Bad Brokers

According to FINRA, Douglas Blake Solinsky was fined $10,000, suspended from association with any FINRA member in all capacities for four months, and ordered to pay $27,622, plus interest, in restitution to customers for excessively and unsuitably trading two customer accounts.

Solinsky engaged i...

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According to FINRA, Douglas Blake Solinsky was fined $10,000, suspended from association with any FINRA member in all capacities for four months, and ordered to pay $27,622, plus interest, in restitution to customers for excessively and unsuitably trading two customer accounts.

Solinsky engaged in excessive trading in a 71-year-old customer's account that had an average month-end equity of approximately $64,750. Despite this modest account size, Solinsky recommended purchases with a total principal value of approximately $601,000 over 12 months, resulting in an annualized turnover rate just over nine. This means the entire account value was turned over nine times in a year.

The trading resulted in an annualized cost-to-equity ratio of just over 26 percent, meaning the customer's investments had to grow by more than 26 percent just to break even after paying commissions and fees. This makes profitable trading virtually impossible. The customer routinely followed Solinsky's recommendations and paid $16,593 in commissions and fees as a result of the unsuitable trading.

Solinsky engaged in similar excessive trading in an account for a married couple—a 63-year-old plumber and a 63-year-old teacher's assistant. Their account had an average month-end equity of approximately $38,700, yet Solinsky recommended purchases totaling approximately $364,000 over 12 months, resulting in an annualized turnover rate over nine. This trading resulted in an annualized cost-to-equity ratio of 29.25 percent, meaning the couple's investments had to grow by 29.25 percent just to break even. They paid $11,029 in commissions and fees.

Both customers routinely followed Solinsky's recommendations, establishing that he effectively controlled the accounts. The excessive trading generated substantial commissions for Solinsky while making it mathematically improbable that the customers could profit. This conduct represents a fundamental breach of the duty to put customers' interests ahead of the representative's financial interests.

The four-month suspension and $27,622 in restitution reflects the serious harm caused to two customers who trusted Solinsky's recommendations. For investors, turnover rates above 6 and cost-to-equity ratios above 20 percent are strong indicators of excessive trading. The suspension is in effect from July 17, 2023, through November 16, 2023.

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According to FINRA, James Anthony Iannazzo was named as a respondent in a FINRA complaint alleging that he repeatedly structured cash deposits and withdrawals to cause financial institutions to fail to file Currency Transaction Reports (CTRs).

The complaint alleges that Iannazzo divided cash tran...

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According to FINRA, James Anthony Iannazzo was named as a respondent in a FINRA complaint alleging that he repeatedly structured cash deposits and withdrawals to cause financial institutions to fail to file Currency Transaction Reports (CTRs).

The complaint alleges that Iannazzo divided cash transactions over $10,000 into smaller deposits or withdrawals conducted over several days at the same bank, and often conducted transactions at different branches of the same bank. He also frequently withdrew more than $10,000 in cash on a single day through transactions conducted at two different financial institutions.

In total, the complaint alleges Iannazzo structured 71 cash deposits and withdrawals totaling $568,440 in two personal bank accounts and 297 ATM deposits and withdrawals totaling $277,450 in an account at his member firm. The alleged structuring was designed to avoid conducting a single deposit or withdrawal over $10,000 at a financial institution, which would require the institution to file a CTR.

Structuring, also known as "smurfing," is a federal crime under the Bank Secrecy Act. CTRs are required for cash transactions over $10,000 to help law enforcement detect money laundering, tax evasion, and other criminal activity. By deliberately breaking up transactions to avoid the $10,000 reporting threshold, individuals attempt to evade this detection.

The complaint alleges that Iannazzo engaged in this conduct despite receiving training on money laundering and structuring from his firm and receiving pamphlets describing CTRs and structuring from one of the banks. This suggests he was aware of the reporting requirements and deliberately structured transactions to avoid them.

It is important to note that this is a complaint with allegations that have not been proven. Iannazzo has the opportunity to respond to the allegations and contest them in a hearing. However, the allegations are serious—structuring is a federal crime that can result in criminal prosecution in addition to securities industry sanctions.

For investors, this case illustrates that financial professionals are subject to anti-money laundering laws and are trained to recognize and avoid structuring. Investors should be aware that legitimate cash transactions over $10,000 are routinely reported and there is no impropriety in such reporting for lawful transactions.

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According to FINRA, Quint Capital Corporation was fined $35,000 and Alexander Norman Quint was fined $10,000 and suspended for five months after they permitted an individual who was statutorily disqualified to associate with the firm and engage in activities requiring registration as a municipal sec...

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According to FINRA, Quint Capital Corporation was fined $35,000 and Alexander Norman Quint was fined $10,000 and suspended for five months after they permitted an individual who was statutorily disqualified to associate with the firm and engage in activities requiring registration as a municipal securities representative.

The case reveals a serious compliance failure in the firm's supervision of disqualified individuals. While FINRA's National Adjudicatory Counsel initially approved an application for the disqualified individual to work at the firm, this approval was contingent on SEC authorization that never came. Despite knowing the approval was not effective, Quint and the firm provided the individual with passwords and system access to trade municipal bonds. The individual then referred four customers to the firm, discussed municipal securities transactions with them, and executed trades on their behalf—all while not properly registered.

This case highlights the importance of understanding conditional regulatory approvals. The firm and its principal misinterpreted FINRA's notice, treating it as effective authorization when it explicitly stated that SEC approval was still required. This oversight allowed an individual with a history of securities violations—including an SEC bar and federal court injunction—to conduct securities business improperly.

Investors should understand that firms have strict obligations to ensure all personnel are properly registered and qualified. Statutory disqualifications exist to protect investors from individuals who have violated securities laws. When firms circumvent these protections, even unintentionally, they put customers at risk. This case demonstrates why it's important for investors to verify that their financial professionals are properly registered through FINRA's BrokerCheck system, which discloses any disciplinary history or registration issues.

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According to FINRA, UBS Securities LLC was censured and fined $475,000 for publishing inaccurate monthly statistics regarding execution of covered orders in violation of Rule 605 of Regulation NMS.

The violations stemmed from coding errors in the firm's alternative trading system that caused sign...

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According to FINRA, UBS Securities LLC was censured and fined $475,000 for publishing inaccurate monthly statistics regarding execution of covered orders in violation of Rule 605 of Regulation NMS.

The violations stemmed from coding errors in the firm's alternative trading system that caused significant inaccuracies in its Rule 605 execution quality reports. Due to one coding error, the firm's reports were based on parent orders instead of the child orders that actually executed, and certain covered child orders were completely excluded from the reports. This resulted in substantially underreporting the number of covered orders and related shares the firm received, executed, and cancelled. A separate coding error caused the firm to double-count cancel shares, overreporting cancelled shares for approximately three years.

Rule 605 of Regulation NMS requires market centers to make monthly, electronic disclosures of statistical information about their order executions. These reports help investors and their brokers evaluate execution quality and make informed routing decisions. When these reports contain inaccurate data, it undermines market transparency and prevents investors from making informed choices about where to route their orders.

The case also revealed supervisory failures. UBS's supervisory system for Rule 605 compliance relied on manual review of an unreasonably small sample of orders, and excluded cancelled orders entirely from review. This inadequate supervision allowed the reporting errors to persist undetected. Even after discovering one coding error, the firm took 17 months to correct it.

For investors, this case underscores the importance of execution quality and the regulatory framework designed to ensure transparency. When firms fail to accurately report execution statistics, it compromises the market's ability to function efficiently and fairly. The substantial fine reflects the seriousness of providing misleading information to the investing public over an extended period.

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According to FINRA, BNA Wealth, Inc. was censured and fined $45,000 for conducting municipal securities business without proper registration and for selling private placements before amending its membership application.

The firm sold approximately $260,000 in 529 college savings plans to customer...

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According to FINRA, BNA Wealth, Inc. was censured and fined $45,000 for conducting municipal securities business without proper registration and for selling private placements before amending its membership application.

The firm sold approximately $260,000 in 529 college savings plans to customers despite knowing it was required to register with the Municipal Securities Rulemaking Board (MSRB) and employ a qualified municipal securities principal before engaging in such business. While the firm received no up-front commissions, it collected trailing commissions from these sales. The firm also failed to establish adequate supervisory procedures for municipal securities, instead allowing a registered representative who was not qualified as a municipal securities principal to review and approve transactions.

Additionally, BNA Wealth sold private placements to customers when its membership agreement did not authorize such activity, implementing a material change in business operations without first obtaining FINRA approval. The firm also lacked adequate procedures for conducting and documenting due diligence on the private placements it recommended to customers.

Municipal securities, including 529 plans, are subject to specific regulatory requirements because they involve government entities and tax-advantaged savings. The MSRB establishes rules specifically for municipal securities dealers to protect investors in these markets. Firms must have properly qualified principals supervising this business to ensure compliance with these specialized rules.

Private placements are unregistered securities offerings that carry significant risks and require firms to conduct thorough due diligence before recommending them to customers. This case demonstrates the dangers when firms expand their business into new product areas without proper authorization, registration, and supervisory infrastructure. Investors should verify that firms are properly authorized to sell the products they offer and have adequate supervisory systems in place.

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According to FINRA, Rosenblatt Securities Inc. was censured and fined $30,000 for failing to timely file private placement documents and for inadequate supervisory procedures regarding FINRA Rule 5123 compliance.

The firm failed to file private placement memoranda or offering documents with FINRA...

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According to FINRA, Rosenblatt Securities Inc. was censured and fined $30,000 for failing to timely file private placement documents and for inadequate supervisory procedures regarding FINRA Rule 5123 compliance.

The firm failed to file private placement memoranda or offering documents with FINRA as required by Rule 5123. For the private offerings sold by the firm's representatives, regulatory filings were made on average approximately 400 days late—more than a year after they were due. This substantial delay in filing deprived FINRA of the ability to conduct timely reviews of these offerings to protect investors.

The case also revealed that the firm's supervisory system was fundamentally deficient. The firm made no reference whatsoever to FINRA Rule 5123 in its written supervisory procedures and had no system or procedures in place for complying with the rule. This complete absence of any framework for compliance demonstrates a significant gap in the firm's supervisory infrastructure.

FINRA Rule 5123 requires member firms to file documents for private securities offerings within 15 calendar days of the date of first sale. This filing requirement serves an important regulatory function, allowing FINRA to review private offerings for potential fraud or regulatory violations. Private placements are high-risk, unregistered securities that are exempt from SEC registration requirements, making regulatory oversight through timely filings particularly important for investor protection.

Investors considering private placement investments should understand that these are among the riskiest securities offerings available. The regulatory filing requirements exist to provide a check on potentially problematic offerings. When firms fail to make timely filings, it can be a red flag indicating broader compliance problems. Following this case, Rosenblatt revised its procedures to address Rule 5123 requirements, but the extended period of non-compliance exposed investors to unnecessary risks.

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According to FINRA, SageTrader, LLC was censured and fined $100,000 for failing to establish and implement adequate anti-money laundering policies and procedures to detect and report suspicious activity.

The firm's AML program was not reasonably tailored to its business model and customer base. T...

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According to FINRA, SageTrader, LLC was censured and fined $100,000 for failing to establish and implement adequate anti-money laundering policies and procedures to detect and report suspicious activity.

The firm's AML program was not reasonably tailored to its business model and customer base. The entire surveillance system relied on alerts generated by a third-party automated system, with all alerts directed to a single compliance officer who had no prior AML supervisory experience or training. The firm provided inadequate guidance to this officer for determining whether alerts warranted follow-up or could be disregarded, and offered no guidance for determining when to file a Suspicious Activity Report (SAR).

This lack of proper procedures led the firm to develop a series of unwritten policies for handling alerts. Notably, the firm generally would not consider filing a SAR unless there were at least three valid alerts involving a single trader showing a pattern of suspicious activity. This informal threshold, combined with other ad hoc policies, resulted in the firm failing to reasonably consider whether particular alerts warranted SAR filings—potentially allowing suspicious or manipulative trading to go unreported.

Anti-money laundering programs are critical protections in the financial system, designed to detect and prevent criminals from using brokerage accounts to launder proceeds of illegal activity. FINRA Rule 3310 requires firms to develop AML programs tailored to their specific risks and business activities. The program must be reasonably designed to detect and cause the reporting of suspicious transactions.

For investors, robust AML compliance is essential to maintaining the integrity of financial markets. When firms fail to maintain adequate AML programs, they may unknowingly facilitate financial crimes, which can damage market confidence and potentially expose innocent customers to regulatory scrutiny. This case demonstrates the importance of having properly trained compliance personnel, written procedures that provide clear guidance, and supervision systems that are actually designed to identify suspicious activity rather than creating arbitrary thresholds that allow suspicious activity to go unreported.

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According to FINRA, Long Island Financial Group, Inc. was censured and fined $35,000 for failing to have adequate written policies, procedures, and supervisory systems to comply with Regulation Best Interest (Reg BI) and Form CRS requirements.

The firm's written policies and procedures made no re...

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According to FINRA, Long Island Financial Group, Inc. was censured and fined $35,000 for failing to have adequate written policies, procedures, and supervisory systems to comply with Regulation Best Interest (Reg BI) and Form CRS requirements.

The firm's written policies and procedures made no reference at all to Reg BI, the SEC's comprehensive standard of conduct for broker-dealers. The firm later adopted procedures that included general background information about Reg BI but still contained no actual procedures to prevent, detect, or correct violations, or to otherwise achieve compliance with the rule. This meant the firm lacked any meaningful framework for ensuring its representatives acted in customers' best interests when making recommendations.

Similarly, the firm failed to establish adequate procedures for its obligations under Exchange Act Rule 17a-14 to prepare, file, and deliver its Customer Relationship Summary (Form CRS). The firm initially made no reference to Form CRS in its procedures, then briefly used procedures with general background information but no actual guidance on preparation, filing, and distribution, and then reverted to procedures with no Form CRS reference at all.

Regulation Best Interest, which became effective in June 2020, requires broker-dealers to act in the best interest of retail customers when making recommendations. It represents a significant enhancement of the standard of care broker-dealers owe their customers. Form CRS is a brief, standardized disclosure document designed to help retail investors understand the services and fees of their financial professional and firm, including key differences between brokerage and advisory services.

These requirements are fundamental to investor protection in the modern regulatory landscape. For investors, this case demonstrates that not all firms were prepared for these important regulatory changes. The complete absence of meaningful policies and procedures meant the firm had no systematic way to ensure compliance. Investors should feel confident that their broker-dealer has robust systems to ensure recommendations are in their best interest—and this case shows what happens when firms fail to implement such systems.

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According to FINRA, Laidlaw & Company (UK) Ltd. was censured and fined $200,000 for conducting securities business while failing to maintain required net capital, filing inaccurate financial reports, and failing to conduct adequate due diligence on private placements.

The firm's net capital defic...

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According to FINRA, Laidlaw & Company (UK) Ltd. was censured and fined $200,000 for conducting securities business while failing to maintain required net capital, filing inaccurate financial reports, and failing to conduct adequate due diligence on private placements.

The firm's net capital deficiencies stemmed from multiple errors in its financial computations. The firm improperly included a certificate of deposit as an allowable asset even though it served as collateral for a line of credit. It also failed to take required deductions for non-marketable shares and improperly excluded lease obligations from its calculations. These errors caused the firm to operate below minimum net capital requirements, violating fundamental financial responsibility rules designed to ensure firms can meet their obligations to customers and counterparties.

When the firm became aware of the deficiencies, it filed a financial notification that incorrectly understated the extent of the problem and failed to file timely notices of net capital deficiency despite receiving inquiries from FINRA. The firm also filed inaccurate FOCUS reports that overstated its net capital and excess net capital, providing misleading information about its financial condition.

Additionally, Laidlaw's supervisory system for private placement due diligence was inadequate. The firm's written procedures provided no guidance on how to document due diligence reviews or who was responsible for ensuring proper documentation. The firm relied almost exclusively on documents provided by issuers without conducting independent analysis or investigation of the issuers or their management, failing to fulfill its obligation to conduct reasonable investigation before recommending these high-risk, unregistered securities.

Net capital rules are among the most important protections in securities regulation. They ensure firms maintain sufficient liquid assets to meet obligations to customers and cover potential losses. When firms operate below minimum net capital, they pose risks to customer assets and market stability. The private placement due diligence failures compounded these problems, as the firm recommended high-risk securities to customers without proper investigation. This case demonstrates the critical importance of accurate financial reporting and thorough due diligence in protecting investors.

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According to FINRA, Fenix Securities, LLC was censured and fined $100,000 for failing to establish and maintain adequate risk management controls for its market access business as required by SEC Rule 15c3-5 (the Market Access Rule).

The firm provided customers with direct market access to multip...

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According to FINRA, Fenix Securities, LLC was censured and fined $100,000 for failing to establish and maintain adequate risk management controls for its market access business as required by SEC Rule 15c3-5 (the Market Access Rule).

The firm provided customers with direct market access to multiple alternative trading systems through its order management systems but failed to implement pre-trade controls that were reasonably designed to prevent erroneous orders. The firm's order size and price variance controls relied on static numbers that were set too high to effectively prevent erroneous orders and did not consider the individual trading characteristics of different securities or customers. The firm maintained no documentation explaining its rationale for setting these control levels.

One price variance control would trigger a warning message to a principal when exceeded, but the order would still route to the market without being stopped. The firm had no policies for how these warnings should be reviewed or documented, and maintained no documentation of such reviews. For some customers, the firm relied on pre-trade controls maintained by the alternative trading systems themselves, but these controls suffered from similar design flaws—using static numbers that were too high—and the firm failed to document which customers were subject to these controls or whether they were appropriate.

Furthermore, the firm failed to conduct required annual reviews of its market access business to assess the effectiveness of its risk management controls and supervisory procedures, and did not complete the required CEO certifications of compliance with the Market Access Rule.

The Market Access Rule requires broker-dealers that provide market access to have controls to manage financial and regulatory risks. Erroneous orders can cause significant market disruptions, as demonstrated by various flash crash" incidents in recent years. Pre-trade controls serve as critical safeguards to prevent orders with obviously incorrect prices or sizes from reaching the market. This case illustrates that simply having some controls is insufficient—they must be reasonably designed based on the firm's specific business and properly documented and reviewed. Investors benefit from these controls as they help maintain orderly markets and prevent the type of extreme volatility that can result from erroneous orders."

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