Bad Brokers

According to FINRA, Jonathan Michael Turner was fined $5,000 and suspended for three months on March 24, 2022, for participating in private securities transactions without providing prior written notice to his member firm.

Turner accepted a position as chief investment officer for a credit card p...

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According to FINRA, Jonathan Michael Turner was fined $5,000 and suspended for three months on March 24, 2022, for participating in private securities transactions without providing prior written notice to his member firm.

Turner accepted a position as chief investment officer for a credit card processing service company. In this role, he was responsible for creating new investment vehicles and raising investor capital. Turner directed two firm customers to the company's website, recommended they invest, and supplied them with forms needed to purchase the company's securities.

One customer invested $100,000 funded with cash from a personal bank account. The other customer invested $100,000 using proceeds from stock liquidations Turner facilitated from a firm account. Turner received no commissions or other compensation regarding these transactions.

Despite his active role in raising capital for the company and directing firm customers to invest, Turner incorrectly certified in the firm's annual compliance attestation that he had not engaged in any private securities transactions not previously cleared by the firm.

This case illustrates that serving as chief investment officer for another company while working as a registered representative creates obvious conflicts of interest requiring firm disclosure and approval. Turner's role involved raising capital - a securities-related activity that required firm knowledge and supervision.

The fact that Turner directed firm customers to invest in a company where he served as chief investment officer creates multiple conflicts. His position with the company gave him a vested interest in raising capital, which could influence his recommendations to customers. The firm had no opportunity to evaluate whether these investments were suitable for the customers or to assess the conflicts created by Turner's dual roles.

Turner's false attestation that he had not engaged in undisclosed private securities transactions compounded the violation by actively concealing his activities.

This case demonstrates that outside positions involving raising capital or selling securities are private securities transactions requiring firm approval, even without direct compensation. Investors should be cautious when their financial professionals recommend investments in companies where they hold officer positions or other roles that create conflicts of interest.

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According to FINRA, Michael McDermott Sr. was suspended for three months on March 28, 2022, for trading without authorization in a customer's account both before and after the customer's death and for causing inaccurate books and records.

McDermott placed a trade in a customer's account without f...

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According to FINRA, Michael McDermott Sr. was suspended for three months on March 28, 2022, for trading without authorization in a customer's account both before and after the customer's death and for causing inaccurate books and records.

McDermott placed a trade in a customer's account without first obtaining authorization. The account was fee-based, so McDermott earned no commission. Later, unaware the customer had died, McDermott placed multiple stop loss orders in the account, some of which were cancelled and others executed.

McDermott entered a note in his firm's electronic customer note system falsely indicating he had spoken with the customer in connection with the stop loss orders. This was impossible as the customer had died prior to McDermott placing the orders. After learning of the customer's death, McDermott edited the note to inaccurately state he had spoken with the customer prior to death. These actions caused the firm to maintain inaccurate books and records.

In light of McDermott's financial status, no monetary sanction was imposed.

Trading in a deceased customer's account is a serious violation because the account should be frozen upon notification of death until proper estate documentation is provided. Only authorized estate representatives can provide trading instructions for a deceased person's account.

The false customer notes compound the violation by creating fictitious documentation of customer authorization that never occurred. When McDermott learned the customer had died, rather than promptly reporting his error, he attempted to cover it up by editing the notes to suggest he had spoken with the customer before death.

Accurate customer notes are critical for supervisory review and regulatory examinations. When representatives create false documentation of customer communications, they undermine the entire supervisory system designed to detect unauthorized trading and other misconduct.

This case illustrates that even in fee-based accounts where representatives earn no commissions from trading, unauthorized trading is prohibited. The compensation structure does not eliminate the requirement to obtain customer authorization before executing trades. Investors and their estate representatives should be aware that accounts must be frozen upon death until proper estate authority is established.

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According to FINRA, Scott Neil Hananel was fined $7,500 and suspended for 15 months on March 29, 2022, for engaging in excessive and unsuitable trading in customer accounts and exercising unauthorized discretionary trading authority.

Hananel exercised de facto control over customer accounts by de...

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According to FINRA, Scott Neil Hananel was fined $7,500 and suspended for 15 months on March 29, 2022, for engaging in excessive and unsuitable trading in customer accounts and exercising unauthorized discretionary trading authority.

Hananel exercised de facto control over customer accounts by deciding which stocks to trade and when to trade them, exercising discretionary authority in connection with some trades, and controlling the volume and frequency of trading. His short-term trading generated significant losses and trading costs in the form of commissions, markups, and markdowns.

In total, customers, some of whom were senior citizens, paid commissions and trading costs of $1,473,118 and incurred losses of $2,103,176. Additionally, Hananel exercised discretionary trading authority in customer accounts without obtaining prior written authorization from customers or approval from his firm to treat the accounts as discretionary.

The scale of this misconduct is staggering. Customers paid nearly $1.5 million in trading costs and suffered losses exceeding $2.1 million. The combination of excessive costs and massive losses demonstrates trading activity that served Hananel's financial interests rather than customers' investment goals.

The fact that some victims were senior citizens is particularly concerning. Senior investors typically cannot afford to recover from such significant losses and may have their retirement security destroyed by excessive trading.

Hananel's exercise of discretionary authority without written authorization or firm approval meant his trading decisions received no supervisory oversight. This lack of supervision enabled the excessive trading to continue unchecked.

The 15-month suspension reflects the serious nature of the violations and the substantial harm to multiple customers. The excessive trading generated tremendous costs while devastating customer account values.

This case illustrates the catastrophic harm that excessive trading can cause. Customers lost over $2 million while paying nearly $1.5 million in trading costs - representing destruction of wealth on a massive scale. Investors should be vigilant for signs of excessive trading including frequent transactions, high trading costs, and declining account values despite overall market performance.

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According to FINRA, Matthew Allen Trueg was fined $5,000 and suspended for two months on March 31, 2022, for affixing customer signatures on account forms without authorization.

Trueg copied customer signatures from older forms customers had previously signed and pasted them onto forms requiring ...

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According to FINRA, Matthew Allen Trueg was fined $5,000 and suspended for two months on March 31, 2022, for affixing customer signatures on account forms without authorization.

Trueg copied customer signatures from older forms customers had previously signed and pasted them onto forms requiring updated customer signatures. He then submitted the altered forms to his firm to complete transactions customers requested. There is no indication that Trueg affixed the signatures without customers' consent to the underlying transactions. Each customer later re-signed the documents.

Some of the account documents were new account agreements and authorizations, which were firm records. By engaging in this conduct, Trueg caused the firm to maintain inaccurate books and records.

While this case appears less egregious than outright forgery cases because customers had requested the underlying transactions and later re-signed the documents, affixing signatures without authorization is still prohibited. The practice creates risks even when done with good intentions.

Signatures serve as evidence that customers reviewed documents, understood their contents, and agreed to the terms. When representatives affix signatures, even using copied signatures from prior documents, customers are denied the opportunity to review current documents before signing. Documents may contain terms, disclosures, or information that differs from prior versions.

Additionally, the practice creates compliance and legal risks for firms. Documents bearing signatures that customers did not personally apply may be challenged later, creating disputes about whether customers actually authorized transactions or agreed to terms.

The appropriate practice when customers need to sign documents is to present the actual documents for signature, even if this creates some inconvenience or delay. Technology solutions like electronic signature platforms can streamline this process while ensuring customers actually review and sign documents.

This case demonstrates that representatives cannot take shortcuts with signature requirements, even when trying to expedite transactions customers requested. The integrity of the signature process must be maintained to protect both customers and firms.

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According to FINRA, Jeffrey Paul Weiner was fined $5,000 and suspended for 30 days on March 31, 2022, for impersonating nine customers during telephone calls to his former firm's insurance affiliate to obtain information about their variable life insurance policies.

Weiner impersonated the custom...

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According to FINRA, Jeffrey Paul Weiner was fined $5,000 and suspended for 30 days on March 31, 2022, for impersonating nine customers during telephone calls to his former firm's insurance affiliate to obtain information about their variable life insurance policies.

Weiner impersonated the customers to facilitate transferring their policies from his former firm to his new member firm. Ultimately four of the nine became Weiner's customers at the new firm. Although the customers gave Weiner permission to obtain their information from the insurance affiliate, they did not authorize him to impersonate them.

Impersonation is a form of fraud that involves deception and misrepresentation of identity. Even when representatives have permission to obtain information on behalf of customers, they must identify themselves truthfully rather than pretending to be the customer.

Insurance companies and financial firms have procedures requiring identity verification before releasing account information. These procedures exist to prevent unauthorized access to confidential customer information and to protect against fraud. When representatives impersonate customers, they circumvent these security measures.

The fact that customers authorized Weiner to obtain information does not excuse the impersonation. The proper approach would have been for Weiner to identify himself as the customers' representative and provide appropriate authorization documentation allowing him to access the information on their behalf.

Impersonation also creates risks for customers. When representatives establish a pattern of impersonating customers to access information or conduct transactions, it becomes easier for unauthorized or fraudulent activity to occur without detection.

This case illustrates that representatives must be truthful about their identity when interacting with financial institutions, even when they have customer permission to act on their behalf. The relatively brief 30-day suspension suggests FINRA considered that customers had authorized Weiner to obtain the information and that he was attempting to facilitate legitimate account transfers. However, the method - impersonation - was impermissible regardless of the underlying legitimate purpose.

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According to FINRA, Fusion Analytics Securities LLC is facing charges alleging it willfully violated securities laws by engaging in fraud in connection with its sale of bonds in two private offerings for a company.

The complaint alleges that at the time the firm agreed to sell the bond offerings,...

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According to FINRA, Fusion Analytics Securities LLC is facing charges alleging it willfully violated securities laws by engaging in fraud in connection with its sale of bonds in two private offerings for a company.

The complaint alleges that at the time the firm agreed to sell the bond offerings, it knew the SEC had issued an order finding that a related company and an executive/promoter had misled investors about use of proceeds in earlier equity offerings. The SEC found that the company and promoter diverted millions of dollars of investor funds to the promoter and his family. The firm's own customers were misled in these prior offerings.

Nonetheless, the firm allegedly agreed to sell new bond offerings purportedly to raise money for building a power plant. The complaint alleges the firm intentionally or recklessly made material misrepresentations and omissions, including failing to disclose the SEC's order and findings, making false and misleading statements about risks and anticipated revenue, making false statements about offering progress and power plant construction, and failing to disclose the issuer's financial distress, late interest payments, and debt covenant violations.

The firm allegedly raised approximately $1.8 million from customers through the bond offerings and generated $146,000 in commissions. The complaint further alleges the firm failed to conduct a reasonable investigation before recommending the offerings despite numerous red flags, and provided false information to FINRA by understating the amount of bonds sold.

This is a pending complaint, so the allegations have not been proven. However, the charges describe serious potential misconduct including securities fraud, failure to conduct adequate due diligence, and providing false information to regulators.

If proven, this case would demonstrate how firms can perpetuate fraud by selling new offerings from issuers with histories of misleading investors. The alleged knowledge of prior SEC findings regarding investor fund diversion makes the decision to sell additional offerings particularly troubling.

Investors should research whether issuers have prior SEC enforcement actions or regulatory issues before investing in private offerings. The existence of prior findings that an issuer misled investors is a critical red flag that should lead to extreme caution or avoidance.

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According to FINRA, Stephen Gregory Whitman is facing charges alleging he failed to provide information and documents requested by FINRA during an investigation.

FINRA's investigation concerned the circumstances of Whitman's termination by his member firm and his alleged acceptance of a loan from...

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According to FINRA, Stephen Gregory Whitman is facing charges alleging he failed to provide information and documents requested by FINRA during an investigation.

FINRA's investigation concerned the circumstances of Whitman's termination by his member firm and his alleged acceptance of a loan from a customer. The complaint alleges that despite FINRA's requests for information and documents, Whitman failed to provide the requested materials.

This is a pending complaint, so the allegations have not been proven. Issuance of a complaint represents FINRA's initiation of formal proceedings and does not represent a decision regarding the allegations.

If proven, the failure to cooperate would represent a serious violation of FINRA rules. The duty to cooperate with investigations is fundamental to the regulatory system and enables FINRA to investigate potential misconduct including inappropriate borrowing from customers.

Loans from customers to registered representatives create conflicts of interest and are generally prohibited or heavily restricted under FINRA rules. Such loans can place customers under pressure to maintain relationships with representatives or can be used to exploit customers financially. This is why FINRA investigates allegations of such loans.

When registered representatives refuse to cooperate with investigations into allegations like accepting loans from customers, it prevents FINRA from determining whether violations occurred and whether customers were harmed. The refusal to participate obstructs the regulatory process designed to protect investors.

If the allegations are proven, Whitman would likely face sanctions potentially including a bar from the industry for failing to cooperate. Accepting loans from customers, if proven, would represent an additional serious violation.

Investors should be aware that lending money to their financial professionals creates problematic relationships and potential conflicts. Such arrangements should generally be avoided to maintain appropriate professional boundaries.

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According to FINRA, Gregory Scott Hanshew is facing charges alleging he failed to provide a complete response to FINRA's requests for information and documents during an investigation.

FINRA's investigation concerned allegations that Hanshew engaged in various sales practice violations involving ...

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According to FINRA, Gregory Scott Hanshew is facing charges alleging he failed to provide a complete response to FINRA's requests for information and documents during an investigation.

FINRA's investigation concerned allegations that Hanshew engaged in various sales practice violations involving senior investors, failures to disclose outside business activities, and failures to disclose judgments and liens while associated with his member firm. FINRA requested information about Hanshew's facilitating receipt and distribution of funds with various individuals and entities, lending arrangements, communications with investors, outside business activities, financial accounts, tax returns, Internet Protocol addresses and Internet Service Providers, and certain judgments or liens.

The complaint alleges that while Hanshew submitted certain information and documents in a response letter, his response was incomplete. Hanshew allegedly has not further responded to FINRA, and as a result, he is currently suspended from associating with any FINRA member in any capacity.

This is a pending complaint, so the allegations have not been proven. However, the charges describe serious potential underlying misconduct involving sales practice violations targeting senior investors, undisclosed outside business activities, and undisclosed financial judgments or liens.

If proven, the allegations suggest a pattern of potentially exploiting senior investors while concealing outside business activities and financial problems from his firm. The alleged failure to fully respond to FINRA prevented the investigation from determining the full extent of potential misconduct.

Senior investors are particularly vulnerable to exploitation and are afforded special protections under securities regulations. Sales practice violations involving seniors can be particularly harmful because older investors often have limited ability to recover from financial losses.

The requirement to disclose outside business activities and financial judgments or liens exists so firms can identify conflicts of interest and assess whether representatives face financial pressures that might lead to misconduct.

If proven, Hanshew's failure to provide complete responses would demonstrate an attempt to obstruct FINRA's investigation into serious allegations of investor harm. The current suspension for failure to cooperate prevents him from associating with member firms until he complies with FINRA's requests.

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According to FINRA, John Anthony Orlando is facing charges alleging he willfully violated securities laws by churning a customer's account, engaging in unsuitable trading, and making false statements to his firm.

The complaint alleges Orlando exercised de facto control over a customer's account b...

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According to FINRA, John Anthony Orlando is facing charges alleging he willfully violated securities laws by churning a customer's account, engaging in unsuitable trading, and making false statements to his firm.

The complaint alleges Orlando exercised de facto control over a customer's account by controlling trading volume and frequency, deciding what securities to buy and sell, quantities, prices, and timing. The customer allegedly relied on Orlando's recommendations and consistently followed them. Orlando's trading allegedly was excessive and quantitatively unsuitable, evidenced by an annualized turnover rate of 9.65 and cost-to-equity ratio of nearly 74 percent.

The alleged trading generated more than $650,000 in commissions for Orlando and his firm, plus more than $770,000 in additional costs paid to underwriters of offerings, totaling over $1.4 million in costs. The customer allegedly experienced approximately $1,245,000 in losses.

The complaint further alleges Orlando lacked reasonable basis to believe his recommended transactions and strategy were suitable for any customer. He allegedly failed to understand or evaluate the fees and costs and their effect on profitability. About half the offerings allegedly included warrants, and Orlando's strategy involved promptly selling newly purchased shares and holding warrants. However, he allegedly failed to conduct due diligence on the companies or analyze likelihood of warrants becoming profitable. The warrants were allegedly issued by companies with little revenue, no income, and subject to going concern opinions.

Additionally, the complaint alleges Orlando falsely characterized transactions as unsolicited when he actually solicited them, causing inaccurate books and records. He also allegedly made false statements to his firm on compliance questionnaires about how he communicated with the customer, denying text message communications when he had exchanged text messages related to the customer's account.

This is a pending complaint, so these allegations have not been proven. However, if proven, they would demonstrate extreme churning that generated massive costs and losses while enriching Orlando. A cost-to-equity ratio of nearly 74 percent and losses exceeding $1.2 million would represent catastrophic harm to the customer.

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According to FINRA, Francis Joseph Velten Jr. is facing charges alleging he failed to respond in any way to FINRA's requests for information during an investigation.

FINRA's investigation concerned an allegation that Velten churned and flipped his elderly customers' accounts at his member firm, e...

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According to FINRA, Francis Joseph Velten Jr. is facing charges alleging he failed to respond in any way to FINRA's requests for information during an investigation.

FINRA's investigation concerned an allegation that Velten churned and flipped his elderly customers' accounts at his member firm, encouraging them to surrender their annuities and sell mutual fund holdings away from the firm and use the proceeds to purchase bonus annuities. The complaint alleges the customers incurred significant surrender charges while Velten pocketed the commissions.

This is a pending complaint, so the allegations have not been proven. However, the underlying allegations describe potentially serious exploitation of elderly customers.

Churning and flipping annuities is a harmful practice where representatives convince customers to surrender existing annuities and purchase new ones, generating new commissions for the representative while subjecting customers to surrender charges and restarting new surrender charge periods. This practice is particularly harmful to elderly customers who may not live long enough to recover from the surrender charges and who are most vulnerable to such exploitation.

If proven, the allegations would suggest Velten encouraged elderly customers to sell mutual fund holdings away from his firm (outside his firm's supervision) and use proceeds to purchase bonus annuities. This would generate commissions for Velten while subjecting customers to surrender charges and potentially unsuitable investments.

Velten's alleged complete failure to respond to FINRA's investigation would have prevented FINRA from determining the full extent of potential customer harm and whether the alleged churning and flipping actually occurred.

The duty to cooperate with investigations is fundamental, particularly when allegations involve potential exploitation of elderly investors. Refusing to respond prevents regulators from protecting vulnerable investors.

If proven, this case would demonstrate how complete refusal to cooperate obstructs investigations into potentially serious misconduct. Elderly investors deserve protection from churning and flipping practices that generate representative commissions while harming customer financial security.

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