Bad Brokers

According to FINRA, Hightower Securities, LLC was censured, fined $100,000, and ordered to pay $253,177.40 in restitution to customers for multiple supervisory failures related to GPB Capital Holdings offerings and an alternative mutual fund.

The firm negligently failed to inform investors that G...

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According to FINRA, Hightower Securities, LLC was censured, fined $100,000, and ordered to pay $253,177.40 in restitution to customers for multiple supervisory failures related to GPB Capital Holdings offerings and an alternative mutual fund.

The firm negligently failed to inform investors that GPB Capital had not timely filed required SEC filings, including audited financial statements. While the firm received letters from the issuer about the delays and its intention to complete a forensic audit, Hightower continued selling GPB Capital limited partnership interests totaling $1,670,000 without disclosing this material information to customers. The firm received $133,600 in commissions from these sales, which it must now repay. In February 2021, the SEC filed a securities fraud complaint against GPB Capital, and the Department of Justice brought criminal charges against executives.

Separately, the firm failed to reasonably supervise representatives' recommendations of an alternative mutual fund. Hightower permitted the fund's sale without having written supervisory procedures requiring due diligence on alternative mutual funds. The firm lacked procedures to ensure it understood the product's unique risks, including that the fund pursued a risky strategy involving uncovered options. The firm also lacked a reasonable supervisory system to review representatives' recommendations of the fund. Representatives sold $190,000 of the fund to customers, and when the fund's value dropped 80 percent during an extreme volatility event and ultimately liquidated, customers suffered thousands of dollars in losses. The firm must pay $119,577.40 in restitution to these customers.

This case illustrates multiple failures in a firm's gatekeeper role. Firms must conduct adequate due diligence on products they offer and must disclose material information about issuers' financial condition and regulatory compliance. Investors should be wary of alternative investments and should ask detailed questions about due diligence conducted by their brokerage firms.

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According to FINRA, Jeffrey Max Cohen was barred from association with any FINRA member in all capacities for refusing to cooperate with a regulatory investigation.

Cohen declined to produce information or documents requested by FINRA during an investigation that originated from allegations regar...

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According to FINRA, Jeffrey Max Cohen was barred from association with any FINRA member in all capacities for refusing to cooperate with a regulatory investigation.

Cohen declined to produce information or documents requested by FINRA during an investigation that originated from allegations regarding the sale of securities through one of his outside business activities. These allegations were disclosed in an arbitration matter on his Form U4. When FINRA sought to investigate these allegations, Cohen refused to provide the requested materials, effectively obstructing the regulatory process.

Cooperation with FINRA investigations is not optional—it is a fundamental obligation of all registered persons. When individuals refuse to provide information or documents, they prevent regulators from determining whether misconduct occurred and whether investors were harmed. This undermines investor protection and the integrity of the regulatory system.

A bar from the securities industry is the most severe sanction FINRA can impose, and it is typically reserved for the most serious violations. By refusing to cooperate with the investigation, Cohen not only violated his regulatory obligations but also raised serious questions about what information he was attempting to conceal. The bar is permanent unless Cohen petitions for re-entry after two years and can demonstrate that he is fit to return to the industry.

For investors, this case serves as a reminder of the importance of checking the regulatory history of financial professionals. Information about bars and other disciplinary actions is publicly available through FINRA's BrokerCheck system. Investors should always research the background of anyone handling their investments and should be particularly cautious about individuals with disclosure events related to outside business activities, which can sometimes involve unsuitable or fraudulent investment schemes.

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According to FINRA, Scott Jay Matalon was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested during a regulatory investigation.

FINRA's investigation stemmed from allegations made in a statement of claim filed against Matalo...

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According to FINRA, Scott Jay Matalon was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested during a regulatory investigation.

FINRA's investigation stemmed from allegations made in a statement of claim filed against Matalon's member firm by one of his clients. When FINRA sought to investigate these customer allegations, Matalon refused to cooperate by providing the requested documents and information. This refusal prevented regulators from determining the validity of the customer's claims and whether any violations occurred.

Registered representatives have an absolute obligation to cooperate with FINRA investigations. This cooperation requirement exists to enable FINRA to fulfill its investor protection mandate by investigating potential misconduct. When individuals refuse to provide information, they obstruct the regulatory process and prevent the discovery of facts that may be essential to protecting investors.

The permanent bar from the securities industry reflects the seriousness of Matalon's refusal to cooperate. While the underlying customer allegations have not been proven through this action, Matalon's refusal to participate in the investigation raises questions about what information he sought to withhold. A bar means Matalon cannot work in any capacity for any FINRA member firm unless he petitions for re-entry after two years and demonstrates fitness to return to the industry.

Investors should understand that when customer complaints are filed, registered representatives are obligated to cooperate with regulatory inquiries. Refusal to cooperate is itself a serious violation that typically results in a bar. Investors can check the disciplinary history of financial professionals through FINRA's BrokerCheck, which provides information about bars, suspensions, customer complaints, and other disclosure events. This transparency helps investors make informed decisions about who they trust with their money.

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According to FINRA, Joanna L. Morgan was barred from association with any FINRA member in all capacities for refusing to provide information and documents requested during a regulatory investigation.

The investigation concerned circumstances giving rise to a Form U5 filed by Morgan's member firm....

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According to FINRA, Joanna L. Morgan was barred from association with any FINRA member in all capacities for refusing to provide information and documents requested during a regulatory investigation.

The investigation concerned circumstances giving rise to a Form U5 filed by Morgan's member firm. The Form U5 stated that the firm had discharged Morgan for altering health-related information on an insurance application—a serious allegation involving potential document falsification. When FINRA sought to investigate this matter, Morgan refused to provide the requested information and documents, preventing regulators from examining the facts surrounding her termination.

The obligation to cooperate with FINRA investigations is absolute and applies to all registered persons. This requirement exists because FINRA cannot effectively regulate the securities industry and protect investors without access to information from the individuals involved in potential misconduct. Refusal to cooperate is treated as a severe violation because it obstructs the regulatory process and prevents fact-finding that is essential to investor protection.

Morgan's permanent bar from the industry reflects the seriousness of her refusal to cooperate. The underlying allegation—altering information on an insurance application—itself raises concerns about honesty and integrity. Her subsequent refusal to cooperate with the investigation of this allegation compounded the problem and demonstrated an unwillingness to be accountable to regulators.

For investors, this case highlights several important lessons. First, document falsification of any type is a serious red flag regarding an individual's trustworthiness. Second, when someone refuses to cooperate with an investigation into their conduct, it raises questions about what they may be trying to hide. Investors should regularly check FINRA's BrokerCheck system to review the background of financial professionals, including information about terminations, customer complaints, and disciplinary actions. A bar from the industry means the individual cannot work for any FINRA member firm unless they successfully petition for re-entry after at least two years.

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According to FINRA, Jermaine K. Benjamin was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested during a regulatory investigation.

The investigation concerned an amended Form U5 filed by Benjamin's member firm that disclosed...

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According to FINRA, Jermaine K. Benjamin was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested during a regulatory investigation.

The investigation concerned an amended Form U5 filed by Benjamin's member firm that disclosed a written customer complaint alleging unauthorized transactions and misappropriation or defalcation by Benjamin while he was associated with the firm. These are among the most serious allegations that can be made against a financial professional, as they involve potential theft or unauthorized use of customer funds. When FINRA sought to investigate these allegations, Benjamin refused to provide the requested documents and information.

Unauthorized transactions occur when a financial professional executes trades or other transactions in a customer's account without the customer's permission. Misappropriation involves taking customer funds or securities for personal use or other unauthorized purposes. Both types of conduct are clear violations of the trust that investors place in financial professionals and can result in significant financial harm to customers.

Benjamin's refusal to cooperate with the investigation prevented FINRA from determining whether these serious allegations were true and whether customers were harmed. This refusal to cooperate is itself a violation that warrants the most severe sanction—a permanent bar from the securities industry. The refusal also raises serious questions about what information Benjamin was seeking to withhold from regulators.

For investors, this case underscores the importance of monitoring account statements for unauthorized activity and promptly reporting any suspicious transactions. Investors should also research financial professionals through FINRA's BrokerCheck before opening accounts, and should regularly check for updates to disciplinary history. A bar means Benjamin cannot work in any capacity for any FINRA member firm unless he successfully petitions for re-entry after at least two years and demonstrates fitness to return to the industry.

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According to FINRA, Sean Pong was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested during a regulatory investigation.

The investigation concerned Pong's outside business activity and originated from a disclosure filed by ...

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According to FINRA, Sean Pong was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested during a regulatory investigation.

The investigation concerned Pong's outside business activity and originated from a disclosure filed by his member firm. The disclosure stated that the firm had become aware of allegations from a former customer related to the outside business activity. When FINRA requested that Pong appear for on-the-record testimony to investigate these customer allegations, Pong refused to appear.

Outside business activities are activities beyond a registered representative's employment with their member firm. Representatives must provide prior written notice to their firm about outside business activities so the firm can evaluate potential conflicts of interest and ensure compliance with securities laws. When outside business activities generate customer complaints, it often indicates that the activities may have involved unsuitable investments, undisclosed conflicts, or potentially fraudulent schemes.

Pong's refusal to appear for testimony prevented FINRA from gathering essential facts about the nature of his outside business activity and the validity of the customer allegations. On-the-record testimony is a critical investigative tool that allows regulators to question individuals under oath about their conduct. Refusing to appear for such testimony obstructs the regulatory process and is treated as a severe violation.

The permanent bar from the securities industry reflects both the seriousness of refusing to cooperate and the importance of the issues under investigation. Investors should be cautious about any investment opportunities presented by financial professionals outside of their brokerage firm employment, as these may not be subject to the same regulatory oversight. Investors can check the background of financial professionals through FINRA's BrokerCheck, which discloses customer complaints, outside business activities, and disciplinary actions. A bar means Pong cannot work for any FINRA member firm unless he petitions for re-entry after at least two years.

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According to FINRA, D. Wray Rodgers was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested during a regulatory investigation.

FINRA's investigation sought to determine whether Rodgers engaged in an outside business activity...

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According to FINRA, D. Wray Rodgers was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested during a regulatory investigation.

FINRA's investigation sought to determine whether Rodgers engaged in an outside business activity without providing prior written notice to his member firm and whether he misused customer funds. These are serious allegations—undisclosed outside business activities can involve conflicts of interest or unsuitable investments, while misuse of customer funds represents a fundamental breach of trust that can cause significant financial harm to investors.

Registered representatives are required to provide prior written notice to their firms about outside business activities so firms can evaluate potential conflicts and ensure compliance with securities laws. When representatives engage in undisclosed outside business activities, they deprive their firms of the opportunity to conduct this oversight and may expose customers to investments that have not been properly vetted.

When FINRA requested that Rodgers appear for on-the-record testimony to investigate these matters, he refused to appear. This refusal prevented regulators from gathering facts about his conduct and determining whether violations occurred. On-the-record testimony allows regulators to question individuals under oath, and refusal to participate obstructs the regulatory process and prevents the discovery of information essential to investor protection.

The permanent bar from the securities industry reflects the seriousness of both the allegations under investigation and Rodgers' refusal to cooperate. His refusal to testify raises questions about what information he sought to withhold. Investors should be particularly cautious about investment opportunities presented outside of a brokerage firm's normal business channels, as these may involve unsuitable or fraudulent schemes. FINRA's BrokerCheck provides public access to information about financial professionals' disciplinary history, customer complaints, and outside business activities, helping investors make informed decisions.

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According to FINRA, Roger Lee Arnold was barred from association with any FINRA member in all capacities for failing to provide information and documents requested during a regulatory investigation. This decision became final on June 12, 2023, after being issued by FINRA's Office of Hearing Officers...

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According to FINRA, Roger Lee Arnold was barred from association with any FINRA member in all capacities for failing to provide information and documents requested during a regulatory investigation. This decision became final on June 12, 2023, after being issued by FINRA's Office of Hearing Officers.

The investigation originated from a Form U5 filed by Arnold's member firm disclosing that Arnold had resigned while the firm investigated unauthorized redemptions and transfers of funds from his wife's account. The Form U5 stated that Arnold admitted to redeeming money from his wife's account and transferring it to a joint bank account without his wife's permission, then resigned while under review.

The case involves particularly egregious conduct—taking funds from a family member's account without authorization represents a fundamental breach of trust. While Arnold admitted to the unauthorized activity, he then refused to cooperate with FINRA's investigation by failing to provide requested information and documents. This refusal prevented regulators from fully investigating the circumstances, determining the extent of any harm, and assessing whether other customers might have been affected.

The combination of admitted unauthorized transactions and refusal to cooperate with the investigation warranted the most severe sanction available—a permanent bar from the securities industry. The bar means Arnold cannot work in any capacity for any FINRA member firm unless he petitions for re-entry after at least two years and demonstrates fitness to return to the industry, though reinstatement after such conduct is unlikely.

For investors, this case serves as a reminder that even family relationships do not justify unauthorized transactions in investment accounts. Investors should carefully monitor their account statements and promptly report any unauthorized activity. The case also demonstrates that resigning from a firm while under investigation does not shield individuals from regulatory consequences. FINRA's BrokerCheck system allows investors to research the background of financial professionals, including information about terminations, admissions of misconduct, and disciplinary actions.

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According to FINRA, Andrew M. Komarow was barred from association with any FINRA member in all capacities for refusing to provide on-the-record testimony and documents requested during a regulatory investigation.

The investigation concerned a Form U5 filed by Komarow's member firm disclosing that...

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According to FINRA, Andrew M. Komarow was barred from association with any FINRA member in all capacities for refusing to provide on-the-record testimony and documents requested during a regulatory investigation.

The investigation concerned a Form U5 filed by Komarow's member firm disclosing that he was terminated for processing Automated Clearing House (ACH) instructions for his own account knowing there were insufficient funds, then improperly using credit to place trades, resulting in a negative balance. An amended Form U5 provided additional details: the firm's internal review concluded that Komarow had caused a personal account to be opened and ACH instructions to be processed, knowing accounts had insufficient funds, and used credited funds to engage in trading that generated losses before the firm received ACH rejection due to insufficient funds.

This conduct describes a scheme to improperly obtain trading capital by exploiting the timing lag in ACH processing. Essentially, Komarow allegedly initiated transfers he knew would fail, used the temporarily credited funds to trade, and left the firm holding losses when the ACH transfers were rejected for insufficient funds. This type of conduct represents fraud against the firm and manipulation of account funding processes.

While Komarow initially produced some documents to FINRA, he failed to respond fully to document requests and ultimately refused to produce additional requested materials or appear to provide on-the-record testimony. This refusal prevented regulators from fully investigating the alleged scheme and determining its full scope and impact.

The permanent bar reflects the seriousness of both the underlying allegations and Komarow's refusal to cooperate. The alleged conduct demonstrates a calculated scheme to defraud his employer, and his refusal to participate in the investigation prevented accountability. For investors, this case illustrates that firms must be vigilant about account opening procedures and fund transfer verification. The case also demonstrates that regulatory investigations continue even after employment termination, and refusal to cooperate results in the most severe sanctions. FINRA's BrokerCheck provides public access to information about such disciplinary actions.

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According to FINRA, Edward Beyn was barred from association with any FINRA member in all capacities in a decision by the Securities and Exchange Commission that became final on June 19, 2023. The SEC affirmed findings and sanctions imposed by FINRA's National Adjudicatory Council.

Beyn engaged in...

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According to FINRA, Edward Beyn was barred from association with any FINRA member in all capacities in a decision by the Securities and Exchange Commission that became final on June 19, 2023. The SEC affirmed findings and sanctions imposed by FINRA's National Adjudicatory Council.

Beyn engaged in excessive trading, known as churning, in customer accounts over which he exercised de facto control. De facto control was established because nearly all relevant trades were solicited by Beyn, and customers testified that they routinely acquiesced to his recommendations and relied on his expertise. Beyn acted with scienter—meaning he knew or was reckless in not knowing that his conduct was improper—and therefore violated Section 10(b) of the Securities Exchange Act and Rule 10b-5, constituting securities fraud.

Beyn misled customers about the true costs of their trading. The accounts had excessively high cost-to-equity ratios that made it virtually impossible for customers to profit from the trading, yet Beyn received $647,648 in compensation from this activity. He deceived a customer about the importance of new account forms and misrepresented on active account worksheets that customers were satisfied with account performance despite significant losses.

Beyn also made unsuitable recommendations of three ETNs to a 65-year-old customer. These ETNs were risky products designed for sophisticated investors and likely to decrease in value if held beyond short terms. Beyn did not explain the risks to the inexperienced customer, held the positions for long terms, and concentrated the customer's limited retirement funds in these products—placing 20 percent and eventually 100 percent of the account in these inappropriate investments. This resulted in losses exceeding $62,000.

For investors, this case demonstrates the devastating impact of churning and unsuitable recommendations. Excessive trading generates large commissions for brokers while destroying customer wealth. Investors should be suspicious of very active trading in their accounts, especially if the account consistently underperforms or generates losses despite market gains. Cost-to-equity ratios above 20 percent are typically considered excessive.

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