Bad Brokers

According to FINRA, J.P. Morgan Securities LLC was censured and fined a total of $750,000, with $187,500 payable to FINRA, for maintaining inadequate financial risk management controls and supervisory procedures that failed to prevent certain erroneous orders.

The firm's market access controls we...

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According to FINRA, J.P. Morgan Securities LLC was censured and fined a total of $750,000, with $187,500 payable to FINRA, for maintaining inadequate financial risk management controls and supervisory procedures that failed to prevent certain erroneous orders.

The firm's market access controls were not reasonably designed to prevent erroneous orders that exceeded appropriate price or size parameters on an order-by-order basis or over short periods, or that indicated duplicative orders. The firm's controls failed to prevent five erroneous orders routed to exchanges and alternative trading systems.

The firm applied fixed single order quantity limits and static single order notional value limits that failed to consider individual characteristics of securities. These thresholds were too large to be effective, and the firm failed to provide documented rationale for setting them at such levels. Many size controls triggered "soft blocks" that paused orders until overridden or cancelled, rather than "hard blocks" that automatically reject orders. However, the firm's written procedures did not address how to handle, document, and review soft block overrides.

The firm also failed to provide documented rationale for setting limit price thresholds at levels greater than the definition of clearly erroneous transactions. Additionally, the firm lacked a reasonable duplicative order control. While it had a control checking for orders with the same symbol, side, and quantity, the 50,000-order threshold within two seconds was too high to be effective.

The firm has since implemented additional controls and enhanced procedures. This case demonstrates the importance of robust market access controls to prevent erroneous orders that can disrupt markets and harm investors. As of July 2022, the firm had implemented additional controls to prevent orders that could potentially lead to unintended market impact based on price and size relative to the market.

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According to FINRA, Financial Security Management, Incorporated was censured and fined $25,000 for failing to establish and implement policies, procedures, and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act (BSA) and implementing regulations.

The firm lacked...

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According to FINRA, Financial Security Management, Incorporated was censured and fined $25,000 for failing to establish and implement policies, procedures, and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act (BSA) and implementing regulations.

The firm lacked reasonable procedures to ensure timely review of and response to information requests from the Financial Crimes Enforcement Network (FinCEN). The firm failed to search its records in response to any FinCEN requests. The firm's written procedures failed to designate a responsible person by name or title, did not explain steps for searching firm records in response to requests, and did not state how searches should be documented. While the firm designated an employee to complete searches, that employee failed to do so, and the firm had no process for verifying completion. The firm has since updated its procedures and systems to address FinCEN request compliance.

FINRA also found the firm failed to conduct adequate annual independent testing of its AML compliance program. Although the firm conducted annual testing, the individual who performed it reported to the firm's AML compliance officer and therefore was not independent. This individual also lacked training and experience concerning BSA requirements and regulations. The firm failed to conduct a risk-based review of its full AML program, limiting testing to a random sample of accounts for know-your-customer and Customer Identification Program compliance without reviewing other AML processes. The firm has since engaged a qualified outside party to perform annual AML testing.

This case illustrates the critical importance of robust anti-money laundering programs to combat financial crimes. Firms must maintain independent testing of AML programs and respond promptly to law enforcement information requests. Investors benefit from strong AML programs that help ensure the integrity of financial markets.

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According to FINRA, Vanguard Marketing Corporation was censured and fined $800,000 for providing misleading account statements to customers due to multiple technical errors affecting performance and yield information.

A technical issue prevented newer information from an automated data feed from ...

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According to FINRA, Vanguard Marketing Corporation was censured and fined $800,000 for providing misleading account statements to customers due to multiple technical errors affecting performance and yield information.

A technical issue prevented newer information from an automated data feed from overwriting certain existing data, causing the firm to fail to update yield data used to calculate estimated yield and annual income figures for money market funds. This caused approximately 8.5 million account statements to overstate estimated yield and estimated annual income. The errors did not affect actual market yields paid to customers or holdings information, which remained correct.

After FINRA began investigating, the firm self-reported additional errors affecting performance information. When customers deposited checks on the last business day of the month, statements incorrectly identified deposits as market value increases instead of cash deposits. The error would auto-correct in the next month's statement as a market value decrease in the same amount. Additionally, margin credits and debits were inaccurately reflected as market appreciation or depreciation for open positions spanning multiple months, auto-correcting when positions closed.

For approximately 50 corporate actions such as stock splits, statements inaccurately reported value differences before and after the action as purchases or withdrawals instead of market appreciation or depreciation. These errors caused inaccurate "Investment Return" calculations.

FINRA also found the firm failed to reasonably investigate red flags. Approximately 50 customers alerted the firm to miscalculated estimated annual yield and income for money market funds, yet the firm failed to promptly investigate. Similarly, the firm received 50 customer communications about deposits being reflected as market value increases and corporate actions being reflected incorrectly but failed to investigate promptly.

This case demonstrates the importance of accurate customer statements and prompt investigation of red flags. Investors rely on account statements to make informed decisions, and firms must ensure statement accuracy and respond promptly to customer concerns about potential errors.

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According to FINRA, Park Avenue Securities LLC was censured, fined $30,000, and required to remediate its supervisory system for monitoring outside business activities and private securities transactions.

The firm failed to reasonably supervise a registered representative who engaged in an undisc...

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According to FINRA, Park Avenue Securities LLC was censured, fined $30,000, and required to remediate its supervisory system for monitoring outside business activities and private securities transactions.

The firm failed to reasonably supervise a registered representative who engaged in an undisclosed outside business activity operating a medical cannabis business and participated in undisclosed private securities transactions involving that business. Despite having an email review system that flagged twenty-six emails related to the medical cannabis business with red flags indicating potential outside business activities or private securities transactions, the firm's first-line reviewers closed out supervisory reviews in all but one instance without further escalation or investigation.

The flagged emails showed the representative received or was copied on investor inquiries, solicitations to prospective investors including firm customers, instructions to investors regarding questions or payments related to investing in the business, and other communications about the business's management, operation, or acquisition. Several emails included attachments such as subscription agreements, business licensure applications, and acquisition documents.

When a supervisor asked the representative about one flagged email, the representative denied knowledge of the medical cannabis business and the firm closed the inquiry without further investigation. The firm did not inquire further even though its system subsequently flagged eight additional emails reflecting the representative's involvement with the business. During an internal investigation, the firm later identified information related to the undisclosed private securities transactions and terminated the representative.

This case highlights the importance of thorough investigation of red flags identified through supervisory systems. Email surveillance systems are only effective if firms appropriately respond to alerts by conducting reasonable investigations. Investors should understand that registered representatives must disclose outside business activities to their firms to enable proper supervision and prevent conflicts of interest.

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According to FINRA, Cullen David Factor was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony.

FINRA requested Factor's testimony in connection with its investigation to determine whether he engaged in sales practice violations duri...

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According to FINRA, Cullen David Factor was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony.

FINRA requested Factor's testimony in connection with its investigation to determine whether he engaged in sales practice violations during his association with his member firm. Factor refused to appear for the requested testimony, which constitutes a violation of FINRA rules requiring cooperation with regulatory investigations.

Under FINRA rules, registered persons must cooperate with FINRA investigations and provide testimony when requested. Refusing to appear for testimony is considered one of the most serious violations because it obstructs FINRA's ability to fulfill its regulatory mission of investor protection and market integrity. Such refusals typically result in a bar from the securities industry.

A bar means Factor is prohibited from associating with any FINRA member firm in any capacity, including back-office or clerical roles. This sanction effectively ends his career in the securities industry unless he successfully appeals or applies for re-entry after the applicable waiting period.

This case serves as a reminder to investors that registered representatives have ongoing obligations to cooperate with regulatory authorities, and that failure to do so results in severe sanctions. When investigating potential misconduct, FINRA needs the cooperation of registered persons to gather facts and protect investors. Investors can check FINRA BrokerCheck to see if a financial professional has been barred or otherwise sanctioned, which is important information when selecting an advisor. Factor's bar should serve as a warning to all registered persons about the importance of regulatory cooperation.

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According to FINRA, Jason Lee Pintus was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony.

FINRA sought Pintus's testimony in connection with its investigation into his and his member firm's supervision of a registered representati...

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According to FINRA, Jason Lee Pintus was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony.

FINRA sought Pintus's testimony in connection with its investigation into his and his member firm's supervision of a registered representative. The investigation covered several serious areas including Pintus's role in the potential falsification of documents produced to FINRA, supervision of the representative, supervision of third-party wires for anti-money laundering red flags, supervision of other firm representatives' potential excessive trading, and Pintus's own potential excessive and unauthorized trading.

Despite FINRA's request for testimony to investigate these serious matters, Pintus refused to appear. This refusal to cooperate with FINRA's investigation violated FINRA rules requiring registered persons to provide information and testimony when requested during regulatory inquiries.

Refusing to testify obstructs FINRA's ability to investigate potential misconduct and protect investors. FINRA rules make clear that cooperation with investigations is a fundamental obligation of all registered persons, and refusal to testify is treated as one of the most egregious violations, typically resulting in a bar from the industry.

The issues under investigation were serious, involving potential document falsification, supervision failures across multiple areas, AML concerns, excessive trading, and unauthorized trading. Pintus's refusal to testify prevented FINRA from fully investigating these matters, which is why a bar was imposed.

This case underscores that registered persons cannot avoid regulatory scrutiny by refusing to cooperate. Investors should understand that securities professionals have ongoing obligations to regulatory authorities, and those who refuse to cooperate face career-ending sanctions. Investors can verify a professional's regulatory status and any sanctions through FINRA BrokerCheck before entrusting them with their assets.

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According to FINRA, Christopher John Carpenter was barred from association with any FINRA member in all capacities for refusing to produce information and documents requested by FINRA.

The matter originated from FINRA's review of the Form U5 filed by Carpenter's member firm, which stated the firm...

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According to FINRA, Christopher John Carpenter was barred from association with any FINRA member in all capacities for refusing to produce information and documents requested by FINRA.

The matter originated from FINRA's review of the Form U5 filed by Carpenter's member firm, which stated the firm was reviewing his alleged participation in unapproved real estate investments with customers. This disclosure raised serious concerns about potential outside business activities and private securities transactions that were not approved by the firm.

FINRA requested that Carpenter produce information and documents related to these alleged unapproved real estate investments. Carpenter refused to comply with FINRA's request, which violated FINRA rules requiring registered persons to cooperate with regulatory investigations by providing requested information and documents.

The refusal to produce documents prevents FINRA from conducting thorough investigations into potential misconduct involving customer investments. When firms report concerns about representatives' participation in unapproved investments with customers on Form U5, FINRA must be able to investigate whether the representative violated rules concerning outside business activities, private securities transactions, or other conduct standards.

Under FINRA rules, registered persons must provide documents and information when requested during investigations. Refusing to do so is considered an obstruction of the regulatory process and results in severe sanctions. The bar means Carpenter is permanently prohibited from working in any capacity with any FINRA member firm unless he applies for and is granted re-entry after the applicable waiting period.

This case emphasizes that securities professionals cannot refuse to cooperate with regulatory requests for documents and information. Investors should be cautious about off-the-books investment arrangements with registered representatives and should verify through FINRA BrokerCheck whether any financial professional they work with has been barred or sanctioned.

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According to FINRA, Antonino Giaccone was barred from association with any FINRA member in all capacities for cheating on the FINRA Series 7 General Securities Representative Examination.

Prior to beginning the examination, Giaccone attested that he had read and would abide by FINRA's Rules of Co...

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According to FINRA, Antonino Giaccone was barred from association with any FINRA member in all capacities for cheating on the FINRA Series 7 General Securities Representative Examination.

Prior to beginning the examination, Giaccone attested that he had read and would abide by FINRA's Rules of Conduct for examinations. However, during the examination, Giaccone accessed the internet, including online forums, to assist with answering examination questions. This constituted cheating in violation of examination rules.

The Series 7 examination is designed to test whether candidates possess the knowledge and competency to perform their job as general securities representatives. The integrity of FINRA qualification examinations is critical to investor protection. These examinations help ensure that only qualified individuals who have demonstrated appropriate knowledge are registered to provide securities services to the public.

Cheating on qualification examinations undermines the entire regulatory framework designed to protect investors. When someone cheats on an exam, they may obtain a registration they have not legitimately earned, potentially allowing them to provide financial advice and services without having demonstrated the required competency. This puts investors at risk of receiving advice from individuals who lack the necessary knowledge to properly serve them.

FINRA takes examination misconduct extremely seriously and routinely bars individuals who cheat on qualification examinations. The bar means Giaccone is permanently prohibited from working in any capacity with FINRA member firms unless he successfully applies for re-entry after the applicable waiting period.

Investors should understand that FINRA qualification examinations serve an important investor protection function, and that the industry has zero tolerance for examination cheating. Investors can use FINRA BrokerCheck to verify that their financial professionals hold appropriate registrations and have no disciplinary history related to examination misconduct.

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According to FINRA, Kevin Cory was barred from association with any FINRA member in all capacities for intentionally misrepresenting and omitting material facts in communications with former customers.

When Cory was not registered or associated with a member firm, two former customers invested $5...

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According to FINRA, Kevin Cory was barred from association with any FINRA member in all capacities for intentionally misrepresenting and omitting material facts in communications with former customers.

When Cory was not registered or associated with a member firm, two former customers invested $500,000 of their retirement funds in a purported investment fund formed and managed by Cory. The fund's offering memorandum, prepared by Cory, represented the fund would invest in global equity securities with an overall long market bias. However, Cory instead used the customers' funds to make loans to small businesses, including businesses owned by Cory or managed by his friends and associates.

The small businesses, including those owned by Cory, defaulted on the loans, leaving the fund with no assets. The fund's corporate registrations were cancelled for failure to pay taxes. After Cory later associated with a firm, the former customers periodically inquired about their investment and requested account statements. Cory prepared and sent fictitious account statements intentionally misrepresenting that their investment had risen in value when it was actually worthless.

Cory also intentionally misrepresented and omitted material facts regarding the investment value, the nature of loans to small businesses, his collection efforts on overdue loans, and falsely claimed others were responsible for preparing financial information. These false and misleading communications to former customers violated FINRA's standards for communications with the public.

This case demonstrates serious fraud involving misappropriation of retirement funds and ongoing deception through fictitious account statements. The conduct is particularly egregious because it targeted a retired couple's retirement savings. Investors should be extremely cautious about investments with individual brokers outside of registered firms, should verify all investments through independent sources, and should be skeptical of consistently positive returns that are not corroborated by independent custodian statements.

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According to FINRA, Shahab Seyedshahab TagnaviDinani was fined $5,000, suspended for 45 days in all capacities, and ordered to pay disgorgement of $1,998.77 in commissions plus interest for placing unauthorized trades in a deceased customer's account.

TagnaviDinani served as registered representa...

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According to FINRA, Shahab Seyedshahab TagnaviDinani was fined $5,000, suspended for 45 days in all capacities, and ordered to pay disgorgement of $1,998.77 in commissions plus interest for placing unauthorized trades in a deceased customer's account.

TagnaviDinani served as registered representative for a customer who maintained a non-discretionary account at his member firm. The customer was the only person authorized to authorize transactions in the account. After the customer died in January 2021, TagnaviDinani learned of the death the following day. Between the customer's death and November 2021, TagnaviDinani placed unauthorized buy and sell orders in the account.

While TagnaviDinani discussed several of the trades with surviving family members of the deceased customer, those individuals did not have trading authorization over the account. Trading authority in a non-discretionary account terminates upon the account holder's death, and surviving family members do not automatically have authority to direct trading unless they have been properly appointed and documented as authorized parties for the estate.

TagnaviDinani received $1,998.77 in commissions from the unauthorized trades, which he has been ordered to disgorge with interest. This commission disgorgement is appropriate because TagnaviDinani should not profit from unauthorized trading activity.

This case illustrates important principles regarding account authority and trading authorization. When an account holder dies, registered representatives must follow proper estate procedures and cannot simply accept trading instructions from family members without proper documentation of their authority. Firms have specific procedures for handling deceased customer accounts, typically requiring death certificates, estate documentation, and proper authorization from executors or administrators before any transactions can occur.

Investors and their families should understand the importance of estate planning for investment accounts and should ensure proper beneficiary designations and estate documentation are in place. Family members dealing with a deceased relative's accounts should work through proper legal channels and provide appropriate documentation to the firm.

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