Bad Brokers

According to FINRA, Gary Steven Costello has been barred from association with any FINRA member firm in all capacities for refusing to appear for on-the-record testimony.

FINRA requested Costello's testimony in connection with its investigation into allegations that he had cancelled trades he pla...

Read More

According to FINRA, Gary Steven Costello has been barred from association with any FINRA member firm in all capacities for refusing to appear for on-the-record testimony.

FINRA requested Costello's testimony in connection with its investigation into allegations that he had cancelled trades he placed in his personal account and rebilled them to several of his customers' accounts—causing those customers to incur losses for trades they did not place.

Under FINRA rules, registered representatives are required to cooperate with regulatory investigations, including providing testimony when requested. Refusal to cooperate is itself a serious violation that results in an automatic bar from the securities industry.

The underlying allegations are concerning: if true, the practice of shifting losing trades from a personal account to customer accounts would constitute a serious breach of fiduciary duty and potentially securities fraud. By rebilling trades, a broker could profit at customers' direct expense by transferring losses to their accounts.

What Investors Can Learn: This case highlights the importance of regularly reviewing account statements and trade confirmations. Investors should verify that all transactions in their accounts were actually authorized by them. Unexpected trades, particularly losing ones, should prompt immediate inquiry with the broker and the firm's compliance department. Investors can also check a broker's disciplinary history through FINRA's BrokerCheck tool.

Show Less

According to FINRA, Dora Alicia Soto has been barred from association with any FINRA member firm in all capacities for refusing to appear for on-the-record testimony requested by FINRA.

The investigation concerned allegations from her member firm that Soto submitted expense reports claiming expen...

Read More

According to FINRA, Dora Alicia Soto has been barred from association with any FINRA member firm in all capacities for refusing to appear for on-the-record testimony requested by FINRA.

The investigation concerned allegations from her member firm that Soto submitted expense reports claiming expenses to which she was not entitled, resulting in a loss to the firm.

FINRA rules require registered persons to cooperate with regulatory investigations. When an individual refuses to provide testimony, FINRA imposes a bar regardless of the underlying allegations, as cooperation with regulatory inquiries is fundamental to investor protection and market integrity.

Expense report fraud, while not directly involving customer funds, is a form of dishonesty that calls into question a registered representative's fitness to handle customer assets and transactions. Regulators view such conduct seriously because it demonstrates a willingness to deceive for personal gain.

What Investors Can Learn: The securities industry has high standards for honesty and integrity. When brokers demonstrate dishonest behavior in any context—even internal firm matters like expense reports—it raises questions about their trustworthiness in handling customer affairs. Investors can use FINRA BrokerCheck to review the disciplinary history of their financial professionals.

Show Less

According to FINRA, Jordan Paul McLendon has been barred from association with any FINRA member firm in all capacities for refusing to provide documents and information requested by FINRA.

The investigation arose from a Form U5 filed by his member firm stating that McLendon was discharged followi...

Read More

According to FINRA, Jordan Paul McLendon has been barred from association with any FINRA member firm in all capacities for refusing to provide documents and information requested by FINRA.

The investigation arose from a Form U5 filed by his member firm stating that McLendon was discharged following provision of falsified documentation, failure to cooperate in internal review, and lack of candor.

A Form U5 is the Uniform Termination Notice for Securities Industry Registration that firms must file when a registered representative leaves. The form requires disclosure of the reason for termination, particularly if it involves possible violations of industry rules or regulations.

The allegations on McLendon's Form U5 are serious: falsified documentation and lack of candor strike at the core of the trust that must exist between financial professionals and both their employers and clients. By refusing to cooperate with FINRA's investigation into these matters, McLendon has been permanently barred from the industry.

What Investors Can Learn: Investors should be aware that they can review a broker's employment history, including termination circumstances, through FINRA's BrokerCheck tool. Disclosure of terminations involving allegations of misconduct provides important information for investors when selecting a financial professional.

Show Less

According to FINRA, Cesar Manuel Casado has been barred from association with any FINRA member firm in all capacities for refusing to produce information and documents requested by FINRA.

The investigation concerned allegations that Casado submitted life insurance applications with inaccurate inf...

Read More

According to FINRA, Cesar Manuel Casado has been barred from association with any FINRA member firm in all capacities for refusing to produce information and documents requested by FINRA.

The investigation concerned allegations that Casado submitted life insurance applications with inaccurate information and discrepancies. FINRA has authority to investigate the conduct of registered representatives, including their activities involving insurance products when those activities are connected to their securities registration.

Submitting inaccurate information on insurance applications is a serious matter that can constitute fraud. Insurance applications require truthful and complete information to properly assess risk and determine appropriate coverage. When representatives submit applications with inaccuracies, it can harm both the insurance company and potentially the client if claims are later denied due to misrepresentations.

By refusing to cooperate with FINRA's investigation, Casado received an industry bar—the most severe sanction available—regardless of what the investigation into the underlying conduct might have revealed.

What Investors Can Learn: Financial professionals who handle both securities and insurance products must maintain high standards of honesty in all their dealings. Investors should be cautious of representatives who have been involved in allegations of submitting inaccurate applications or other forms of document falsification.

Show Less

According to FINRA, Roger Albert Taft Gallagher has been barred from association with any FINRA member firm in all capacities for refusing to provide documents, information, and on-the-record testimony requested by FINRA.

The investigation concerned, among other things, the allegations in a crimi...

Read More

According to FINRA, Roger Albert Taft Gallagher has been barred from association with any FINRA member firm in all capacities for refusing to provide documents, information, and on-the-record testimony requested by FINRA.

The investigation concerned, among other things, the allegations in a criminal indictment filed against Gallagher. While FINRA did not specify the nature of the criminal charges, the existence of a criminal indictment indicates that a grand jury found sufficient evidence to bring formal charges.

FINRA's investigation of registered representatives facing criminal charges is an important part of investor protection. Even when criminal proceedings are ongoing, FINRA has independent authority to investigate and take action to protect investors. By refusing to cooperate, Gallagher has been permanently barred from the securities industry.

Registered representatives have an obligation to cooperate with FINRA investigations regardless of any parallel criminal or civil proceedings. While individuals have constitutional rights in criminal proceedings, the regulatory framework requires cooperation with industry regulators as a condition of industry participation.

What Investors Can Learn: Investors should regularly check their broker's record through FINRA BrokerCheck, which discloses criminal charges and proceedings. The presence of criminal charges is a serious red flag that warrants careful consideration when deciding whether to continue a business relationship with a financial professional.

Show Less

According to FINRA, Mary Beth Fisher Spuhler has been barred from association with any FINRA member firm in all capacities for refusing to provide information and documents requested by FINRA.

The investigation concerned allegations that Spuhler engaged in personal transactions with clients witho...

Read More

According to FINRA, Mary Beth Fisher Spuhler has been barred from association with any FINRA member firm in all capacities for refusing to provide information and documents requested by FINRA.

The investigation concerned allegations that Spuhler engaged in personal transactions with clients without prior approval from her member firm. Many broker-dealers prohibit or restrict personal financial transactions between their representatives and clients because such arrangements can create conflicts of interest and potential for abuse.

When a registered representative engages in personal transactions with clients—such as loans, business deals, or other financial arrangements outside the normal broker-client relationship—it can blur the professional boundaries that exist to protect investors. These restrictions exist because the trust clients place in their financial advisors could be exploited for personal gain.

By refusing to cooperate with FINRA's investigation, Spuhler received an automatic bar from the industry, regardless of what the underlying investigation might have determined about the nature of her transactions with clients.

What Investors Can Learn: Investors should be cautious if a broker proposes personal financial transactions outside the normal advisory relationship. Such arrangements should generally be avoided, and if they occur, investors should ensure the broker's firm has approved them. Report any concerns to the firm's compliance department.

Show Less

According to FINRA, Szczepan Kosmaczewski has been barred from association with any FINRA member firm in all capacities for refusing to appear for on-the-record testimony.

The investigation originated from FINRA's examination of Kosmaczewski's member firm and a resulting investigation into the re...

Read More

According to FINRA, Szczepan Kosmaczewski has been barred from association with any FINRA member firm in all capacities for refusing to appear for on-the-record testimony.

The investigation originated from FINRA's examination of Kosmaczewski's member firm and a resulting investigation into the recommendations of securities transactions at the firm. This suggests FINRA identified potential concerns about whether securities recommendations made to customers were appropriate.

Suitability and best interest requirements are fundamental investor protections. Brokers must have a reasonable basis to believe that recommended transactions are appropriate for customers based on their investment profile, including factors such as age, financial situation, investment experience, risk tolerance, and investment objectives.

When FINRA identifies potential issues with recommendations during a firm examination, it may investigate individual representatives to determine whether violations occurred. By refusing to testify, Kosmaczewski prevented FINRA from fully investigating whether customers were harmed by inappropriate recommendations.

What Investors Can Learn: Investors should ensure their brokers understand their financial situation and investment goals before making recommendations. Keep records of your stated investment objectives and risk tolerance. If you believe you received unsuitable recommendations, you can file a complaint with FINRA or pursue arbitration to recover losses.

Show Less

According to FINRA, William Slattery has been barred from association with any FINRA member firm in all capacities for cheating on the Series 66 Uniform Combined State Law Exam.

Before starting the exam, Slattery attested that he had read and would abide by the NASAA Qualification Examinations Ru...

Read More

According to FINRA, William Slattery has been barred from association with any FINRA member firm in all capacities for cheating on the Series 66 Uniform Combined State Law Exam.

Before starting the exam, Slattery attested that he had read and would abide by the NASAA Qualification Examinations Rules of Conduct, which prohibit candidates from acting unethically, dishonestly, or unfairly by cheating or attempting to cheat. The rules also prohibit the use of personal items including electronic devices during the examination and require candidates to store all personal items in a locker prior to entering the test room.

During an unscheduled restroom break, Slattery accessed exam study materials and ChatGPT on his cellphone, which he had hidden in the toilet seat cover dispenser of the testing center restroom. After returning to his workstation, Slattery changed his answers to at least two questions based on his review of the prohibited materials.

The Series 66 exam tests knowledge of state securities regulations and is required for individuals who want to act as investment adviser representatives. Qualification exams ensure that securities professionals have the knowledge necessary to serve investors competently.

What Investors Can Learn: This case demonstrates that FINRA takes examination integrity seriously. Securities licensing exams exist to protect investors by ensuring financial professionals have necessary knowledge. When individuals cheat, they may lack the competence to properly advise clients. This case should reassure investors that testing protocols are in place to detect and punish cheating.

Show Less

According to FINRA, Keith Craig Baron has been barred from associating with any FINRA member firm and ordered to pay disgorgement of $284,890 plus prejudgment interest following a hearing panel decision.

Baron was found to have omitted material information and made misrepresentations to an elderl...

Read More

According to FINRA, Keith Craig Baron has been barred from associating with any FINRA member firm and ordered to pay disgorgement of $284,890 plus prejudgment interest following a hearing panel decision.

Baron was found to have omitted material information and made misrepresentations to an elderly married couple regarding stock of a company purportedly in the business of acquiring oil and gas leases. Baron had entered into a consulting agreement with the company that paid him $10,000 per month, even though the company was not generating any revenue.

Baron represented to the elderly couple that the company stock was a guaranteed investment and that the price would double within three months. He failed to disclose his consulting agreement with the company. The couple purchased shares totaling $359,806 in four transactions, none of which were executed through Baron's member firm. Following these purchases, the company paid Baron $284,890 in compensation.

Baron also failed to disclose his consulting agreement as an outside business activity in annual compliance certifications and failed to disclose his participation in these private securities transactions to his firm. He made misrepresentations to both his firm and to FINRA about his involvement with the couple's investment.

What Investors Can Learn: This case illustrates several red flags investors should watch for: promises of guaranteed returns, claims that investments will double quickly, and investment opportunities offered outside normal brokerage channels. Always ask about any financial relationship your broker may have with companies they recommend.

Show Less

According to FINRA, Tyler Morgan Krol has been barred from association with any FINRA member firm in all capacities for refusing to provide documents and information requested by FINRA.

The investigation arose from allegations contained in a Form U5 filed by his member firm. The firm disclosed th...

Read More

According to FINRA, Tyler Morgan Krol has been barred from association with any FINRA member firm in all capacities for refusing to provide documents and information requested by FINRA.

The investigation arose from allegations contained in a Form U5 filed by his member firm. The firm disclosed that Krol had been terminated by its affiliate bank for opening two credit cards for affiliate bank customers without their knowledge or consent and charging over $31,000 for personal use.

Opening accounts in customers' names without authorization is a serious form of fraud. This type of conduct gained national attention through the Wells Fargo unauthorized accounts scandal and has resulted in significant regulatory focus on account opening practices. Creating accounts without customer authorization and then using them for personal benefit compounds the violation.

By refusing to provide documents and information to FINRA, Krol has been permanently barred from the securities industry. The regulatory bar applies regardless of any criminal or civil proceedings that might arise from the underlying alleged conduct.

What Investors Can Learn: Investors should regularly review all accounts in their name and immediately report any accounts they did not authorize. Monitor credit reports for unauthorized account openings. If you discover unauthorized accounts, report them to the institution, relevant regulators, and consider filing a police report.

Show Less