Bad Brokers

According to FINRA, Rebecca Ann Everett was assessed a deferred fine of $5,000 and suspended for two months on January 20, 2022, for reusing client signatures on various forms without authorization.

Everett reused client signatures on money movement authorization forms, ACH profile setup request ...

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According to FINRA, Rebecca Ann Everett was assessed a deferred fine of $5,000 and suspended for two months on January 20, 2022, for reusing client signatures on various forms without authorization.

Everett reused client signatures on money movement authorization forms, ACH profile setup request forms, and individual retirement account cash distribution request forms. While there were no indications that any submission was made contrary to client wishes, the unauthorized reuse of signatures violated firm policies and securities regulations. Additionally, Everett's conduct caused her member firm to create and maintain inaccurate books and records.

Each time a customer wants to move money, set up ACH transfers, or take IRA distributions, they must provide authorization through their signature on appropriate forms. This signature requirement serves multiple important purposes: it provides evidence that the customer authorized the transaction, creates an audit trail for regulatory and supervisory review, and protects against unauthorized transactions.

When Everett reused signatures rather than obtaining fresh authorizations, she circumvented these important safeguards. Even though the transactions appear to have been consistent with client wishes in this case, the practice of reusing signatures creates serious risks. It eliminates the opportunity for customers to review and confirm each transaction before it occurs. It also makes it difficult to determine after the fact whether transactions were actually authorized.

The requirement to maintain accurate books and records is fundamental to securities regulation. When firms' records contain reused signatures rather than actual authorizations, the records do not accurately reflect what occurred. This undermines regulatory oversight and the firm's ability to supervise its representatives properly.

For investors, this case illustrates the importance of the authorization process for financial transactions. Every time money moves from your account, you should be signing a current authorization form after reviewing the details. Be suspicious if your advisor seems to be processing transactions without asking you to sign new forms.

Investors should review account statements carefully to ensure all money movement, ACH transfers, and distributions were actually authorized. Report any unauthorized transactions immediately to your firm and to regulatory authorities.

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According to FINRA, Robert James McNamara was fined $5,000 and suspended for 30 business days on January 21, 2022, for exercising discretion in customer accounts without proper authorization.

McNamara exercised discretion in customer accounts without obtaining the customers' written authorization...

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According to FINRA, Robert James McNamara was fined $5,000 and suspended for 30 business days on January 21, 2022, for exercising discretion in customer accounts without proper authorization.

McNamara exercised discretion in customer accounts without obtaining the customers' written authorization and without his member firm approving the accounts for discretionary trading. This violation is particularly concerning because McNamara effected the discretionary trades after a prior AWC was issued for the same type of violation (exercising discretion without authorization), but before his suspension for that prior violation began.

This pattern of conduct - committing the same violation again after being sanctioned but before serving the suspension - demonstrates a troubling disregard for regulatory obligations and past disciplinary actions. It suggests that McNamara did not take the prior AWC seriously or modify his conduct in response to regulatory discipline.

Discretionary authority allows brokers to make investment decisions in customer accounts without obtaining approval before each trade. Because this authority gives brokers significant control, FINRA requires written authorization from customers and written acceptance by the firm. These requirements protect investors by creating clear documentation of discretionary authority and triggering enhanced supervisory procedures.

When brokers exercise discretion without proper authorization, they circumvent important investor protections. Even when customers trust their broker and are satisfied with the trading decisions, the written authorization requirement serves critical functions: documenting the scope of authority granted, ensuring customers understand they are giving discretionary authority, and triggering firm supervisory obligations.

McNamara's recidivism - committing the same violation shortly after being disciplined for it - is an aggravating factor that justified enhanced sanctions. Representatives who repeat violations demonstrate that standard sanctions are insufficient to modify their conduct.

For investors, this case illustrates the importance of understanding whether your account is discretionary or non-discretionary. If you want your broker to make investment decisions without consulting you first, ensure you provide written authorization and your firm accepts the account as discretionary. If you have not provided written discretionary authorization, your broker should contact you before making trades.

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According to FINRA, Andrew Abriol Santos Ang was assessed a deferred fine of $10,000, suspended for six months, and required to requalify as a research analyst by passing the Series 86/87 examination on January 24, 2022, for co-authoring research reports without disclosing material conflicts of inte...

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According to FINRA, Andrew Abriol Santos Ang was assessed a deferred fine of $10,000, suspended for six months, and required to requalify as a research analyst by passing the Series 86/87 examination on January 24, 2022, for co-authoring research reports without disclosing material conflicts of interest arising from employment discussions with the company being analyzed.

Ang was contacted by an executive recruiter about an investor relations position at a pharmaceutical company that was covered by his research group. Ang expressed interest, transmitted his resume, and discussed the position with directors and employees at the company. The employment discussions reached a level of seriousness with mutual expressions of interest and Ang's candidacy clearly visible, creating a material conflict of interest requiring disclosure.

While engaged in these employment discussions, Ang's firm published two research reports he co-authored about the company. The first analyzed the company's third quarter financial results. Ang continued employment discussions with the company, and the firm published a second report providing analysis of recent news about the company and other pharmaceutical firms. Neither research report disclosed that Ang was engaged in employment discussions with the company.

Ang subsequently received and accepted a written employment offer from the company. Only then did he inform his firm's research compliance department that he was interviewing with the company, but he did not disclose that he had already accepted an employment offer. Ang later resigned from the firm while it was conducting an internal investigation.

Research analysts play a critical role in securities markets by providing independent analysis to help investors make informed decisions. The value of research reports depends on analysts' objectivity and independence. When analysts have undisclosed conflicts of interest - such as seeking employment with companies they cover - their objectivity is compromised.

Investors rely on research reports to provide unbiased analysis. When analysts fail to disclose that they are seeking jobs with the companies they analyze, investors cannot properly evaluate potential bias in the research. An analyst seeking employment has obvious incentives to publish favorable research to improve their employment prospects.

This case demonstrates the importance of conflicts disclosure in research reports. Investors should carefully review disclosures in research reports and be skeptical of analysis when material conflicts of interest exist.

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According to FINRA, Brian Orlando Blanco was assessed a deferred fine of $5,000 and suspended for six months on January 24, 2022, for forging and falsifying signatures on insurance applications.

Blanco forged the signatures of insurance customers on life insurance applications without the custome...

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According to FINRA, Brian Orlando Blanco was assessed a deferred fine of $5,000 and suspended for six months on January 24, 2022, for forging and falsifying signatures on insurance applications.

Blanco forged the signatures of insurance customers on life insurance applications without the customers' knowledge or permission and submitted the forged applications for processing. Additionally, Blanco falsified the signatures of other insurance customers who were family or close friends and had authorized him to sign their names. He also falsified dates on these applications. The insurance affiliate of Blanco's member firm identified his misconduct after one customer whose signature was forged complained.

While the applications were submitted to the insurance affiliate and none of the insurance customers held brokerage accounts at the firm, Blanco's conduct violated fundamental principles of honesty and integrity required in the securities industry. Furthermore, Blanco falsely stated on annual compliance questionnaires that he had not signed or directed someone else to sign applicants' names, compounding his misconduct with false attestations.

Forgery - signing someone else's name without authorization - is a serious violation that can constitute criminal conduct. Even when Blanco believed customers wanted the insurance, forging their signatures violated their rights and created documentation falsely indicating they had personally signed the applications.

The falsification of signatures for customers who had authorized Blanco to sign is also problematic. Even with authorization to complete applications, Blanco should not have falsified the customers' signatures. If customers authorize a representative to sign on their behalf, the proper procedure is for the representative to sign their own name and indicate they are signing as authorized representative, not to create false signatures appearing to be the customers'.

The false statements on compliance questionnaires demonstrate dishonesty beyond the underlying signature violations. When firms ask representatives to certify compliance with policies, truthful responses are essential to enable firms to identify and address misconduct.

For investors, this case illustrates the importance of carefully reviewing all documents before signing and verifying that signatures on documents are actually yours. Never authorize someone to sign your name on financial documents. If you need assistance, the proper approach is to provide power of attorney or similar authorization, not to allow forgery.

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According to FINRA, Joseph Brian LaScala Jr. was fined $7,500 and suspended for four months on January 24, 2022, for engaging in excessive and quantitatively unsuitable trading in a customer's account and exercising unauthorized discretionary authority.

LaScala engaged in short-term trading in a ...

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According to FINRA, Joseph Brian LaScala Jr. was fined $7,500 and suspended for four months on January 24, 2022, for engaging in excessive and quantitatively unsuitable trading in a customer's account and exercising unauthorized discretionary authority.

LaScala engaged in short-term trading in a customer's individual 401(k) account. He decided which stocks to trade and when to trade them, exercising discretionary authority over the trades. He controlled the volume and frequency of trading, giving him de facto control over the customer's account. LaScala's short-term trading resulted in $90,720 in trading costs and $116,194 in losses for the customer.

Additionally, LaScala exercised discretionary authority to effect trades without obtaining prior written authorization from the customer or approval from his member firm to treat the account as discretionary. Under FINRA rules, discretionary trading requires both written customer authorization and firm acceptance of the account as discretionary.

Excessive trading, also known as churning, occurs when a broker engages in trading primarily to generate commissions rather than to benefit the customer. Trading costs of $90,720 combined with losses of $116,194 demonstrate the devastating impact of LaScala's trading strategy on this customer's retirement savings.

The 401(k) account context makes this misconduct particularly harmful. 401(k) accounts contain retirement savings that many investors depend on for financial security in retirement. Excessive trading that generates substantial costs and losses in a retirement account can significantly impair an investor's ability to retire comfortably.

Short-term trading strategies that generate high trading costs are rarely suitable for retirement accounts. Most retirement investors benefit from long-term, buy-and-hold strategies that minimize trading costs and allow investments to grow over time. High-frequency trading that generates substantial commissions typically benefits the broker more than the customer.

For investors, this case illustrates several warning signs of excessive trading: frequent trades, high trading costs relative to account value, short holding periods, and persistent losses despite high trading activity. Investors should review their 401(k) and other account statements carefully and question advisors who recommend frequent trading.

If your account shows high turnover and substantial commission charges without corresponding positive performance, seek a second opinion from another financial professional or consider filing a complaint with FINRA.

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According to FINRA, Alan Robert Price was assessed a deferred fine of $5,000 and suspended for 18 months on January 25, 2022, for borrowing $150,000 from an elderly customer without receiving written permission from his firm, and for failing to respond to FINRA's requests until after a complaint was...

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According to FINRA, Alan Robert Price was assessed a deferred fine of $5,000 and suspended for 18 months on January 25, 2022, for borrowing $150,000 from an elderly customer without receiving written permission from his firm, and for failing to respond to FINRA's requests until after a complaint was filed.

Price borrowed $150,000 from a customer without receiving written permission from his firm as required by the firm's procedures. At the time, the firm's written procedures prohibited lending or borrowing between registered representatives and customers unless specific exceptions applied, and required the firm's written approval prior to any loan. Price did not notify the firm of the loan, and none of the specified exceptions applied.

Additionally, Price failed to respond to FINRA's requests for documents and information until after a complaint was filed in connection with an investigation into whether he borrowed money from the elderly customer or other customers. During on-the-record testimony, Price failed to provide testimony about whether he borrowed money from the customer. When his counsel withdrew representation and FINRA suspended his testimony, Price refused to appear later to complete his testimony until after FINRA initiated the proceeding.

Borrowing money from customers creates serious conflicts of interest and potential for abuse. Registered representatives have significant influence over customers who trust them with their financial affairs. This power imbalance makes customers vulnerable to pressure or manipulation regarding loans.

Firm policies requiring approval before borrowing from customers exist to enable firms to evaluate whether such loans are appropriate and to implement additional supervision when loans are permitted. When representatives borrow without firm approval, they circumvent these important protections.

The fact that the customer was elderly is an aggravating factor. Elderly investors are often more vulnerable to financial exploitation and may have difficulty refusing requests from trusted advisors. Financial professionals owe heightened duties of care when working with elderly or vulnerable customers.

Price's failure to cooperate with FINRA's investigation compounded the underlying misconduct. The duty to cooperate with regulatory investigations is fundamental, and Price's refusal to provide information until forced to do so demonstrates disrespect for regulatory oversight.

For investors, particularly seniors, this case serves as a warning to be extremely cautious if your financial advisor asks to borrow money. Such arrangements are heavily regulated and often prohibited because they create conflicts of interest and put customer funds at risk.

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According to FINRA, Riley Smith was assessed a deferred fine of $5,000 and suspended for 18 months on January 26, 2022, for having access to prohibited materials while taking the Securities Industry Essentials (SIE) examination.

During an unscheduled break while taking the SIE examination, Smith ...

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According to FINRA, Riley Smith was assessed a deferred fine of $5,000 and suspended for 18 months on January 26, 2022, for having access to prohibited materials while taking the Securities Industry Essentials (SIE) examination.

During an unscheduled break while taking the SIE examination, Smith went to the testing center restroom where he had access to his SIE examination study materials that he had placed in the garbage can there before beginning the exam. This conduct violated the Rules of Conduct governing FINRA examinations and constituted cheating.

The SIE examination is the foundational qualification examination for securities industry professionals. It tests knowledge of basic securities industry concepts, products, market structure, regulatory agencies, and prohibited practices. Passing qualifying examinations demonstrates that registered persons possess minimum competency to serve investors.

Examination integrity is essential to ensuring that registered persons actually possess the knowledge these exams are designed to test. When individuals cheat on examinations by accessing prohibited materials, they may obtain registration despite lacking the required knowledge. This puts investors at risk by allowing unqualified individuals to provide financial advice and services.

Smith's conduct was premeditated - he deliberately placed study materials in the restroom garbage can before beginning the exam, demonstrating advance planning to cheat. During an unscheduled break, he accessed these materials. This was not an inadvertent or accidental violation, but a deliberate scheme to gain unfair advantage on the examination.

Testing centers implement strict rules prohibiting test-takers from accessing any materials during examinations, including during breaks. These rules exist to maintain examination integrity and ensure all test-takers are evaluated under the same conditions. Smith's violation undermined these important safeguards.

The 18-month suspension is substantial and reflects the seriousness with which FINRA views examination misconduct. Individuals who cheat on qualifying examinations demonstrate a lack of integrity that raises concerns about their fitness to work in the securities industry.

For investors, this case illustrates that FINRA takes examination integrity seriously and will impose significant sanctions on individuals who cheat. Investors should feel confident that registered professionals have legitimately demonstrated their qualifications through proper examination procedures.

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According to FINRA, Michael Peter Dmytryshyn was fined $2,500 and suspended for 10 business days on January 28, 2022, for causing his member firm to maintain inaccurate books and records by changing representative codes on trades.

Dmytryshyn entered into an agreement through which he agreed to se...

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According to FINRA, Michael Peter Dmytryshyn was fined $2,500 and suspended for 10 business days on January 28, 2022, for causing his member firm to maintain inaccurate books and records by changing representative codes on trades.

Dmytryshyn entered into an agreement through which he agreed to service certain customer accounts, including executing trades, under a joint representative code he shared with a retired representative. The agreement specified what percentages of commissions each representative would earn on trades placed using the joint code.

Although the firm's system correctly prepopulated trades with the applicable joint representative code, Dmytryshyn changed the code to his personal representative code. He discussed this with the retired representative, who agreed that Dmytryshyn could make the change. However, changing the codes caused the firm's trade confirmations to inaccurately reflect Dmytryshyn's personal code rather than the joint code.

Dmytryshyn's actions resulted in his receiving higher commissions than he was entitled to receive under the agreement. The firm later reimbursed the retired representative for the commission shortfall.

Accurate books and records are fundamental to securities regulation. Trade confirmations must accurately reflect which registered representative handled each trade for supervisory, compliance, and regulatory purposes. When representatives change representative codes on trades, it causes the firm's records to be inaccurate.

Even though the retired representative initially agreed to allow Dmytryshyn to change the codes, this agreement did not make the resulting inaccurate records acceptable. The firm's records should reflect the actual arrangement under which trades were executed - the joint representative code indicating both representatives were involved in servicing the accounts.

The fact that Dmytryshyn received higher commissions than entitled under the agreement is also problematic, even though this was ultimately corrected. Representatives must comply with commission-sharing agreements and cannot unilaterally change arrangements to increase their own compensation.

For investors, accurate trade records are important because they show which representative handled your trades. This information can be relevant if problems arise with trades or if you need to file a complaint. When firms' records are inaccurate, it can complicate efforts to hold the appropriate individuals accountable for any misconduct.

While this case involved a commission-sharing dispute between representatives rather than direct harm to customers, it illustrates the importance of maintaining accurate books and records throughout the securities industry.

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According to FINRA, Michael Murray Knittel was assessed a deferred fine of $10,000 and suspended for four months on January 28, 2022, for participating in a private securities transaction without providing required notice to his member firm.

Knittel recommended that investors invest $245,000 in a...

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According to FINRA, Michael Murray Knittel was assessed a deferred fine of $10,000 and suspended for four months on January 28, 2022, for participating in a private securities transaction without providing required notice to his member firm.

Knittel recommended that investors invest $245,000 in a promissory note issued by a limited liability company to fund renovation of a residential property and pay legal fees associated with renegotiating an existing lien. Under the promissory note terms, investors would receive repayment of principal and a share of profits upon the property's sale.

Knittel introduced the investors to an owner of the company and provided them with information and documents about the investment, including a draft subscription agreement. After the investors invested, Knittel received $10,000 from the company as compensation for his role in the transaction. He failed to provide prior written notice to his firm or receive approval before participating in this transaction.

Later, the investors expressed complaints to Knittel about the company and their investments and commenced a civil action that was disclosed on an amended Form U4 filed by Knittel's firm. Knittel then sent the investors the $10,000 he had received from the company.

Private securities transactions - often called "selling away" - occur when registered representatives engage in securities transactions outside their firm's supervision. FINRA rules require representatives to provide prior written notice to their firms before participating in private securities transactions. This requirement enables firms to supervise these activities, evaluate whether they are appropriate, and protect investors from unsuitable investments or fraudulent schemes.

The $245,000 promissory note secured by a residential property renovation project carried significant risks that may not have been apparent to investors. Real estate development projects can encounter numerous problems including cost overruns, delays, market downturns, and contractor issues. Promissory notes secured by such projects may not be repaid if the project fails.

Knittel's receipt of $10,000 compensation from the company created a significant conflict of interest. He had financial incentive to recommend the investment regardless of whether it was suitable for the investors. When transactions occur outside firm supervision, firms cannot evaluate these conflicts or determine whether recommendations are appropriate.

For investors, this case illustrates the risks of investing in securities offered by your financial advisor outside their registered firm. Such "selling away" transactions lack proper supervision and often involve high-risk investments. Be extremely cautious about promissory notes or private placements recommended by your advisor, and verify that any investments are offered through their registered firm.

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According to FINRA, Jimmy William Nunez Jr. was assessed a deferred fine of $10,000 and suspended for two years on January 28, 2022, for forging a customer's signature on account documents, falsifying documents, and providing false statements to FINRA during its investigation.

Nunez forged a cust...

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According to FINRA, Jimmy William Nunez Jr. was assessed a deferred fine of $10,000 and suspended for two years on January 28, 2022, for forging a customer's signature on account documents, falsifying documents, and providing false statements to FINRA during its investigation.

Nunez forged a customer's signature and initials on a variable annuity application and related new account documents without obtaining the customer's permission to sign her name or initial any documents for her. Nunez also falsified these documents by placing a date on them that was later than the actual date when they were signed and initialed. He then submitted the forged and falsified documents to his member firm, causing the firm's books and records to be inaccurate.

When FINRA investigated Nunez's conduct, he provided false written statements and testimony in response to FINRA's requests. Nunez subsequently recanted his false statements, but the damage from his initial dishonesty remained.

Forgery - signing someone else's name without authorization - is among the most serious violations in the securities industry. It represents a fundamental breach of trust and can constitute criminal conduct. When representatives forge customer signatures on account documents, they create false documentation indicating the customer authorized transactions or applications they may not have wanted.

Variable annuities are complex insurance products that involve significant costs and long-term commitments. Customers must receive proper disclosure and make informed decisions about whether to purchase these products. When a representative forges a customer's signature on a variable annuity application, the customer may be committed to a long-term contract they never actually agreed to purchase.

The falsification of dates on the documents compounded the forgery by creating false documentation about when the application was signed. This type of backdating can conceal timing issues or make it appear that applications were submitted earlier than they actually were.

Nunez's provision of false statements to FINRA during its investigation represents additional serious misconduct. The duty to provide truthful information to regulators is fundamental. When individuals lie to investigators, they obstruct regulatory oversight and impede FINRA's ability to protect investors. Although Nunez eventually recanted his false statements, the initial dishonesty demonstrated poor integrity.

The two-year suspension reflects the seriousness of the combined violations - forgery, falsification, and providing false statements to regulators. This substantial sanction demonstrates that FINRA treats document forgery and dishonesty with investigators as grave misconduct warranting lengthy suspensions.

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