Bad Brokers

According to FINRA, Eric James Stone was barred from association with any FINRA member in all capacities for failing to make a complete production of information and documents and failing to appear for on-the-record testimony requested by FINRA.

The investigation originated from a Form U5 filed b...

Read More

According to FINRA, Eric James Stone was barred from association with any FINRA member in all capacities for failing to make a complete production of information and documents and failing to appear for on-the-record testimony requested by FINRA.

The investigation originated from a Form U5 filed by Stone's member firm disclosing that he had been discharged because of concerns related to loans he solicited and obtained from clients. Stone initially did not respond by the due date but belatedly provided a statement that included some of the information sought by FINRA. Although he later provided additional information, he failed to provide substantially all of the information or any of the documents sought by FINRA, and those materials remain outstanding.

Stone's refusal to fully cooperate with FINRA's investigation into allegations of soliciting and obtaining loans from clients represents a serious violation of regulatory obligations. Investors should understand that borrowing money from clients raises significant compliance and ethical concerns, as it can create conflicts of interest and put clients in vulnerable positions. Firms prohibit or strictly regulate such arrangements to protect customers.

The permanent bar from the industry reflects the gravity of obstructing regulatory investigations, particularly when the underlying conduct involves potential exploitation of client relationships. Stone's failure to produce requested documents and appear for testimony prevented FINRA from fully investigating the allegations, which involved loans solicited from his own clients. This case demonstrates that cooperation with regulatory inquiries is mandatory, and failure to comply results in the most severe sanctions available.

Show Less

According to FINRA, Kevin Andrew Hobbs was barred from association with any FINRA member in all capacities for providing an inaccurate response to FINRA's request for information and for participating in numerous private securities transactions without prior written disclosure or approval.

FINRA'...

Read More

According to FINRA, Kevin Andrew Hobbs was barred from association with any FINRA member in all capacities for providing an inaccurate response to FINRA's request for information and for participating in numerous private securities transactions without prior written disclosure or approval.

FINRA's investigation concerned allegations that Hobbs traded away from his member firm in a customer's third-party brokerage account. When FINRA requested that Hobbs identify all individuals for whom he had effected securities transactions in accounts other than at his firm, he provided an inaccurate response that failed to identify at least one other individual whose account he had traded away from his firm. This information was material to FINRA's investigation. Hobbs also failed to disclose this information to his firm when questioned during its internal investigation.

Additionally, FINRA found that Hobbs participated in numerous private securities transactions without prior written disclosure to or approval from his firm. Trading away from one's firm and engaging in private securities transactions without disclosure create significant risks for investors. These activities occur outside the firm's supervisory framework, meaning they lack oversight to ensure suitability, proper execution, and compliance with securities regulations.

Investors should understand that registered representatives must conduct securities business through their registered firm and disclose any private securities transactions to ensure proper supervision. When representatives trade in customer accounts at other firms without disclosure, customers lose important protections. The permanent bar reflects both the underlying misconduct of undisclosed trading activities and the additional serious violation of providing false information to regulators during an investigation.

Show Less

According to FINRA, Crystal Bing Sum Cho was barred from association with any FINRA member in all capacities for refusing to produce information and documents requested by FINRA.

The request was made in connection with FINRA's investigation into the circumstances giving rise to Cho's member firm'...

Read More

According to FINRA, Crystal Bing Sum Cho was barred from association with any FINRA member in all capacities for refusing to produce information and documents requested by FINRA.

The request was made in connection with FINRA's investigation into the circumstances giving rise to Cho's member firm's termination of her association with it. FINRA's investigation sought to understand the reasons behind Cho's termination, but Cho refused to provide the requested information and documents. This refusal prevented FINRA from conducting a thorough investigation into the circumstances of her departure from the firm.

Investors should understand that when firms terminate registered representatives, FINRA often investigates to determine whether customer harm occurred or regulatory violations took place. Registered persons have a fundamental obligation to cooperate with these investigations by providing requested information and documents. Refusing to cooperate with regulatory inquiries undermines investor protection and the integrity of the regulatory system.

The permanent bar from the securities industry reflects the serious nature of obstructing regulatory investigations. When individuals refuse to provide basic information about their termination from a firm, it raises concerns about what they may be hiding and prevents regulators from protecting investors. This case serves as a clear reminder that cooperation with FINRA investigations is not optional. Registered persons who refuse to produce documents or information when requested face automatic bars from the industry, effectively ending their securities careers. The severity of this sanction underscores the critical importance regulators place on transparency and cooperation in maintaining market integrity.

Show Less

According to FINRA, David Shane Simmons was barred from association with any FINRA member in all capacities for refusing to produce documents and information and refusing to appear for on-the-record testimony requested by FINRA.

The investigation concerned allegations referenced in a Form U5 file...

Read More

According to FINRA, David Shane Simmons was barred from association with any FINRA member in all capacities for refusing to produce documents and information and refusing to appear for on-the-record testimony requested by FINRA.

The investigation concerned allegations referenced in a Form U5 filed by Simmons' member firm that disclosed he was discharged when he, through counsel, informed the firm that he would not provide a response to the firm's inquiries in connection with an internal investigation. FINRA sought to investigate the circumstances surrounding Simmons' discharge and the underlying conduct that prompted the firm's internal investigation. However, Simmons refused to participate in FINRA's investigation by failing to produce requested documents and information and refusing to appear for testimony.

Investors should understand that when firms discharge registered representatives and file Form U5 disclosures, FINRA typically investigates to determine the full facts and whether customer harm or regulatory violations occurred. The fact that Simmons refused to cooperate with both his firm's internal investigation and FINRA's subsequent investigation raises serious questions about the underlying conduct.

The permanent bar reflects the fundamental importance of regulatory cooperation in the securities industry. Registered persons have an obligation to assist in investigations, and refusal to do so prevents regulators from fulfilling their investor protection mission. When individuals refuse to provide any information or testimony about the circumstances of their discharge, they effectively obstruct the regulatory process. This case demonstrates that non-cooperation with regulatory authorities results in the most severe sanction available, permanent removal from the securities industry.

Show Less

According to FINRA, Sukthavy Sisamouthp was barred from association with any FINRA member in all capacities for refusing to provide information, documents, and on-the-record testimony requested by FINRA.

The investigation concerned allegations contained in a Form U5 filed by Sisamouthp's member f...

Read More

According to FINRA, Sukthavy Sisamouthp was barred from association with any FINRA member in all capacities for refusing to provide information, documents, and on-the-record testimony requested by FINRA.

The investigation concerned allegations contained in a Form U5 filed by Sisamouthp's member firm disclosing that he had been discharged for removing cash from an office of the firm's insurance affiliate. FINRA requested that Sisamouthp provide information, documents, and testimony related to these allegations of cash removal, but he refused to cooperate with the investigation. This refusal prevented FINRA from investigating the serious allegations of potential misappropriation or theft from the firm.

Investors should understand that allegations of cash removal by registered representatives raise serious concerns about honesty, integrity, and potential customer harm. When firms discover such conduct, they terminate the individual and file a Form U5 disclosure to alert regulators and other firms. FINRA then investigates to determine the full scope of the conduct and whether any customers or other parties were harmed.

The permanent bar from the securities industry reflects both the seriousness of the underlying allegations and the additional violation of obstructing the regulatory investigation. By refusing to provide any information or testimony about allegations that he removed cash from the firm, Sisamouthp prevented FINRA from determining what actually occurred and whether customers suffered losses. This case illustrates that cooperation with regulatory inquiries is mandatory, particularly when investigations involve potential theft or misappropriation. Non-cooperation results in permanent removal from the industry.

Show Less

According to FINRA, Joseph Louis Menotti was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in all capacities for nine months for making reckless misrepresentations to the Michigan Unemployment Insurance Agency in requests for unemployment benefits.

Menot...

Read More

According to FINRA, Joseph Louis Menotti was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in all capacities for nine months for making reckless misrepresentations to the Michigan Unemployment Insurance Agency in requests for unemployment benefits.

Menotti applied for pandemic unemployment assistance benefits through the Michigan agency despite earning a salary while teleworking for his member firm. He submitted 18 certifications claiming pandemic unemployment assistance benefits. In each certification, Menotti recklessly misrepresented that he did not work full time during the week he requested benefits. In 17 certifications, he also recklessly misrepresented that he did not do any type of work or have any earnings during the week he requested benefits. In fact, Menotti was employed full-time as a registered representative and received a salary from his member firm.

Based on Menotti's misrepresentations, the Michigan Unemployment Insurance Agency approved his application and Menotti received more than $11,000 in pandemic unemployment assistance benefits to which he was not entitled. Menotti has repaid $1,570 to the Michigan agency but owes additional restitution.

Investors should understand that FINRA holds registered persons to high standards of honesty and ethical conduct, even in matters outside their securities activities. Fraudulently obtaining government benefits demonstrates a lack of integrity that raises concerns about an individual's fitness to handle customer accounts and funds. The nine-month suspension and fine reflect the seriousness of repeatedly making false statements to a government agency to obtain benefits fraudulently. This case serves as a reminder that registered representatives must maintain ethical standards in all aspects of their conduct.

Show Less

According to FINRA, Kevin Casey was fined $5,000 and suspended from association with any FINRA member in all capacities for 30 days for creating, signing, and producing checklists without disclosing to FINRA that he had created them after receiving FINRA's request for information.

FINRA requested...

Read More

According to FINRA, Kevin Casey was fined $5,000 and suspended from association with any FINRA member in all capacities for 30 days for creating, signing, and producing checklists without disclosing to FINRA that he had created them after receiving FINRA's request for information.

FINRA requested that Casey's member firm provide checklists documenting reviews for a specified period. Casey had not created such checklists during this period as required. After the firm provided Casey with FINRA's request, he created and signed checklists reflecting that he had reviewed surveillance reports on a weekly basis, even though he had not actually created these checklists at the time of the reviews. Casey then produced these backdated checklists to FINRA without disclosing that he had created them after receiving FINRA's request.

By creating false documentation to make it appear that required supervisory reviews had been conducted when they had not, Casey misled FINRA investigators about his firm's supervisory compliance. This conduct undermines the integrity of regulatory examinations and investigations, which rely on accurate documentation to assess whether firms are properly supervising their representatives.

Investors should understand that supervisory reviews and documentation requirements exist to ensure firms are monitoring their representatives' activities and protecting customers. When supervisors fail to conduct required reviews and then create false documentation to cover up this failure, it demonstrates both inadequate supervision and dishonesty. The suspension reflects the seriousness of misleading regulators by producing fabricated compliance documents. This case serves as a warning that backdating or falsifying supervisory records is a serious violation that results in sanctions even when the underlying supervisory failure may have been less serious.

Show Less

According to FINRA, Gary Mark Goldberg was assessed a deferred fine of $25,000, suspended from association with any FINRA member in all capacities for 18 months, and ordered to pay $594,590 plus interest in deferred restitution to customers for making unsuitable variable annuity recommendations.

...

Read More

According to FINRA, Gary Mark Goldberg was assessed a deferred fine of $25,000, suspended from association with any FINRA member in all capacities for 18 months, and ordered to pay $594,590 plus interest in deferred restitution to customers for making unsuitable variable annuity recommendations.

Goldberg recommended that customers who had or were establishing advisory accounts purchase B-shares of a particular variable annuity in their brokerage accounts, even though advisory shares of the same variable annuity were available. The advisory shares provided virtually identical living and death benefits, sub-account investment options, and other features as the B-shares, but at lower cost to customers. Goldberg and his firm earned a seven percent commission on B-share sales but no commissions on advisory share sales.

Goldberg also recommended that each customer transfer the B-shares from their brokerage account to their advisory account, usually within one business day of purchase. As a result, customers were required to pay annual advisory fees of 1.875 percent plus annual variable annuity fees that were 0.95 percent higher than if they had purchased advisory shares. Customers were also subject to a seven-year surrender fee from purchasing B-shares. Goldberg's customers who held B-shares have collectively paid approximately $594,590 in unnecessary fees as a result of the higher annual fees imposed by B-shares.

Investors should be aware that variable annuities come in different share classes with varying fee structures and commission arrangements. Representatives have an obligation to recommend share classes that are in customers' best interests rather than those generating higher commissions. This case demonstrates how unsuitable share class recommendations can result in customers paying tens of thousands of dollars in unnecessary fees over time.

Show Less

According to FINRA, Jose Manuel Candelario Padilla was fined $2,500, suspended from association with any FINRA member in all capacities for three months, and ordered to pay $26,422 plus interest in restitution to customers for willfully violating the Care Obligation under Regulation Best Interest.
...

Read More

According to FINRA, Jose Manuel Candelario Padilla was fined $2,500, suspended from association with any FINRA member in all capacities for three months, and ordered to pay $26,422 plus interest in restitution to customers for willfully violating the Care Obligation under Regulation Best Interest.

Candelario Padilla recommended that retail customers purchase leveraged and inverse exchange-traded funds (NT-ETFs) without having a sufficient understanding of the risks and features associated with these products. As a result, he did not have a reasonable basis to believe that NT-ETFs could be suitable for or in the best interest of any retail customers. At Candelario Padilla's recommendation, customers held NT-ETF positions for periods ranging from 14 to 65 days, and these customers suffered net losses from NT-ETF trading of approximately $26,000.

Investors should understand that leveraged and inverse ETFs are complex products designed for short-term trading by sophisticated investors who can monitor their positions closely. These products use derivatives and debt to amplify returns or provide inverse exposure to an underlying index. However, due to daily rebalancing and compounding effects, they generally should not be held for extended periods, as their performance can deviate significantly from the underlying index over time.

This case illustrates the importance of Regulation Best Interest, which requires broker-dealers to act in the best interest of retail customers when making recommendations. Representatives must have a reasonable basis to believe that a recommendation is in a customer's best interest based on the customer's investment profile. When representatives recommend complex products without understanding their risks, customers can suffer significant losses, as occurred here with approximately $26,000 in customer losses.

Show Less

According to FINRA, Maria P. Acevez Perez was fined $5,000 and suspended from association with any FINRA member in all capacities for six months for failing to timely respond to FINRA requests for information and documents.

The investigation related to, among other things, Acevez Perez's disclose...

Read More

According to FINRA, Maria P. Acevez Perez was fined $5,000 and suspended from association with any FINRA member in all capacities for six months for failing to timely respond to FINRA requests for information and documents.

The investigation related to, among other things, Acevez Perez's disclosed outside business activity. She made an initial partial production and belatedly produced additional documents but failed to make a complete production until more than five months after an extended due date, and only after FINRA followed up in writing noting deficiencies in prior responses. FINRA later sent Acevez Perez another request containing sixteen additional request items. In response, she produced information and documents responsive to only one of the requests. Subsequently, she made another production that still did not respond to the outstanding requests. Acevez Perez belatedly made a complete production approximately two and one-half months after the original extended due date.

Investors should understand that timely responses to regulatory requests are critical to FINRA's ability to investigate potential misconduct and protect investors. When registered persons delay or provide incomplete responses to FINRA's information requests, it impedes investigations and can allow misconduct to continue. The investigation here concerned Acevez Perez's outside business activities, which firms must monitor to ensure they do not conflict with representatives' obligations to customers or involve unsuitable investments.

The six-month suspension reflects that while Acevez Perez eventually provided complete responses, her repeated delays and incomplete productions significantly hindered FINRA's investigation. This case demonstrates that registered persons must treat regulatory requests with urgency and provide complete, timely responses. Delays of months beyond extended deadlines result in significant sanctions.

Show Less