reported risk tolerance, liquidity needs, annual income, and/or their status as an accredited investor.

While Johnson was associated with the firm, it had a policy that limited customers from investing more than 35% of their liquid net worth in alternative investments. Johnson allegedly dramatically inflated customers' net worth and liquid net worth and dramatically understated the percentage of customers' assets invested in alternative investments in order to circumvent the firm's concentration policy and its supervisory oversight.

This is an unadjudicated complaint, and Johnson has not been found guilty of these allegations. However, the allegations, if true, would represent serious misconduct involving unsuitable recommendations and document falsification. Investors should carefully review account opening documents and alternative investment subscription agreements to ensure their financial information is accurately stated.

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According to FINRA, Darren Michael Kubiak was named in a complaint alleging that he failed to appear for on-the-record testimony requested by FINRA in connection with its investigation into the suitability of his recommendations to his customers, two of which were seniors, to invest in limited partn...

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According to FINRA, Darren Michael Kubiak was named in a complaint alleging that he failed to appear for on-the-record testimony requested by FINRA in connection with its investigation into the suitability of his recommendations to his customers, two of which were seniors, to invest in limited partnerships.

The complaint alleges that Kubiak's testimony was material to FINRA's investigation and was necessary to complete it, and his failure to appear for testimony impeded FINRA's investigation into whether Kubiak made unsuitable recommendations to his customers.

This is an unadjudicated complaint. However, the allegations involve a refusal to cooperate with a FINRA investigation into potentially unsuitable recommendations to seniors. Limited partnerships are often complex, illiquid investments that may not be suitable for all investors, particularly seniors who may need access to their funds and cannot afford to wait years for liquidity. When representatives refuse to testify about their recommendations, it suggests potential unfitness for the securities industry.

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