Bad Brokers

According to FINRA, Brendan Ercole was fined $7,500 and suspended from association with any FINRA member in all capacities for 15 business days for improperly removing non-public personal customer information from his member firm without the firm or customers' knowledge or consent.

In anticipatio...

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According to FINRA, Brendan Ercole was fined $7,500 and suspended from association with any FINRA member in all capacities for 15 business days for improperly removing non-public personal customer information from his member firm without the firm or customers' knowledge or consent.

In anticipation of joining another firm, Ercole downloaded and sent to his personal email address unencrypted documents containing non-public personal information of over 200 customers, including dates of birth, driver's license numbers, and social security numbers. Additionally, Ercole saved several different types of firm documents containing customer non-public personal information such as dates of birth and social security numbers to a drive external to the firm. Ercole resigned from the firm and joined a new firm that same day.

Ercole used the customers' non-public personal information he removed from the firm to populate a separate customer information database for use at his new firm. Prior to resigning, Ercole also compiled pre-filled new account packets containing non-public personal information to be sent to existing firm customers once he registered with his new firm to transition the customers. These pre-filled forms were saved on an electronic drive external to the firm's secure system and were disseminated to customers using email or physical mail once Ercole registered with the new firm.

Investors should understand that firms have strict policies protecting customer information, and representatives are prohibited from removing this information when they leave. This case illustrates a common but serious violation where departing representatives take customer information to facilitate transitioning customers to a new firm. By removing unencrypted documents containing sensitive information like social security numbers and driver's license numbers, Ercole exposed over 200 customers to potential identity theft and privacy violations.

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According to FINRA, Derek John Rehill was suspended from association with any FINRA member in all capacities for two months for preparing inaccurate customer contact notes reflecting telephone calls with customers. No monetary sanction was imposed in light of Rehill's financial status.

Rehill was...

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According to FINRA, Derek John Rehill was suspended from association with any FINRA member in all capacities for two months for preparing inaccurate customer contact notes reflecting telephone calls with customers. No monetary sanction was imposed in light of Rehill's financial status.

Rehill was responsible for periodically calling customers whose accounts his member firm had identified as actively traded to confirm, among other things, the investment objective and risk tolerance reflected on the customer's new account form. For each call, Rehill was required to complete a customer contact form including fields to record whether the customer had confirmed his or her investment objective and risk tolerance.

Rehill completed customer contact forms that inaccurately stated that customers had confirmed their investment objectives and risk tolerances when they had not. He also completed customer contact forms reflecting that customers had confirmed they had a speculative investment objective when, in fact, the customers had not made such confirmations. In one instance, Rehill completed a customer contact form reflecting that a customer had confirmed he had a speculative risk tolerance when Rehill had not asked the customer any questions about his risk tolerance.

Investors should understand that customer contact notes and investment profile confirmations are important safeguards to ensure that trading activity in accounts remains suitable for customers' actual objectives and risk tolerance. When representatives falsify these records, it undermines the firm's ability to supervise trading activity and protect customers from unsuitable recommendations. This case demonstrates that creating false documentation about customer conversations is a serious violation even when there is no evidence of customer harm. Accurate recordkeeping is fundamental to investor protection and regulatory oversight.

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According to FINRA, Jeffrey Lance Prince was fined $5,000 and suspended from association with any FINRA member in all capacities for three months for causing his member firm to maintain inaccurate books and records by falsifying representative codes for trades.

Prince entered into an agreement to...

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According to FINRA, Jeffrey Lance Prince was fined $5,000 and suspended from association with any FINRA member in all capacities for three months for causing his member firm to maintain inaccurate books and records by falsifying representative codes for trades.

Prince entered into an agreement to service certain customer accounts, including executing trades, under a joint representative code he shared with a retired representative. The agreement specified what percentages of commissions Prince and the retired representative earned on trades placed using the joint representative code. Although the firm's system correctly prepopulated trades with the joint representative code pursuant to the agreement, Prince changed the representative code to a different code he shared with the retired representative.

As a result, the firm's trade confirmations reflected an inaccurate representative code, and Prince received a higher percentage of commissions than what he was entitled to receive under the joint production agreement. Prince mistakenly believed that the retired representative had previously agreed that he could change the representative codes to receive higher commission percentages. However, Prince did not confirm this understanding by asking the retired representative whether he could change codes or speaking with the firm.

The firm has since paid restitution of approximately $17,000 to the retired representative, which is the approximate amount of additional commissions that should have been credited to the retired representative if Prince had not changed the representative code on trades. Investors should understand that accurate books and records, including correct representative codes on trades, are essential for proper supervision, commission tracking, and regulatory oversight. Altering these codes, even based on a mistaken belief, constitutes a serious violation.

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According to FINRA, Roman Meyerhans was fined $10,000 and suspended from association with any FINRA member in all capacities for 30 days for causing his member firm to maintain incomplete books and records by using an instant messaging application to communicate with firm customers regarding securit...

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According to FINRA, Roman Meyerhans was fined $10,000 and suspended from association with any FINRA member in all capacities for 30 days for causing his member firm to maintain incomplete books and records by using an instant messaging application to communicate with firm customers regarding securities-related business.

The instant messaging application was not an approved electronic communications channel, so the firm did not capture or maintain Meyerhans' communications through this platform. After discovering Meyerhans' use of the unapproved instant messaging application, the firm issued a Letter of Education reminding him of the firm's prohibition against using unapproved electronic messaging platforms. Meyerhans acknowledged that he had read, understood, and agreed to comply with the terms of the Letter of Education, including the firm's electronic communications policies.

Despite this acknowledgment, Meyerhans continued to use the instant messaging application to communicate with firm customers regarding securities-related business for another 19 months. This extended period of continued violations after receiving explicit warning from the firm demonstrates a willful disregard for compliance requirements and firm policies.

Investors should understand that firms are required to maintain records of all securities-related communications with customers. This requirement exists so that firms can supervise representatives' communications, respond to customer complaints, and allow regulators to review communications during investigations. When representatives use unapproved messaging applications, these communications occur outside the firm's recordkeeping and supervisory systems, creating gaps in oversight and accountability. The case demonstrates that continuing to violate recordkeeping requirements after receiving explicit warnings from a firm results in significant sanctions. Representatives must use only approved communication channels when discussing securities business with customers.

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According to FINRA, Olivier Robert Gillier was assessed a deferred fine of $15,000 and suspended from association with any FINRA member in all capacities for 12 months for participating in a private securities transaction without providing prior written notice to his member firm.

Gillier made a c...

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According to FINRA, Olivier Robert Gillier was assessed a deferred fine of $15,000 and suspended from association with any FINRA member in all capacities for 12 months for participating in a private securities transaction without providing prior written notice to his member firm.

Gillier made a capital contribution of $300,000 in exchange for Class A membership interests in a limited liability company formed to purchase and manage a building in New York. Gillier also facilitated the investments of three individuals, including one firm customer, who invested a total of more than $2 million in Class B membership interests in the LLC. The right to manage the LLC was vested exclusively in a managing member. Neither Gillier nor the Class B investors had any role in the operation or management of the building. Class A and Class B members expected to share in potential LLC profits according to their membership percentages. These membership interests were investment contracts constituting securities.

Gillier's involvement in the LLC was outside the scope of his employment with the firm, and he did not provide prior written notice to the firm before investing in the LLC or facilitating the investments of the Class B investors. Additionally, Gillier falsely certified on the firm's annual compliance attestations that he had not engaged in any private securities transactions that had not been previously disclosed to the firm.

Investors should understand that private securities transaction rules, often called selling away, require representatives to provide written notice to their firms before participating in securities transactions outside their employment. This allows firms to evaluate potential conflicts of interest, assess risks to customers, and provide appropriate supervision. The case is particularly serious because Gillier facilitated investments by three other individuals, including a firm customer, and then falsely certified compliance on annual attestations.

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According to FINRA, Andrew Justin Grant was fined $5,000 and suspended from association with any FINRA member in all capacities for one month for exercising discretionary authority in customer accounts without obtaining prior written authorization from customers and without having the accounts accep...

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According to FINRA, Andrew Justin Grant was fined $5,000 and suspended from association with any FINRA member in all capacities for one month for exercising discretionary authority in customer accounts without obtaining prior written authorization from customers and without having the accounts accepted as discretionary accounts by his member firm.

Discretionary authority allows a representative to make investment decisions in a customer's account without obtaining the customer's prior approval for each transaction. This includes deciding which securities to buy or sell, the amount of securities, and whether to buy or sell. Because of the significant control this gives representatives over customer accounts, FINRA rules require written authorization from the customer and firm acceptance of the account as discretionary before a representative can exercise discretion.

Grant exercised discretionary authority in customer accounts without completing these required steps. By making investment decisions without proper authorization, Grant violated important safeguards designed to protect customers from unauthorized trading. Discretionary accounts require enhanced supervision by firms to ensure representatives do not abuse their authority or engage in excessive trading to generate commissions.

Investors should understand that they must provide written authorization before a representative can exercise discretion in their accounts, and the firm must formally accept the accounts as discretionary. If a representative is making investment decisions without asking for approval on each trade, and no discretionary authorization has been signed, this constitutes unauthorized trading. Customers should immediately contact their firm if they discover unauthorized discretionary trading in their accounts. This case demonstrates that exercising unauthorized discretion results in sanctions including suspension from the industry.

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According to FINRA, Dana H. Davis was suspended from association with any FINRA member in all capacities for 12 months and ordered to pay $75,000 in deferred partial restitution to customers for recommending unsuitable use of margin to effect trades in customer accounts. No monetary fine was imposed...

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According to FINRA, Dana H. Davis was suspended from association with any FINRA member in all capacities for 12 months and ordered to pay $75,000 in deferred partial restitution to customers for recommending unsuitable use of margin to effect trades in customer accounts. No monetary fine was imposed in light of Davis' financial status.

Davis recommended extensive use of margin in his customers' accounts to leverage additional buying power while charging commissions on both buy and sell transactions. His customers were not experienced or sophisticated investors and did not understand margin. Davis' recommendations to engage in unsuitable trading on margin exposed his customers to significant risk, increased costs, and sizeable losses in their accounts. Davis lacked a reasonable basis to believe that using margin in this way was suitable given the customers' investment objectives, financial situation, and needs.

In total, Davis' customers realized trading losses of $108,016.82 and paid $150,067.15 in costs, commissions, and margin interest for trades executed on margin in their accounts. The total customer losses and costs exceeded $258,000, demonstrating the severe financial harm that can result from unsuitable margin trading recommendations.

Investors should understand that margin trading involves borrowing money from the brokerage firm to purchase securities, which amplifies both potential gains and losses. Margin also incurs interest charges and can result in margin calls requiring customers to deposit additional funds or face liquidation of positions at unfavorable prices. Margin trading is generally suitable only for experienced, sophisticated investors who understand the risks and can afford potential losses. When representatives recommend extensive margin use to inexperienced customers who do not understand it, they expose those customers to unsuitable risk that can result in devastating losses.

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According to FINRA, Miche D. Jean was named a respondent in a complaint alleging that he failed to provide information and documents and appear for on-the-record testimony requested by FINRA as part of its investigation into whether he converted money from his customer through fraudulent automated c...

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According to FINRA, Miche D. Jean was named a respondent in a complaint alleging that he failed to provide information and documents and appear for on-the-record testimony requested by FINRA as part of its investigation into whether he converted money from his customer through fraudulent automated clearing house (ACH) transfers to pay his personal credit card.

The underlying investigation concerns very serious allegations that Jean may have stolen money from a customer by making fraudulent ACH transfers from the customer's account to pay his own personal credit card bills. Customer conversion represents one of the most egregious violations in the securities industry, as it involves theft of customer funds by a person in a position of trust. Jean allegedly refused to cooperate with FINRA's investigation into these allegations by failing to provide requested information and documents and failing to appear for testimony.

Investors should understand that ACH transfers are electronic fund transfers that should only be initiated with proper customer authorization. When representatives make unauthorized transfers from customer accounts for their personal benefit, this constitutes conversion or theft. FINRA investigates these allegations seriously to protect investors and maintain industry integrity.

It is important to note that a complaint represents allegations that have not been proven, and Jean has the opportunity to defend against these charges. However, the failure to cooperate with the investigation itself constitutes a serious violation regardless of the underlying conduct. Registered persons have an obligation to participate in regulatory investigations, and refusal to do so typically results in a bar from the industry. Investors should monitor their accounts carefully for unauthorized transfers and immediately report any suspicious activity to their firm and regulators.

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According to FINRA, BrokerBank Securities, Inc. and Philip Paul Wright were named respondents in a complaint alleging that the firm, acting through Wright, permitted an unregistered individual to engage in securities business through the firm by participating in the sale of bonds and preferred share...

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According to FINRA, BrokerBank Securities, Inc. and Philip Paul Wright were named respondents in a complaint alleging that the firm, acting through Wright, permitted an unregistered individual to engage in securities business through the firm by participating in the sale of bonds and preferred shares of a single issuer to the firm's retail customers.

The complaint alleges that the unregistered individual engaged in securities business by and through the firm while he was not registered with FINRA in any capacity, and he was permitted to do so by the firm and Wright. The complaint also alleges that the firm and Wright permitted the unregistered individual to associate with the firm while he was statutorily disqualified. Statutory disqualification typically results from serious misconduct such as criminal convictions, regulatory bars, or findings of fraud, and disqualified individuals are prohibited from associating with FINRA member firms without special approval.

The complaint further alleges that the firm, acting through Wright, paid the unregistered individual compensation totaling more than $100,000 derived from commissions generated by his customers' purchases of securities through the firm while he was not registered with FINRA. Additionally, the complaint alleges that Wright, as the firm's custodian of records, failed to provide information and documents requested by FINRA in connection with its investigation of all sales of the securities through the firm, including those purchased by the unregistered individual's customers.

Investors should understand that allowing unregistered individuals to conduct securities business circumvents fundamental investor protections including registration examinations, background checks, and supervision requirements. The allegations are particularly serious because they involve an individual who was statutorily disqualified, meaning he had a regulatory history that would have prevented him from working in the industry. The firm allegedly paid this individual over $100,000 in commissions while he was conducting unregistered securities business.

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According to FINRA, Webull Financial LLC was fined $3 million for not exercising reasonable due diligence before approving customers for options trading, not maintaining a supervisory system reasonably designed to identify and respond to customer complaints, and not reporting certain written custome...

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According to FINRA, Webull Financial LLC was fined $3 million for not exercising reasonable due diligence before approving customers for options trading, not maintaining a supervisory system reasonably designed to identify and respond to customer complaints, and not reporting certain written customer complaints to FINRA as required.

Between December 2019 and July 2021, the firm did not exercise reasonable due diligence before approving customers for options trading. The firm employed an automated system to review customer applications for options trading, but the system failed to compare new applications with information previously provided by customers. This led to Webull approving customers for options trading who did not satisfy the firm's eligibility criteria or whose accounts contained red flags that options trading was potentially inappropriate.

For example, the firm approved more than 2,500 customers under age 21 to trade options spreads, even though the firm's eligibility criteria required customers to have at least three years of options trading experience before approval for that trading level. Due to program errors in automated systems, the firm mistakenly approved 9,000 accounts for options trading even though those customers stated they did not have any investment experience, which should have made them ineligible under the firm's criteria.

Separately, from May 2018 through December 2021, Webull's supervisory system to identify and respond to customer complaints was not reasonably designed. The firm failed to commit sufficient staff and resources to keep pace with hundreds of thousands of customer communications it received, including complaints. The firm also did not report certain written customer complaints to FINRA as required, including complaints involving allegations of theft or misappropriation. Investors should understand that options trading involves significant risks and requires appropriate knowledge and experience.

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