Bad Brokers

According to FINRA, David Brian Test was fined $5,000 and suspended from association with any FINRA member in all capacities for two months for forging customer initials and falsifying customer documents.

Test met with certain customers to transfer their assets to a mutual fund sold through his m...

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According to FINRA, David Brian Test was fined $5,000 and suspended from association with any FINRA member in all capacities for two months for forging customer initials and falsifying customer documents.

Test met with certain customers to transfer their assets to a mutual fund sold through his member firm and provided the customers with new account documents to complete and sign. After the customers had signed the new account documents, Test realized that some customers had not checked certain boxes on their new account documents related to the rationale for the transactions.

Without the customers' prior permission, Test checked the applicable boxes on new documents that had previously been signed by the customers and signed the customers' initials next to the boxes he had checked. Test then submitted all the documents to the firm. Subsequently, Test admitted to the firm that he had signed the customers' initials on the documents without the customers' prior permission.

After the firm identified Test's forgeries, the firm requested that the customers re-execute the new account documents, and all of the customers re-executed the documents with the same information Test had previously submitted. By forging and falsifying documents, Test caused the firm to maintain inaccurate books and records.

The suspension was in effect from February 21, 2023, through April 20, 2023.

Even though the customers ultimately re-executed the documents with the same information and no customer was harmed, Test's conduct was still a serious violation. Forging customer initials, even for what may seem like a minor omission, is never acceptable. Customers have the right to review and initial or sign every part of their account documents.

Test's conduct shows poor judgment and a willingness to take shortcuts rather than following proper procedures. The proper course of action would have been to contact the customers and ask them to check the boxes and initial the documents themselves. Instead, Test took it upon himself to forge their initials, which violated their trust and the firm's procedures.

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According to FINRA, William Anthony Massarweh was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in all capacities for one year for serving as chief financial officer for a non-profit foundation without providing prior notice to or receiving approval from hi...

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According to FINRA, William Anthony Massarweh was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in all capacities for one year for serving as chief financial officer for a non-profit foundation without providing prior notice to or receiving approval from his member firm, and for improperly using customer funds.

Massarweh's duties with the foundation included bookkeeping and tracking its expenses. Additionally, Massarweh completed, signed, and filed documentation establishing the foundation as a non-profit organization in the State of California. These activities fell outside the scope of Massarweh's relationship with his firm. Massarweh did not disclose his involvement with the foundation to his firm until after it inquired about his role with the foundation.

Massarweh also improperly used the funds of a customer at the firm. The customer instructed Massarweh to transfer $600,000 to the foundation as a charitable bequest. Instead of transferring the funds to an account held by the foundation, Massarweh initiated a request to transfer the funds to an account in his name. Although Massarweh believed the account was a related account of the foundation's, it was not and was solely in Massarweh's name. The firm reversed the transfer of funds, and the funds were never transferred to Massarweh.

The suspension was in effect from February 6, 2023, through February 5, 2024.

This case involves two separate but related violations. First, Massarweh failed to disclose his significant outside business activity serving as CFO of a non-profit foundation. Firms need to know about outside business activities so they can identify potential conflicts of interest and ensure that registered persons are not engaging in activities that could harm customers or the firm.

Second, and more seriously, Massarweh attempted to transfer $600,000 in customer funds to an account in his own name. Even though Massarweh claimed he believed the account was related to the foundation, the fact remains that the account was solely in his name. This created an unacceptable risk to customer funds. The firm's reversal of the transfer prevented the customer from being harmed, but the attempt itself was a serious violation.

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According to FINRA, Jay William Eng was fined $10,000 and suspended from association with any FINRA member in all capacities for 20 business days for impersonating a prospective customer on a telephone call with an annuity company and for improperly retaining and using nonpublic personal customer in...

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According to FINRA, Jay William Eng was fined $10,000 and suspended from association with any FINRA member in all capacities for 20 business days for impersonating a prospective customer on a telephone call with an annuity company and for improperly retaining and using nonpublic personal customer information from his former firms.

Eng impersonated a prospective customer on a telephone call to obtain information about the annuity's surrender timetable and charges. Eng used the prospective customer's social security number, date of birth, and policy number to convince the annuity company that he was the prospective customer. Although the prospective customer had requested that Eng transfer a variable annuity to Eng's member firm, the prospective customer was not aware that Eng contacted the annuity company and did not authorize Eng to impersonate him.

Additionally, Eng improperly retained nonpublic personal customer information from his former firms, without the firms' or the customers' knowledge or consent, and subsequently used that information to transfer customer accounts to his new firm. The night before Eng resigned from his former firms, he printed customer records including customer names, social security numbers, account numbers, and account values. After becoming associated with his current firm, Eng pre-filled customer information, including social security numbers and account numbers, on customer account transfer forms that were transmitted electronically to customers for execution. The forms were used to effectuate account transfers to Eng's new firm.

The suspension was in effect from February 21, 2023, through March 20, 2023.

This case involves two separate violations, both of which demonstrate a troubling disregard for proper procedures and customer privacy. First, impersonating a customer on a phone call with an annuity company is a serious violation that involves deception and unauthorized use of personal information. Even if Eng believed he was helping the customer by obtaining information, he had no authority to impersonate the customer.

Second, Eng's retention and use of confidential customer information from his former firms raises significant privacy and data security concerns. Customer information belongs to the firm and the customers, not to individual brokers. When brokers change firms, they should not take customer information with them.

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According to FINRA, Altin Tirana was fined $5,000 and suspended from association with any FINRA member in all capacities for three months for falsifying the representative code for trades in his member firm's order entry system, causing the firm's trade confirmations to show an inaccurate representa...

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According to FINRA, Altin Tirana was fined $5,000 and suspended from association with any FINRA member in all capacities for three months for falsifying the representative code for trades in his member firm's order entry system, causing the firm's trade confirmations to show an inaccurate representative code and as a result, causing the firm to maintain inaccurate books and records.

Tirana entered into an agreement through which he agreed to service certain customer accounts, including executing trades for those accounts, under a joint representative code that he shared with a retired representative. Although the firm's system correctly prepopulated the trades with the joint representative code, Tirana entered the transactions under his personal representative code through which he received a higher percentage of commissions than what he was entitled to receive pursuant to the agreement.

Tirana mistakenly believed the retired representative had agreed that he could change the representative code so that Tirana would receive higher percentages of commissions in order to increase compensation he paid to support staff servicing the customer accounts subject to the agreement. However, Tirana negligently failed to verify whether the representative had agreed that he could change the representative code in this manner. The firm paid restitution of approximately $24,000 to the retired representative, which is the approximate amount of additional commissions Tirana received as a result of changing the representative code on the trades.

The suspension was in effect from February 21, 2023, through May 20, 2023.

This case involves the improper alteration of representative codes to receive higher commissions. While Tirana claimed he mistakenly believed he had permission to change the codes, he failed to verify this belief before taking action. This negligence resulted in him receiving approximately $24,000 in commissions he was not entitled to receive.

Representative codes are important for accurate recordkeeping and for ensuring that commissions are properly allocated among brokers who service accounts. When brokers falsify representative codes, it not only harms other brokers who are entitled to commissions, but also creates inaccurate books and records that can undermine the firm's ability to properly supervise trading activity.

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According to FINRA, Robert Henderson Jr. was fined $30,000 and suspended from association with any FINRA member in all capacities for 13 months for engaging in outside business activities without providing written notice to his member firm and for willfully failing to timely amend his Form U4 to dis...

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According to FINRA, Robert Henderson Jr. was fined $30,000 and suspended from association with any FINRA member in all capacities for 13 months for engaging in outside business activities without providing written notice to his member firm and for willfully failing to timely amend his Form U4 to disclose federal tax liens totaling $368,221. This decision was issued by the National Adjudicatory Council affirming an Office of Hearing Officers decision.

Henderson did not disclose all his outside business activities when he became associated with the firm and later formed an additional company while employed with the firm that he did not disclose. Henderson disclosed his activities in an amended Form U4 filing after an on-the-record interview with FINRA during which he was asked about his failure to disclose his outside business activities.

Additionally, Henderson willfully failed to timely amend his Form U4 to disclose federal tax liens totaling $368,221. As a result of Henderson's willful failure to disclose material information that was required to be stated on the Form U4, Henderson is statutorily disqualified.

The suspension was in effect from March 6, 2023, through April 8, 2024.

This case involves serious violations related to disclosure obligations. Henderson failed to disclose multiple outside business activities to his firm, which prevented the firm from evaluating potential conflicts of interest and ensuring appropriate supervision. Outside business activities can create situations where a registered person's obligations to customers or the firm conflict with their obligations to the outside business.

More seriously, Henderson willfully failed to disclose federal tax liens totaling over $368,000 on his Form U4. Tax liens are important disclosure items because they can indicate financial difficulties that may create incentives for misconduct. The willful nature of the failure means Henderson knew or should have known about his disclosure obligation and chose not to comply.

As a result of the willful failure to disclose, Henderson is now statutorily disqualified, which means he cannot associate with a FINRA member firm without special permission. Statutory disqualification is a serious consequence that can effectively end a securities career.

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According to FINRA, Robert Jeffrey Boschke was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for 30 days for impersonating a former customer of his member firm in calls with an annuity company to facilitate the transfer of the former custom...

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According to FINRA, Robert Jeffrey Boschke was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for 30 days for impersonating a former customer of his member firm in calls with an annuity company to facilitate the transfer of the former customer's annuity.

Boschke called the annuity company to facilitate the transfer of the former customer's annuity to the former customer's ex-wife as part of a divorce settlement. During the call, Boschke impersonated the former customer and stated that he was divorced, that his ex was getting the account and that he was instructed by his attorney to call and get the value of the account as of the divorce date. The annuity company provided the information to Boschke.

Later, Boschke called the annuity company again and impersonated the same former customer. Boschke stated that a problem existed with the Notification of Divorce and Division Instructions form due to outdated signatures. Boschke asked the company to email him (the former customer) the form to be re-signed. Boschke was unable to answer the security question that the annuity company posed to him, and the instruction form was not sent.

The suspension was in effect from February 6, 2023, through March 7, 2023.

Impersonating a customer is a serious violation that involves deception and misrepresentation. Even if Boschke believed he was helping facilitate a legitimate transfer as part of a divorce settlement, he had no authority to impersonate the customer and represent himself as that person to the annuity company.

The proper procedure would have been to have the customer contact the annuity company directly or to arrange for a three-way call where Boschke could participate with the customer's knowledge and consent. By impersonating the customer, Boschke bypassed important safeguards designed to protect customer accounts from unauthorized access.

The fact that Boschke was unable to answer the security question posed by the annuity company shows that the company's security procedures were effective in preventing the impersonation from succeeding. This case serves as a reminder that brokers must never impersonate customers, even when they believe they are acting in the customer's best interest.

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According to FINRA, Steven G. Brettler 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 the representative code for trades in the firm's order entry system, caus...

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According to FINRA, Steven G. Brettler 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 the representative code for trades in the firm's order entry system, causing the firm's trade confirmations to show an inaccurate representative code.

Brettler entered into an agreement through which he agreed to service certain customer accounts, including executing trades for those accounts, under a joint representative code that he shared with the estate of a retired representative. The agreement set forth what percentages of the commissions Brettler and the estate of the retired representative earned on trades placed using the joint representative code.

Although the firm's system prepopulated the trades with a joint representative code Brettler shared with the estate of the retired representative, Brettler entered the transactions under his personal representative code. Brettler failed to verify whether the transactions at issue were subject to the joint production agreement. In addition, Brettler did not ask the estate of the retired representative whether he could change the code on the trades at issue.

As a result, the firm's trade confirmations inaccurately reflected Brettler's personal representative code instead of the joint representative code that Brettler shared with the estate of the retired representative. Brettler's actions resulted in his receiving higher commissions from the trades than what he was entitled to receive pursuant to the agreement. The firm has since paid restitution to the estate of the retired representative. Brettler reimbursed the firm a total of approximately $76,577, the approximate amount of additional commissions that Brettler received as a result of changing the representative code on trades.

The suspension was in effect from February 21, 2023, through May 20, 2023.

This case is similar to other cases involving falsification of representative codes to receive higher commissions. Brettler had an agreement to share commissions with the estate of a retired representative, but he entered trades under his personal code instead of the joint code, resulting in him receiving approximately $76,577 more in commissions than he was entitled to receive.

While Brettler ultimately reimbursed the firm for the excess commissions, his conduct still violated recordkeeping requirements and demonstrated poor judgment. The proper course of action would have been to verify which trades were subject to the joint production agreement and to use the correct representative code from the outset.

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According to FINRA, Todd Anthony Cirella was fined $5,000, suspended from association with any FINRA member in all capacities for three months, and ordered to pay $27,566, plus interest, in restitution to customers for willfully violating the Best Interest Obligation under Regulation BI by recommend...

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According to FINRA, Todd Anthony Cirella was fined $5,000, suspended from association with any FINRA member in all capacities for three months, and ordered to pay $27,566, plus interest, in restitution to customers for willfully violating the Best Interest Obligation under Regulation BI by recommending a series of trading in a senior customer's account that was excessive, unsuitable, and not in the customer's best interest.

The customer relied on Cirella's advice and routinely followed his recommendations and, as a result, Cirella exercised de facto control over the customer's account. Cirella's trading in the customer's account generated $27,566 in commissions and resulted in approximately $12,000 in trading losses, an annualized cost-to-equity ratio of 37.65 percent, and an annualized turnover rate of 20.39.

The suspension was in effect from February 21, 2023, through May 20, 2023.

This case involves excessive trading, also known as churning, which occurs when a broker engages in excessive buying and selling of securities in a customer's account primarily to generate commissions rather than to benefit the customer. The extraordinarily high cost-to-equity ratio of 37.65 percent means that the customer would have needed to earn returns of over 37 percent just to break even after paying commissions. This is far higher than reasonable market expectations.

The turnover rate of 20.39 means that the entire value of the account was turned over more than 20 times in a year, indicating an extremely aggressive trading strategy that was inconsistent with the customer's needs and best interest. The fact that the trading resulted in approximately $12,000 in losses while generating $27,566 in commissions demonstrates that the trading was designed to benefit Cirella through commissions rather than to benefit the customer.

Regulation BI (Best Interest) requires brokers to act in the best interest of retail customers when making recommendations. Excessive trading that generates high commissions while producing losses for customers is a clear violation of this obligation. The fact that the customer was a senior citizen who relied on Cirella's advice makes the violation particularly concerning, as senior investors are often more vulnerable to abusive practices.

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According to FINRA, Edward Scott Short was assessed a deferred fine of $5,000, suspended from association with any FINRA member in all capacities for seven months, and ordered to pay $116,859, plus interest, in deferred restitution to customers for willfully violating the Best Interest Obligation un...

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According to FINRA, Edward Scott Short was assessed a deferred fine of $5,000, suspended from association with any FINRA member in all capacities for seven months, and ordered to pay $116,859, plus interest, in deferred restitution to customers for willfully violating the Best Interest Obligation under Regulation BI by recommending a series of trading in an elderly customer's account that was excessive, unsuitable, and not in the customer's best interest.

The customer relied on Short's advice and routinely followed his recommendations and, as a result, Short exercised de facto control over the customer's account. As a result of Short's trading, the customer's account generated $116,859 in commissions and resulted in approximately $185,000 in trading losses, an annualized cost-to-equity ratio of 76.53 percent, and an annualized turnover rate of 47.49.

The suspension was in effect from February 6, 2023, through September 5, 2023.

This case involves egregious excessive trading that caused substantial harm to an elderly customer. The cost-to-equity ratio of 76.53 percent is extraordinarily high and means that the customer would have needed to earn returns of over 76 percent just to break even after paying commissions. This is far beyond what any reasonable investor could expect to earn.

The turnover rate of 47.49 means that the entire value of the account was turned over more than 47 times in a year, indicating an extremely aggressive and unreasonable trading strategy. The trading generated $116,859 in commissions for Short while causing the customer to suffer approximately $185,000 in trading losses. This clearly demonstrates that the trading was designed to generate commissions for Short rather than to benefit the customer.

The fact that the customer was elderly and relied on Short's advice makes this violation particularly serious. Elderly investors are often more vulnerable to abusive practices and may be less able to recover from significant financial losses. Short's de facto control over the account meant the customer trusted him to make appropriate investment decisions, but Short violated that trust by engaging in excessive trading that benefited himself at the customer's expense.

The seven-month suspension and substantial restitution order reflect the severity of the harm caused to the customer. This case serves as a reminder that brokers must always act in their customers' best interest, not their own financial interest.

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According to FINRA, an Office of Hearing Officers decision was issued barring David Thomas Hixon from association with any FINRA member in all capacities for failing to provide information and documents requested by FINRA in connection with its investigation into the circumstances of his termination...

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According to FINRA, an Office of Hearing Officers decision was issued barring David Thomas Hixon from association with any FINRA member in all capacities for failing to provide information and documents requested by FINRA in connection with its investigation into the circumstances of his termination from his member firm. Hixon has appealed this decision to the National Adjudicatory Council, so the sanction is not currently in effect.

FINRA requested information and documents relating to Hixon's solicitation and acceptance of loans from two customers, repayment of a loan from a customer, and any documents relating to loans from customers or co-workers. In addition, FINRA wanted Hixon to provide information pertaining to a customer complaint against him regarding an annuity exchange.

Although Hixon submitted some information to FINRA, he failed to fully and timely provide much of the requested information and documents. Hixon failed to provide any documents—or state that he had none—relating to his loan and receipt of funds from a certain customer or relating to his repayment of that loan. Hixon also failed to confirm or deny whether he solicited or obtained a loan from any customers other than the customers that were named in FINRA's requests, and, if he did solicit other loans, he failed to state the intended purpose of any such solicited or obtained loan.

The information sought, and not provided, was material to FINRA's investigation and necessary to complete its regulatory mandate to fully investigate potential rule violations and to protect the investing public.

Because this decision has been appealed, it is not yet final and the bar sanction is not currently in effect. The National Adjudicatory Council will review the decision and may affirm, modify, or reverse the findings and sanctions. This case involves serious allegations regarding loans from customers and failure to cooperate with FINRA's investigation, but the ultimate outcome remains to be determined through the appeals process.

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