Bad Brokers

According to FINRA, Robert Vincent Judge was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for four months on August 3, 2023. The suspension was in effect from August 7, 2023, through December 6, 2023.

FINRA found that Judge permitted hi...

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According to FINRA, Robert Vincent Judge was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for four months on August 3, 2023. The suspension was in effect from August 7, 2023, through December 6, 2023.

FINRA found that Judge permitted his business partner to falsify his own signature and customer signatures on account documents. In certain instances, Judge signed his own name on documents after his business partner signed for the customer. The account documents, which included new account applications, money transfer forms, and Individual Retirement Account (IRA) contribution and distribution forms, were required books and records of his member firm. None of the customers complained.

FINRA also found that Judge caused his firm to maintain inaccurate books and records as a result of the falsified signatures.

Falsifying customer signatures on account documents is a serious violation that undermines the integrity of the account opening and maintenance process. Account documents typically require customer signatures to confirm that the customer has reviewed and agrees to the information contained in the documents, such as investment objectives, risk tolerance, and account terms. When signatures are falsified, there is no assurance that customers actually authorized the account activities or agreed to the representations made in the documents.

Even though none of the customers complained in this case, the falsification of signatures creates risks for investors and violates fundamental principles of customer protection. Customers have a right to review and approve documents before they are submitted to the firm, and brokers have an obligation to obtain genuine customer signatures rather than forging them for convenience.

The fact that Judge permitted his business partner to falsify both his own signature and customer signatures, and that Judge himself signed documents after customer signatures had been forged, demonstrates a pattern of disregard for proper procedures. These shortcuts may have been taken to expedite account processing, but they violated the firm's obligations to maintain accurate books and records.

Accurate books and records are fundamental to the securities industry. They enable regulatory examinations, help resolve customer disputes, and provide evidence of compliance with securities laws and regulations. When firms maintain inaccurate books and records due to falsified signatures, it undermines regulatory oversight and investor protection.

Investors should be concerned if their broker asks them to sign documents without reviewing them or if they later discover signatures on documents they do not remember signing. These can be red flags of improper practices. Investors should carefully review all documents before signing and keep copies of signed documents for their records.

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According to FINRA, Bradley Thomas Wastler was assessed a deferred fine of $7,500 and suspended from association with any FINRA member in all capacities for 10 months on August 3, 2023. The suspension was in effect from August 7, 2023, through June 6, 2024.

FINRA found that Wastler forged or fals...

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According to FINRA, Bradley Thomas Wastler was assessed a deferred fine of $7,500 and suspended from association with any FINRA member in all capacities for 10 months on August 3, 2023. The suspension was in effect from August 7, 2023, through June 6, 2024.

FINRA found that Wastler forged or falsified customer and registered representative electronic signatures on account documents. At least nine of the customers' names were signed without their permission. Wastler also electronically signed the name of another representative, his business partner, on account documents, at least some of which were without the representative's permission. None of the customers complained.

In addition, Wastler falsely attested in a compliance questionnaire that he had not signed or affixed another person's signature on a document. FINRA also found that by forging and falsifying customer and registered representative signatures, Wastler caused his member firm to maintain inaccurate books and records.

Forging customer signatures on account documents is a serious violation that undermines the integrity of the account opening and maintenance process. Account documents require customer signatures to confirm that the customer has reviewed and agreed to the information in the documents. When signatures are forged, there is no assurance that customers actually authorized the account activities or agreed to the representations made on their behalf.

The fact that at least nine customers had their names signed without permission demonstrates a pattern of misconduct. Even though none of the customers complained, the forgery of signatures creates risks for investors and violates fundamental principles of customer protection. Customers have the right to review and approve documents before they are submitted, and brokers have an obligation to obtain genuine signatures.

Wastler's conduct was aggravated by his false attestation in a compliance questionnaire that he had not signed another person's signature on a document. This false statement demonstrates a lack of candor and an attempt to conceal his misconduct from his firm. Compliance questionnaires are important tools that firms use to monitor their representatives' compliance with securities laws and firm policies. When representatives provide false answers, they undermine the effectiveness of the firm's compliance program.

The forgery of another registered representative's signature also raises concerns. Registered representatives are responsible for the activities conducted under their names, and forging their signatures can create confusion about who was actually responsible for account activities.

By causing the firm to maintain inaccurate books and records, Wastler undermined regulatory oversight and investor protection. Accurate books and records are fundamental to the securities industry and enable effective regulatory examinations and customer dispute resolution.

Investors should review all documents before signing and keep copies for their records. If they discover signatures they do not remember providing, they should immediately contact their firm and regulatory authorities.

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According to FINRA, Shane Nowosacki was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for one month on August 4, 2023. The suspension was in effect from August 7, 2023, through September 6, 2023.

FINRA found that Nowosacki engaged in an ...

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According to FINRA, Shane Nowosacki was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for one month on August 4, 2023. The suspension was in effect from August 7, 2023, through September 6, 2023.

FINRA found that Nowosacki engaged in an outside business activity without providing prior written notice to his member firm. Nowosacki requested approval from the firm to act as a general agent for an outside insurance company and the firm denied his request. Thereafter, while he was associated with the firm, Nowosacki sold fixed annuity contracts to firm customers and received compensation of approximately $7,210. These sales were outside the scope of Nowosacki's relationship with the firm.

FINRA rules require registered representatives to provide prior written notice to their member firms before engaging in any business activity outside the scope of their relationship with the firm. This rule serves important investor protection purposes by ensuring that firms are aware of their representatives' outside activities and can supervise those activities to prevent conflicts of interest, ensure suitability, and protect customers.

In this case, Nowosacki not only failed to provide prior notice, but actually requested approval and was explicitly denied by his firm. Despite this clear denial, he proceeded to engage in the outside business activity anyway. This demonstrates a deliberate disregard for his firm's decision and for FINRA's outside business activity rules.

The fact that Nowosacki sold fixed annuity contracts to firm customers makes his violation more serious. When registered representatives sell products to their firm's customers through outside business activities, it creates several concerns. First, the firm may not be aware of these transactions and therefore cannot supervise them. Second, customers may not understand that the transactions are not being conducted through the firm and may not be subject to the same protections. Third, there may be conflicts of interest if the representative is earning compensation that the firm is not aware of or cannot supervise.

Fixed annuities can be appropriate investments for some customers, but they also have features such as surrender charges and limited liquidity that make suitability analysis important. When these products are sold through undisclosed outside business activities, the firm cannot ensure that appropriate suitability analysis is being conducted.

Investors should be aware that their financial professionals may engage in outside business activities. They should ask questions about whether a particular transaction or service is being provided through the broker-dealer or through an outside business, and they should understand the differences in how those transactions are supervised and protected. Investors can also check FINRA's BrokerCheck system to see outside business activities that registered representatives have disclosed to their firms.

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According to FINRA, Michael Ramon DeLao was fined $2,500 and suspended from association with any FINRA member in all capacities for three months on August 8, 2023. In consideration of a sanction already levied by DeLao's member firm, FINRA made a corresponding reduction to the fine it imposed. The s...

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According to FINRA, Michael Ramon DeLao was fined $2,500 and suspended from association with any FINRA member in all capacities for three months on August 8, 2023. In consideration of a sanction already levied by DeLao's member firm, FINRA made a corresponding reduction to the fine it imposed. The suspension was in effect from September 5, 2023, through December 4, 2023.

FINRA found that DeLao failed to timely amend his Uniform Application for Securities Industry Registration or Transfer (Form U4) to disclose that he had been charged with, and subsequently been found guilty of, a felony. DeLao was charged in an Arizona State court with an offense deemed a felony and the court found him guilty. At that time, the court imposed conditions on DeLao that if successfully completed would lead the court to ultimately reclassify the offense as a misdemeanor, which the court later did.

Prior to the reclassification, the offense to which DeLao pleaded guilty was considered a felony offense for all purposes under Arizona law. As a result, DeLao was required to disclose that he was charged with a felony offense within 30 days of being charged and that he had been found guilty of that offense within no more than 10 days of the court's entry of judgment against him. However, DeLao failed to make any such disclosure until years later.

In addition, DeLao falsely stated on annual compliance questionnaires that he had no arrests that had not been disclosed to the firm.

Form U4 is a critical document in the securities industry. It contains information about a registered person's background, qualifications, and disciplinary history. This information is made available to the public through FINRA's BrokerCheck system, which allows investors to research the background of their financial professionals before deciding to work with them.

Registered representatives are required to keep their Form U4 accurate and current by amending it promptly when certain events occur, including criminal charges and convictions. These disclosure requirements exist to ensure that investors and regulators have current information about registered persons' backgrounds and can make informed decisions about their trustworthiness and fitness to work in the securities industry.

DeLao's failure to disclose the felony charge and conviction for years deprived investors and regulators of important information about his background. Even though the offense was later reclassified as a misdemeanor, at the time it occurred it was a felony and required immediate disclosure.

DeLao's false statements on annual compliance questionnaires compound his violation. These questionnaires are important tools that firms use to monitor whether their representatives have properly updated their Form U4s. By providing false answers, DeLao prevented his firm from discovering and correcting the Form U4 deficiency.

Investors should always check FINRA's BrokerCheck before working with a financial professional to review their background and disciplinary history.

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According to FINRA, Kevin Joe Hall was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for four months on August 8, 2023. The suspension was in effect from August 21, 2023, through December 20, 2023.

FINRA found that Hall improperly used h...

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According to FINRA, Kevin Joe Hall was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for four months on August 8, 2023. The suspension was in effect from August 21, 2023, through December 20, 2023.

FINRA found that Hall improperly used his member firm's funds by incurring $725 in charges on his corporate credit card and submitting an expense report with inaccurate information. The charges were made by Hall or with his knowledge during a personal trip to a night club. Hall was not entitled to use the corporate credit card for non-business purposes.

Nonetheless, Hall submitted to the firm an expense report containing inaccurate information regarding the non-business charges and the firm paid the expenses.

Misuse of firm funds is a serious violation that demonstrates dishonesty and a lack of integrity. When firms provide corporate credit cards to their employees, they do so with the expectation that those cards will be used only for legitimate business expenses. Using corporate credit cards for personal expenses violates the trust that firms place in their employees and can be considered a form of theft or conversion of firm property.

In this case, Hall not only improperly used the corporate credit card for personal expenses at a night club during a personal trip, but he also submitted an expense report with inaccurate information in an attempt to obtain reimbursement from the firm. This demonstrates a deliberate attempt to conceal the improper charges and to defraud the firm.

The submission of false expense reports is particularly concerning because it involves active deception rather than a passive failure to correct a mistake. By providing inaccurate information in his expense report, Hall caused the firm to pay expenses that were not legitimate business expenses.

Integrity and honesty are fundamental qualities required of securities professionals. Investors trust their financial advisors to act honestly and ethically in managing their investments and handling their money. When a registered representative demonstrates a lack of honesty in dealing with his own firm, it raises serious questions about whether he can be trusted to deal honestly with customers.

While the amount at issue in this case ($725) is relatively small, the nature of the conduct—using firm funds for personal entertainment and then submitting false information to obtain reimbursement—demonstrates a concerning lack of integrity.

Firms rely on the honesty of their employees in reporting expenses and using corporate resources appropriately. When employees violate this trust, it can lead to financial losses for the firm and undermine the firm's compliance culture.

Investors should be concerned about financial professionals who demonstrate dishonesty in any aspect of their professional conduct, as it may indicate a broader pattern of unethical behavior.

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According to FINRA, Bryan Adem Joseph was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for 18 months on August 9, 2023. The suspension was in effect from August 21, 2023, through February 20, 2025.

FINRA found that Joseph possessed and ...

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According to FINRA, Bryan Adem Joseph was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for 18 months on August 9, 2023. The suspension was in effect from August 21, 2023, through February 20, 2025.

FINRA found that Joseph possessed and had access to his cell phone while taking the General Securities Representative (Series 7) examination. Joseph took the examination at his home, using a remote delivery platform. Prior to beginning the examination, Joseph attested that he had reviewed and would abide by FINRA's Rules of Conduct, which require candidates to store all personal items outside the room where they take the examination and prohibit access to personal items, including cell phones, during the examination. Prior to beginning the examination, Joseph also told the proctor that his cell phone was stored in another room.

FINRA's qualification examinations, including the Series 7 exam, assess whether individuals have the knowledge and competency required to perform the functions of a registered representative. These examinations are a critical component of FINRA's investor protection mission because they help ensure that only qualified individuals are allowed to sell securities and provide investment advice to the public.

The integrity of the examination process depends on candidates following the rules and not using unauthorized materials or assistance. Rules prohibiting access to cell phones and other personal items during examinations exist to prevent cheating and to ensure that examination results accurately reflect each candidate's knowledge and competency.

In this case, Joseph not only possessed and had access to his cell phone during the examination, but he also falsely attested that he would follow the rules and falsely told the proctor that his cell phone was stored in another room. This demonstrates deliberate dishonesty and an intentional violation of the examination rules.

Cell phones can be used to access information on the internet, to communicate with others who might provide answers, or to photograph examination questions. Even if Joseph did not actually use his cell phone during the examination, his possession of and access to it violated the rules and undermined the integrity of the examination process.

Cheating on qualification examinations is a serious violation because it means that individuals who have not demonstrated the required knowledge and competency may be allowed to work in the securities industry. This puts investors at risk because these individuals may not have the knowledge necessary to properly advise customers or comply with securities laws and regulations.

The 18-month suspension reflects the seriousness of Joseph's conduct and sends a message that FINRA will not tolerate cheating on its examinations. Integrity and honesty are essential qualities for securities professionals, and Joseph's conduct demonstrates a troubling lack of both.

Investors should have confidence that their financial professionals have passed legitimate examinations and possess the required knowledge and competency to serve them.

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According to FINRA, Richard S. Siminou was fined $5,000, suspended from association with any FINRA member in all capacities for four months, and ordered to pay $17,021 plus interest in restitution to customers on August 31, 2023. The suspension was in effect from September 18, 2023, through January ...

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According to FINRA, Richard S. Siminou was fined $5,000, suspended from association with any FINRA member in all capacities for four months, and ordered to pay $17,021 plus interest in restitution to customers on August 31, 2023. The suspension was in effect from September 18, 2023, through January 17, 2024.

FINRA found that Siminou excessively and unsuitably traded two elderly customer accounts. This trading resulted in an annualized cost-to-equity ratio of over 29 percent and 34 percent, respectively. As a result of Siminou's unsuitable recommendations, the customers paid $17,021 in commissions and fees.

Excessive trading, also known as churning, occurs when a broker places trades in a customer's account primarily to generate commissions rather than to benefit the customer's investment objectives. This harmful practice can rapidly deplete customer accounts through unnecessary trading costs and commissions while providing little or no investment benefit to the customer.

The cost-to-equity ratio is a key metric used to identify excessive trading. It measures the total costs (commissions, fees, and other charges) as a percentage of the average equity in the account. A cost-to-equity ratio over 29 percent means that the customer would need to earn returns of more than 29 percent just to break even after paying trading costs. Such high cost-to-equity ratios are generally considered excessive and unsuitable unless there are exceptional circumstances.

In this case, both accounts had annualized cost-to-equity ratios exceeding 29 percent, with one reaching 34 percent. These extraordinarily high ratios indicate that Siminou was placing far more trades than could reasonably be justified by the customers' investment objectives and that he was generating substantial commissions at the customers' expense.

The fact that the accounts belonged to elderly customers makes Siminou's conduct particularly concerning. Elderly investors may be more vulnerable to abusive sales practices and may be less able to recover from investment losses. They may also be more trusting of their financial advisors and less likely to question excessive trading activity.

Brokers have an obligation to recommend only those transactions that are suitable for their customers based on the customers' investment objectives, financial situation, and needs. When brokers recommend excessive trading that generates high commissions but provides little benefit to customers, they violate their suitability obligations and place their own financial interests ahead of their customers' interests.

The restitution of $17,021 plus interest that Siminou was ordered to pay represents the commissions and fees that the customers paid as a result of the excessive trading. This restitution is intended to make the customers whole for the harm they suffered.

Investors, particularly elderly investors, should be alert to signs of excessive trading in their accounts, such as frequent trading activity, high commission charges relative to account value, or trading that does not align with their investment objectives. They should review their account statements carefully and question any trading activity that seems excessive or inconsistent with their needs.

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According to FINRA, an Office of Hearing Officers (OHO) issued a decision on August 4, 2023, barring Suzanne Marie Capellini from association with any FINRA member in all capacities. No other sanctions were imposed because of the bar. Capellini appealed the decision to the National Adjudicatory Coun...

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According to FINRA, an Office of Hearing Officers (OHO) issued a decision on August 4, 2023, barring Suzanne Marie Capellini from association with any FINRA member in all capacities. No other sanctions were imposed because of the bar. Capellini appealed the decision to the National Adjudicatory Council (NAC), so the sanction is not in effect pending review.

The OHO found that Capellini provided false and misleading responses and an altered document to FINRA in response to its requests related to low-priced securities trading activity in accounts held by her husband at her member firm. The evidence demonstrated that Capellini altered one document before providing it to FINRA by jaggedly cutting off the bottom almost three-quarters of an inch of each page of the form provided. Capellini also acted intentionally to mislead FINRA and continued to disavow responsibility for her actions even up through the hearing.

The OHO also found that Capellini failed to establish and implement an anti-money laundering (AML) program reasonably designed to cause the detection and reporting of suspicious low-priced securities activity under the Bank Secrecy Act (BSA). Capellini failed to detect or investigate many red flags of suspicious activity in a customer's account, some of which may have been reportable.

While trading in low-priced securities was a tiny fraction of her firm's overall business, Capellini's failures were systemic and widespread, encompassing all low-priced securities activity at the firm. In addition, Capellini's misconduct led to the potential for her own monetary gain because her husband used nearly $400,000 in low-priced securities proceeds for their household living expenses, such as rent and tuition. Capellini's misconduct demonstrated a lack of understanding of the AML rules and her duties as an anti-money laundering compliance officer (AMLCO) and compliance professional.

Providing false information and altered documents to FINRA is among the most serious violations a securities professional can commit. It undermines the entire regulatory process and makes it impossible for FINRA to effectively investigate potential misconduct and protect investors. The fact that Capellini altered documents by physically cutting off portions before providing them to FINRA demonstrates a deliberate attempt to conceal information from regulators.

Anti-money laundering programs are critical tools in combating financial crimes and preventing the securities markets from being used for money laundering. Broker-dealers are required by the Bank Secrecy Act to establish and implement AML programs reasonably designed to detect and report suspicious activity. As the firm's AMLCO, Capellini had primary responsibility for the firm's AML program.

Low-priced securities, often called penny stocks, are frequently used in money laundering schemes and fraudulent pump-and-dump schemes. AML programs must be designed to detect red flags of suspicious activity in low-priced securities trading, such as unusual trading patterns, rapid liquidation of positions, or deposits of large quantities of low-priced securities.

Capellini's failure to detect or investigate red flags of suspicious activity in her husband's accounts is particularly concerning because it suggests a conflict of interest may have influenced her performance of AML duties. The fact that her husband used nearly $400,000 in proceeds from low-priced securities for household expenses creates the appearance that she may have personally benefited from the failure to investigate and report suspicious activity.

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According to FINRA, Traderfield Securities Inc. and Mario Divita were sanctioned for failing to establish and maintain an adequate supervisory system regarding outside business activities. The firm was fined $75,000 jointly with Divita, and Divita was suspended from any principal capacity for six mo...

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According to FINRA, Traderfield Securities Inc. and Mario Divita were sanctioned for failing to establish and maintain an adequate supervisory system regarding outside business activities. The firm was fined $75,000 jointly with Divita, and Divita was suspended from any principal capacity for six months.

The case centered on two registered representatives who were engaged in outside activities involving investment funds and private placement offerings. These representatives owned and managed investment funds that raised $60 million from over 200 individual investors. While the representatives presented these activities as outside business activities to the firm and Divita, neither conducted proper due diligence to determine whether they should be treated as outside securities activities.

FINRA found that the firm and Divita failed to evaluate whether these activities should be restricted, prohibited, or recorded on the firm's books and records. The firm's written supervisory procedures did not reference or require compliance with FINRA Rule 3270.01 or the factors listed there.

Investors should understand that brokerage firms have a responsibility to properly supervise their registered representatives' outside activities, especially when those activities involve investment-related business. When firms fail to maintain adequate supervisory systems, it can expose investors to unauthorized or unsuitable investment schemes. This case demonstrates the importance of firms conducting thorough evaluations of representatives' outside activities to determine their true nature and potential conflicts of interest. The substantial amount raised ($60 million from over 200 investors) underscores the significant risk that inadequate supervision can pose to the investing public.

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According to FINRA, Electronic Transaction Clearing, Inc. was sanctioned with a total fine of $3 million for failing to reasonably supervise for potentially manipulative trading and failing to establish adequate anti-money laundering policies and procedures.

The firm failed to reasonably surveil ...

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According to FINRA, Electronic Transaction Clearing, Inc. was sanctioned with a total fine of $3 million for failing to reasonably supervise for potentially manipulative trading and failing to establish adequate anti-money laundering policies and procedures.

The firm failed to reasonably surveil for certain forms of manipulation such as marking the open or close, prearranged trading, and wash sales. Most concerning, the firm failed to review more than one million alerts that exceeded its vendor-provided system's scoring threshold for potential manipulative trading. The firm had limited staff and resources to sufficiently review and resolve these alerts, and there were significant delays in reviewing surveillance alerts. Additionally, the firm permitted first-level reviewers to close surveillance alerts without any oversight or supervision by a firm principal.

From an AML perspective, the firm failed to reasonably surveil trading and did not respond to red flags of suspicious activity for purposes of determining whether to file Suspicious Activity Reports (SARs). The firm also failed to implement reasonable procedures for filing SARs when it detected suspicious transactions, resulting in the firm failing to file SARs in certain instances where suspicious activity had been identified.

FINRA also found that the firm's market access controls and supervisory procedures were not reasonably designed, including inadequate documentation of financial risk management controls and overly permissive price controls for sponsored access clients.

This case highlights the critical importance of adequate staffing and resources for compliance functions. Firms cannot simply install surveillance systems and ignore the alerts they generate. Investors should be aware that inadequate supervision creates an environment where manipulative trading and money laundering can flourish, potentially harming market integrity and individual investors.

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