Bad Brokers

According to FINRA, Carl Wade Thomason was barred from association with any FINRA member in all capacities on January 31, 2022, for refusing to appear for on-the-record testimony requested by FINRA.

FINRA's investigation originated from a tip received by FINRA. Tips from industry participants, cu...

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According to FINRA, Carl Wade Thomason was barred from association with any FINRA member in all capacities on January 31, 2022, for refusing to appear for on-the-record testimony requested by FINRA.

FINRA's investigation originated from a tip received by FINRA. Tips from industry participants, customers, or other sources often alert FINRA to potential misconduct that requires investigation. When FINRA receives credible information about possible violations, it has a duty to investigate to protect investors and maintain market integrity.

During the course of this investigation, FINRA requested that Thomason appear for on-the-record testimony. Such testimony is a standard investigative tool that allows FINRA to gather facts, understand the circumstances of potential violations, and determine whether disciplinary action is warranted.

Thomason refused to appear for the requested testimony. This refusal to cooperate with FINRA's investigation represents a fundamental violation of the obligations that accompany securities industry registration. The duty to cooperate is not optional - it is a core regulatory requirement that enables FINRA to fulfill its investor protection mission.

When registered persons refuse to provide testimony or otherwise cooperate with FINRA investigations, they typically face severe sanctions, including bars from the industry. These strong sanctions reflect the critical importance of cooperation with regulatory oversight. Without the cooperation of industry participants, FINRA cannot effectively investigate potential misconduct and protect investors.

The refusal to cooperate is itself sanctionable, regardless of what the underlying investigation might have revealed. By refusing to participate in the investigative process, Thomason prevented FINRA from determining whether any misconduct occurred and whether investors were harmed.

For investors, this case serves as a reminder of the importance of regulatory oversight in protecting investor interests. Investors should check their financial advisor's background through FINRA BrokerCheck, which displays disciplinary actions including bars from the industry. Individuals who are barred cannot legally work as registered representatives, and investors should avoid doing business with them.

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According to FINRA, Kelly Diane Thomason was barred from association with any FINRA member in all capacities on January 31, 2022, for refusing to appear for on-the-record testimony requested by FINRA.

FINRA's investigation originated from a tip received by FINRA. Tips from various sources - inclu...

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According to FINRA, Kelly Diane Thomason was barred from association with any FINRA member in all capacities on January 31, 2022, for refusing to appear for on-the-record testimony requested by FINRA.

FINRA's investigation originated from a tip received by FINRA. Tips from various sources - including industry participants, customers, whistleblowers, and other informants - often provide FINRA with initial information about potential misconduct in the securities industry. When FINRA receives credible tips suggesting possible violations of securities laws or rules, it has a responsibility to investigate to protect investors and maintain market integrity.

During this investigation, FINRA requested that Thomason appear for on-the-record testimony. On-the-record testimony is a fundamental investigative tool that allows FINRA staff to question individuals under oath, gather relevant facts, understand the circumstances surrounding potential violations, and determine what disciplinary action, if any, is appropriate.

Thomason refused to appear for the requested testimony, thereby failing to cooperate with FINRA's investigation. This refusal represents a serious violation of the regulatory obligations that come with registration in the securities industry. Every registered person has a duty to cooperate with regulatory investigations - this duty is not optional or discretionary.

The duty to cooperate is essential to FINRA's ability to regulate the securities industry effectively. Without cooperation from the individuals it regulates, FINRA cannot adequately investigate potential misconduct, protect investors, or maintain fair and orderly markets.

When registered persons refuse to cooperate with FINRA investigations by declining to provide testimony, they typically face severe sanctions, including bars from the industry. These strong sanctions reflect how critical the duty to cooperate is to the regulatory framework.

For investors, this case illustrates the importance of working with financial professionals who demonstrate respect for regulatory oversight and their obligations to cooperate with regulatory authorities. Investors can check their advisor's disciplinary history through FINRA BrokerCheck, which displays regulatory actions including industry bars.

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According to FINRA, Shawn Paris Patrick was fined $5,000 and suspended for 10 business days on January 4, 2022, for impersonating customers during telephone calls to a third-party firm that administered a 401(k) plan.

Four customers requested Patrick's assistance with making changes to their 401(...

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According to FINRA, Shawn Paris Patrick was fined $5,000 and suspended for 10 business days on January 4, 2022, for impersonating customers during telephone calls to a third-party firm that administered a 401(k) plan.

Four customers requested Patrick's assistance with making changes to their 401(k) accounts, including reallocating account holdings. Rather than having the customers make the calls themselves or facilitating proper authorization, Patrick made four separate calls to the plan administrator and posed as the customers. While impersonating them, Patrick made the requested changes to their account allocations.

Although the customers had requested these changes and Patrick was trying to help them, his conduct violated fundamental principles of proper customer authorization and account handling. Financial professionals must ensure that account changes are properly authorized by the actual account holders, not by impersonating them.

Impersonation creates serious risks even when the representative believes they are acting in the customer's best interests. It bypasses important safeguards designed to ensure that account changes are actually authorized by customers. It also creates opportunities for unauthorized trades or changes that customers did not request.

FINRA considered that Patrick's member firm had already suspended him for 14 days and fined him $7,500 when determining the appropriate regulatory sanctions. The firm's internal discipline demonstrates that it took this misconduct seriously and acted to address it.

For investors, this case illustrates the importance of directly authorizing any changes to your accounts. While it may seem convenient to have your advisor handle administrative tasks, proper procedures require your direct involvement to protect your interests. Be cautious if an advisor suggests taking shortcuts with authorization procedures, as this can expose you to risk of unauthorized account activity.

Investors should review their account statements regularly to ensure all activity was properly authorized and report any discrepancies immediately.

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According to FINRA, Philip Jenss Myers was assessed a deferred fine of $5,000 and suspended for two months on January 7, 2022, for providing a gift exceeding FINRA limits to a bank employee who engaged in business with his member firm.

Myers provided church bonds with a face value of $100,000 to ...

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According to FINRA, Philip Jenss Myers was assessed a deferred fine of $5,000 and suspended for two months on January 7, 2022, for providing a gift exceeding FINRA limits to a bank employee who engaged in business with his member firm.

Myers provided church bonds with a face value of $100,000 to a bank employee in recognition of services the employee had provided on a firm church bond project. While the bonds were in default at the time and their market value was likely much lower than face value, they still exceeded the gift limit established by FINRA Rule 3220.

FINRA Rule 3220 limits gifts to $100 per person per year. This rule exists to prevent conflicts of interest and improper influence in business relationships. Even when gifts are given with good intentions to recognize someone's assistance, they can create inappropriate obligations or the appearance of impropriety.

The fact that the bonds were in default and worth less than their face value does not eliminate the violation. The bonds still had value, and providing them to someone associated with a business relationship with the firm created a conflict of interest. Such gifts can influence business decisions and create obligations that may not be in the best interests of clients.

Church bonds themselves merit some explanation for investors. These are debt securities issued by religious organizations to finance construction or other projects. They often lack the same regulatory protections as traditional securities and can carry significant risks, including default risk as was the case with the bonds in this matter.

For investors, this case illustrates that FINRA rules exist to maintain appropriate boundaries in business relationships and prevent conflicts of interest. These rules protect investors by ensuring that business decisions are made based on merit rather than personal relationships or obligations created by gifts.

Investors should be aware that their financial advisors must comply with rules limiting gifts and other benefits in business relationships. These restrictions help ensure that recommendations and business arrangements are made in clients' best interests.

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According to FINRA, John Michael LoPinto was assessed a deferred fine of $7,500, suspended for nine months, and ordered to pay $135,333 plus interest in deferred restitution on January 10, 2022, for excessively trading customer accounts and exercising unauthorized discretion.

LoPinto excessively ...

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According to FINRA, John Michael LoPinto was assessed a deferred fine of $7,500, suspended for nine months, and ordered to pay $135,333 plus interest in deferred restitution on January 10, 2022, for excessively trading customer accounts and exercising unauthorized discretion.

LoPinto excessively traded five customers' accounts by recommending high-frequency trading. The customers routinely followed his recommendations, giving LoPinto de facto control over their accounts. His trading strategy was excessive and unsuitable given the customers' investment profiles.

The results were devastating for these customers: they suffered collective realized losses of $240,331 while paying total trading costs of $205,523, including $161,706 in commissions. The high trading frequency generated substantial commissions for LoPinto while causing significant losses for his customers.

Additionally, LoPinto exercised discretion to effect trades in one customer's account without obtaining the customer's prior written authorization and without his member firm accepting the account as discretionary. The customer paid $21,632 in commissions on these unauthorized discretionary trades.

Excessive trading, also known as churning, occurs when a broker engages in excessive buying and selling in a customer's account primarily to generate commissions rather than to benefit the customer. This violates fundamental suitability obligations and breaches the broker's duty to act in the customer's best interests.

The restitution ordered ($135,333) represents commissions paid by three of the five customers plus the customer whose account was traded with unauthorized discretion. The remaining customers had previously received restitution in connection with another matter.

For investors, this case illustrates several critical warning signs of excessive trading: high trading frequency, substantial commission charges relative to account value, and persistent losses despite high trading activity. Investors should review their account statements carefully and question advisors who recommend frequent trading that generates high commissions while producing poor investment results.

Monthly account statements show commission charges - if commissions represent a significant percentage of your account value over time, this may indicate excessive trading. Consider seeking a second opinion if your account shows high turnover without corresponding positive performance.

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According to FINRA, Christopher T. Joseph was assessed a deferred fine of $10,000 and suspended for six months on January 12, 2022, for engaging in outside business activities and private securities transactions without providing required notice to his member firms.

While registered with one firm...

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According to FINRA, Christopher T. Joseph was assessed a deferred fine of $10,000 and suspended for six months on January 12, 2022, for engaging in outside business activities and private securities transactions without providing required notice to his member firms.

While registered with one firm, Joseph signed an employment agreement with another firm that paid him $31,750.47. His responsibilities involved managing relationships with current and prospective clients but did not involve executing securities transactions. Joseph failed to provide prior written notice of this employment to his registered firm.

Additionally, Joseph was a founder, owner, and chief operating officer of a company he formed with his wife to launch a mobile application. He handled various business aspects including working with vendors to develop and market the application. Joseph received a company credit card for business expenses but did not receive a salary. He also failed to disclose this outside business activity to his firms.

Joseph further participated in raising $462,500 through sales of convertible notes to investors who were friends and family for the mobile application business. He assisted with pitching investments and sending offering documents. These activities constituted private securities transactions that required prior written notice to his firms, which Joseph failed to provide.

FINRA rules require registered representatives to provide prior written notice of outside business activities and private securities transactions. These requirements exist so firms can supervise their representatives' activities, identify potential conflicts of interest, and protect customers from unsuitable investments or fraudulent schemes that occur outside firm supervision.

The risks of undisclosed activities include divided attention between multiple business ventures, conflicts of interest that may influence recommendations to customers, and participation in unregistered securities offerings that lack proper disclosures and protections for investors.

For investors, this case illustrates the importance of understanding all business activities in which your financial advisor is engaged. Advisors juggling multiple business ventures may have divided loyalties or conflicts of interest. Investors should ask their advisors about any outside business activities and be cautious about investing in securities offerings promoted by their advisor outside their registered firm.

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According to FINRA, Joel Paul Kichline was fined $5,000 and suspended for one month on January 13, 2022, for exercising discretion in customer accounts without proper authorization.

Kichline exercised discretion in customer accounts without obtaining the customers' prior written authorization and...

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According to FINRA, Joel Paul Kichline was fined $5,000 and suspended for one month on January 13, 2022, for exercising discretion in customer accounts without proper authorization.

Kichline exercised discretion in customer accounts without obtaining the customers' prior written authorization and without his member firm having accepted the accounts as discretionary. The customers had given Kichline oral permission to purchase or sell securities in their accounts, but oral authorization is not sufficient under FINRA rules.

Discretionary authority allows a broker to make investment decisions for a customer without obtaining the customer's approval before each transaction. This includes decisions about which securities to buy or sell, the quantity of securities, and whether to buy or sell. Because discretionary authority gives brokers significant control over customer accounts, FINRA requires specific safeguards.

For an account to be handled on a discretionary basis, the customer must provide prior written authorization, and the member firm must accept the account as discretionary in writing. These requirements create a paper trail documenting the authorization and ensure that both the customer and the firm understand that discretionary trading is occurring. Firms that accept discretionary accounts must also implement enhanced supervisory procedures.

When brokers exercise discretion without proper authorization, it circumvents these important safeguards. Even when customers have given oral permission and trust their broker to make decisions, the written authorization requirement protects both customers and firms by creating clear documentation of the scope of authority granted.

For investors, this case illustrates the importance of understanding whether your account is discretionary or non-discretionary. If you want your advisor to make investment decisions without consulting you first, ensure that you provide written authorization and that your firm accepts the account as discretionary. This provides important protections through enhanced firm supervision of discretionary trading.

If you have not provided written discretionary authorization, your broker should contact you before making trades in your account. Investors should review account statements carefully and question any trades that were not discussed with you in advance.

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According to FINRA, Partho Sarathi Ghosh was fined $10,000 and suspended for three months on January 18, 2022, after a NAC decision became final. The NAC modified sanctions imposed by an Office of Hearing Officers and dismissed the requalification requirement because Ghosh has not been registered fo...

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According to FINRA, Partho Sarathi Ghosh was fined $10,000 and suspended for three months on January 18, 2022, after a NAC decision became final. The NAC modified sanctions imposed by an Office of Hearing Officers and dismissed the requalification requirement because Ghosh has not been registered for more than five years.

Ghosh was found in violation of FINRA rules by engaging in outside business activities without providing prior written notice to his member firm. Before becoming associated with the firm, Ghosh submitted an outside business activity request form, but the firm denied the request and directed him to dissolve his company. After dissolving that company but before registering with the firm, Ghosh formed and incorporated a new company under the same business model. Ghosh was the new company's sole owner and director.

This time, Ghosh neither informed the firm about the new company nor submitted an OBA request form for approval. He became a registered representative of the firm while continuing to engage in undisclosed business activities through his new company.

When Ghosh later submitted an annual supervisory questionnaire, he certified that he understood and complied with the firm's requirement to obtain prior written approval before engaging in outside business activities, and that he complied with submission of marketing materials for review and use of approved email addresses. In fact, Ghosh had not complied with these requirements.

Approximately two and a half months after registering, Ghosh submitted an OBA request for his new company. When asked for additional information, some of his responses contradicted his previous representations. The firm denied this OBA request. Despite the denial, Ghosh continued conducting the company's business. He voluntarily resigned approximately three and a half months after registering with the firm.

FINRA rules require representatives to provide prior written notice of outside business activities so firms can supervise these activities and identify potential conflicts of interest. When Ghosh formed a new company to continue activities the firm had already rejected, he deliberately circumvented the firm's supervisory authority.

For investors, this case demonstrates the importance of transparency in the advisor-firm relationship. Firms need to know about their representatives' outside activities to provide proper supervision and protect clients from conflicts of interest.

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According to FINRA, Shane Edward Perry was fined $7,500 and suspended for five months on January 19, 2022, for willfully failing to timely amend his Form U4 to disclose outstanding federal tax liens totaling $1,015,063.

The Internal Revenue Service filed tax liens against Perry and sent notificat...

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According to FINRA, Shane Edward Perry was fined $7,500 and suspended for five months on January 19, 2022, for willfully failing to timely amend his Form U4 to disclose outstanding federal tax liens totaling $1,015,063.

The Internal Revenue Service filed tax liens against Perry and sent notifications to his residence, so he was aware of the liens and his obligation to disclose them on his Form U4. However, Perry only disclosed the liens after they were brought to his attention by his member firm or FINRA, approximately eight to 30 months after they were required to be reported.

Form U4 is the Uniform Application for Securities Industry Registration that registered representatives must keep current and accurate. It includes questions about financial matters, including tax liens, bankruptcies, judgments, and other financial issues that could affect a representative's fitness to work in the securities industry.

The requirement to disclose tax liens and other financial problems exists because financial difficulties can create temptations for registered representatives to engage in misconduct to resolve their financial issues. Firms and investors need to know about representatives' financial problems to assess potential risks.

Perry's tax liens totaling over $1 million represented substantial financial obligations that could have impacted his financial decision-making and created pressure that might affect his conduct in dealing with customers. The willful failure to disclose these liens for extended periods deprived his firm and potential customers of important information about his financial condition.

The delays in disclosure - ranging from eight to 30 months - were substantial and went well beyond minor or inadvertent omissions. Perry only disclosed the liens when prompted by his firm or FINRA, rather than proactively updating his Form U4 as required.

For investors, this case illustrates the importance of reviewing your financial advisor's Form U4 disclosure through FINRA BrokerCheck. BrokerCheck displays information about tax liens, bankruptcies, customer complaints, and regulatory actions. While financial difficulties do not automatically disqualify someone from working in the securities industry, investors have a right to know about these issues when deciding whether to work with a particular advisor.

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According to FINRA, Dinu Marian Tise was assessed a deferred fine of $7,500 and suspended for six months on January 19, 2022, for acting unethically by circumventing his member firm's policies when he caused a senior customer to draft and sign a will naming him as primary beneficiary, and by conceal...

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According to FINRA, Dinu Marian Tise was assessed a deferred fine of $7,500 and suspended for six months on January 19, 2022, for acting unethically by circumventing his member firm's policies when he caused a senior customer to draft and sign a will naming him as primary beneficiary, and by concealing this conduct from his firm.

A senior customer had engaged an attorney to draft a will naming Tise as a beneficiary with at least a six-figure bequest. However, the customer never signed that attorney-drafted will. Later, Tise typed a will for the customer that named him as primary beneficiary, which would have resulted in a bequest of over $5 million to him. Tise provided this typed will to the customer to use as a guide to handwrite a new will.

Two days later, the customer handwrote and signed a will nearly identical to the version Tise provided. This handwritten will was valid under state law until the customer executed a new will. The customer later complained to the firm, had her account reassigned to a different representative, and signed a new will that did not name Tise as beneficiary.

Despite being aware of both the draft unsigned will and the signed handwritten will naming him as beneficiary, and contrary to firm policies and procedures, Tise never disclosed to the firm that the customer had named him as a beneficiary. Tise also provided a false compliance attestation stating he had reported all potential policy violations, despite knowing that being named a beneficiary violated firm policy. During a firm investigation, Tise initially denied typing the will before voluntarily correcting that misstatement later the same day.

This conduct represents a serious breach of ethical obligations and a violation of the trust that customers place in their financial advisors. Financial professionals should never use their position to obtain personal benefits from customers, particularly elderly or vulnerable customers. Firm policies prohibiting representatives from being named as beneficiaries exist specifically to prevent this type of exploitation.

For investors, particularly seniors, this case serves as a warning about the risks of naming your financial advisor as a beneficiary. Such arrangements create obvious conflicts of interest and may result from undue influence. Investors should consult with independent attorneys regarding estate planning, not their financial advisors who may benefit from such arrangements.

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