Bad Brokers

According to FINRA, Adam Petersen Summers was fined $5,000 and suspended for five months for engaging in forgery by signing his supervisor's name on new account forms without permission.

Summers signed his supervisor's name on new account forms that had already been signed by customers. He then s...

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According to FINRA, Adam Petersen Summers was fined $5,000 and suspended for five months for engaging in forgery by signing his supervisor's name on new account forms without permission.

Summers signed his supervisor's name on new account forms that had already been signed by customers. He then submitted these signed forms to his member firm's home office for approval. While each customer had legitimately signed the forms, Summers forged his supervisor's signature rather than obtaining the required supervisory approval.

Supervisory approval of new accounts is a critical safeguard designed to ensure that accounts are properly established, that the customer information is complete and accurate, and that the firm maintains adequate oversight of account opening procedures. By forging his supervisor's signature, Summers bypassed this important review and created false records that appeared to show proper supervisory approval when none had been obtained.

Forgery is a serious violation that demonstrates dishonesty and a willingness to circumvent compliance procedures. Even though the customers had legitimately signed the forms and there is no indication that they were harmed, the forgery undermined the integrity of the firm's supervisory system and created false records.

The relatively light sanction compared to some other forgery cases may reflect the fact that the customers had actually signed the forms and intended to open accounts. However, the unauthorized signing of another person's name is still a serious breach of trust and professional standards.

Investors should understand that supervisory procedures exist for their protection. When brokers forge signatures or otherwise bypass compliance reviews, it creates risks that problems will go undetected. Forgery demonstrates a lack of integrity that should raise concerns about trustworthiness in other areas. Before working with a financial professional, investors should check FINRA BrokerCheck for any disciplinary history related to forgery, false statements, or circumventing supervisory procedures, as these indicate serious character issues.

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According to FINRA, Patrick Nicholas Teutonico was suspended for three months and ordered to pay $42,092 in restitution for excessively and unsuitably trading in a customer's account.

Teutonico's customer account had an average monthly equity of approximately $94,000, but the trades recommended b...

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According to FINRA, Patrick Nicholas Teutonico was suspended for three months and ordered to pay $42,092 in restitution for excessively and unsuitably trading in a customer's account.

Teutonico's customer account had an average monthly equity of approximately $94,000, but the trades recommended by Teutonico resulted in the customer paying $42,092 in commissions and other trading costs. The excessive trading resulted in the account having an annualized turnover rate of 13 and an annualized cost-to-equity ratio of more than 35 percent. This means the customer's investments would have had to grow by more than 35 percent just to break even after paying commissions and costs.

A turnover rate of 13 means the entire value of the portfolio was turned over 13 times in a year, indicating extremely frequent trading. This level of activity is almost never appropriate for retail investor accounts and typically indicates that the broker is generating commissions rather than pursuing sound investment strategies for the customer.

Excessive trading, also known as churning, violates suitability obligations because the trading activity is excessive in light of the customer's investment objectives and the character of the account. It represents placing the broker's interest in generating commissions ahead of the customer's interest in achieving reasonable investment returns.

The 35 percent cost-to-equity ratio is particularly striking. It means that more than one-third of the account value was consumed by trading costs in a year. No reasonable investment strategy justifies such costs, which made it virtually impossible for the customer to achieve positive returns.

Investors should monitor their accounts for signs of excessive trading, including unusually high commission charges, frequent buy and sell transactions, and high turnover of holdings. Account statements show commission charges and transaction activity. If commissions represent more than a few percent of account value annually, or if securities are held for only brief periods before being sold, these are warning signs of potential churning. Investors should question brokers about the rationale for frequent trading and consider whether a fee-based account might be more appropriate.

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According to FINRA, Christopher John Passero was fined $10,000 and suspended for three months for sharing in customer losses by making payments totaling $249,560 to customers without firm authorization, and for making an unauthorized loan to a customer.

Passero made substantial payments to custom...

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According to FINRA, Christopher John Passero was fined $10,000 and suspended for three months for sharing in customer losses by making payments totaling $249,560 to customers without firm authorization, and for making an unauthorized loan to a customer.

Passero made substantial payments to customers to compensate them for losses associated with investments he had recommended. While making customers whole for losses may appear generous, FINRA rules require brokers to obtain firm approval before sharing in customer losses. These rules exist because such arrangements can create improper incentives, hide problems from firms and regulators, and may indicate underlying suitability or other violations that should be investigated.

Passero did not tell his firm about these payments or seek authorization before making them. He compounded this violation by completing and submitting compliance questionnaires that falsely stated he did not share directly or indirectly in customer losses. These false statements prevented the firm from discovering the payments and investigating the circumstances that led to the customer losses.

In addition, Passero loaned $10,000 to a customer to assist with paying a tax liability, without notifying the firm about the loan. He also falsely stated in a compliance questionnaire that he did not loan money to customers. FINRA has rules about lending to and borrowing from customers because such arrangements can create conflicts of interest and inappropriate relationships between brokers and clients.

The size of the payments—nearly $250,000—is substantial and raises questions about what caused such significant customer losses. The failure to disclose these payments and the false compliance certifications prevented the firm from investigating whether the losses resulted from unsuitable recommendations or other violations.

Investors should understand that when brokers make substantial payments to customers, it may indicate underlying problems with the investment recommendations. While receiving such payments may benefit individual investors, the failure to disclose them to the firm and regulators prevents broader investor protection. Investors who experience significant losses should consider whether firm notification or FINRA complaint might be appropriate, rather than accepting private settlements that may hide broader problems.

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According to FINRA, William Martin Beasley was fined $2,500 and suspended for one month for causing his member firm to maintain inaccurate books and records by changing representative codes for trades.

Beasley had entered into an agreement through which he agreed to service certain customer accou...

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According to FINRA, William Martin Beasley was fined $2,500 and suspended for one month for causing his member firm to maintain inaccurate books and records by changing representative codes for trades.

Beasley had entered into an agreement through which he agreed to service certain customer accounts under a joint representative code that he shared with the estate of a retired representative. The agreement specified what percentages of commissions Beasley and the estate would earn on trades placed using the joint representative code.

Although the firm's system correctly prepopulated trades with the applicable joint representative code, Beasley negligently entered the trades under his personal representative code instead. As a result, the firm's trade confirmations inaccurately reflected Beasley's personal representative code instead of the joint code. This caused Beasley to receive higher commissions than he was entitled to receive pursuant to the agreement.

The firm subsequently reimbursed the estate of the retired representative for the improperly allocated commissions. While Beasley's conduct appears to have been negligent rather than intentional, the result was that he received commissions he was not entitled to and the firm's records were inaccurate.

Accurate books and records are fundamental to regulatory oversight and firm operations. Representative codes on trades determine commission allocations and are used for supervision and compliance monitoring. When trades are recorded under incorrect representative codes, it distorts the firm's records and can impair supervisory reviews.

Investors should understand that accurate recordkeeping is essential for investor protection. While this violation involved commission allocations rather than customer harm, it demonstrates the importance of proper procedures and attention to detail in the securities industry. Inaccurate records can impede supervision and allow problems to go undetected. The relatively light sanction reflects that the conduct was negligent rather than intentional and that restitution was made, but it still warranted discipline because of the recordkeeping violations.

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According to FINRA, Steven Kent Romjue was fined $5,000 and suspended for six months for causing his member firm to maintain inaccurate books and records by deliberately changing representative codes for trades.

Romjue had entered into agreements through which he agreed to service customer accoun...

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According to FINRA, Steven Kent Romjue was fined $5,000 and suspended for six months for causing his member firm to maintain inaccurate books and records by deliberately changing representative codes for trades.

Romjue had entered into agreements through which he agreed to service customer accounts under joint representative codes that he shared with two retired representatives. Each agreement specified what percentages of commissions each representative would earn on trades placed using the applicable joint representative code.

Although the firm's system correctly prepopulated trades with the applicable joint representative code, Romjue changed the codes to his personal representative code or another representative code. He did not ask either retired representative whether he could change the code on the trades and did not otherwise indicate to them that he was doing so. Instead, Romjue incorrectly assumed that the retired representatives agreed with his changing the codes because they did not complain about the commissions they received.

Romjue's actions resulted in his receiving higher commissions from the trades than what he was entitled to receive. The firm subsequently paid restitution to the retired representatives, and Romjue reimbursed the firm $182,232, which was the approximate amount of additional commissions he improperly received.

Unlike some representative code cases that involve negligence, Romjue's conduct involved deliberately changing the codes. His assumption that silence constituted consent was unreasonable, particularly given the substantial amount of commissions at issue. The unauthorized change of representative codes constitutes falsification of firm books and records.

Accurate books and records are essential for regulatory oversight, firm supervision, and proper commission allocations. Representative codes on trades are used to track production, determine compensation, and monitor for compliance issues. Falsifying these codes undermines record integrity and can impair the firm's ability to supervise trading activity.

Investors should understand that the integrity of firm records is important for investor protection. While this case involved commission allocations rather than direct customer harm, it demonstrates a willingness to manipulate records for personal financial gain, which raises broader concerns about trustworthiness and ethical standards.

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According to FINRA, John Tayib Lund was fined $5,000 and suspended for four months for electronically signing customer names on various account forms without proper authorization.

Lund electronically signed a customer's name, without permission, on two account transfer forms, two forms providing ...

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According to FINRA, John Tayib Lund was fined $5,000 and suspended for four months for electronically signing customer names on various account forms without proper authorization.

Lund electronically signed a customer's name, without permission, on two account transfer forms, two forms providing Lund with discretionary authority over the accounts, and two new account applications. The account transfers were in connection with a bulk transfer of Lund's accounts from his former member firm to his new firm. The customer did not authorize Lund to electronically sign her name and complained once she learned of the transfers, which the firm reversed.

The signing of a customer's name without authorization is forgery, which is a serious violation involving dishonesty. In this case, it resulted in unauthorized account transfers and the unauthorized granting of discretionary authority. The customer's complaint led to reversal of the transfers, but the violation had already occurred.

In addition, Lund electronically signed, with prior permission, three account transfer forms and four new account applications for four other customers, one of whom was a senior. While these customers had given permission, obtaining customer permission to sign on their behalf is generally not appropriate and can create opportunities for abuse. The proper procedure is for customers to sign their own forms.

As a result of this conduct, Lund caused his firm to maintain inaccurate books and records. The forms appeared to bear customer signatures when they were actually signed by Lund, making it impossible to verify that customers had actually reviewed and approved the documents.

Investors should understand that they should personally sign all account documents, including account applications, transfer forms, and discretionary authority forms. Allowing a broker to sign on your behalf, even with permission, creates risks that documents may be completed incorrectly or that unauthorized changes may be made. Investors should never allow brokers to have electronic access to their signatures. The forging of customer signatures, even for supposedly legitimate purposes, demonstrates a lack of respect for proper procedures and creates serious risks of unauthorized activity.

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According to FINRA, Jonathan William Affe was fined $5,000 and suspended for 15 business days for impersonating a customer during telephone calls with an insurance company.

With the customer's permission and in the customer's presence, Affe impersonated the customer during telephone calls to an i...

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According to FINRA, Jonathan William Affe was fined $5,000 and suspended for 15 business days for impersonating a customer during telephone calls with an insurance company.

With the customer's permission and in the customer's presence, Affe impersonated the customer during telephone calls to an insurance company to obtain information concerning the customer's existing variable annuity investment. During the calls, Affe introduced himself to the insurance company as the customer by name and used the customer's personal identifying information for authentication purposes.

The particularly concerning aspect of this case is that Affe engaged in this conduct after receiving a warning from FINRA that impersonating customers violates FINRA rules. Despite this prior warning, he continued the practice. During one of the telephone calls, a representative of the insurance company stated that she had reason to believe Affe was impersonating the customer. Rather than acknowledging the truth, Affe repeated his claim that he was the customer and ended the call.

While Affe may have believed he was helping the customer by obtaining information more efficiently, impersonation is prohibited because it undermines the security measures that companies have in place to protect customer information and accounts. It also involves dishonesty and misrepresentation.

Even with customer permission, impersonation is not appropriate. The proper procedure is for the customer to contact the company directly or to provide written authorization for the broker to act on their behalf. Insurance companies and other financial institutions have security procedures requiring verification of identity before releasing information, and these procedures exist for customer protection.

The fact that Affe continued to impersonate customers after receiving a prior warning from FINRA demonstrates a disregard for regulatory guidance and a willingness to engage in dishonest conduct even after being told it was prohibited. The relatively light sanction may reflect that the conduct was done with customer permission and in the customer's presence, but it still constituted a violation warranting discipline.

Investors should never give brokers permission to impersonate them when contacting financial institutions. Such practices undermine security procedures designed to protect accounts and can create opportunities for unauthorized activity.

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According to FINRA, Bruce Cameron Amman was fined $5,000 and suspended for 12 months for participating in a private securities transaction without providing prior written notice to his member firm, and for providing an incorrect answer on a firm compliance questionnaire.

Amman participated in a p...

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According to FINRA, Bruce Cameron Amman was fined $5,000 and suspended for 12 months for participating in a private securities transaction without providing prior written notice to his member firm, and for providing an incorrect answer on a firm compliance questionnaire.

Amman participated in a private securities transaction involving a customer who was a sophisticated investor. The customer was selling partnership interests in a limited partnership which would generate large capital gains, and wanted to invest in a specialized tax-advantaged investment to offset those gains. Amman introduced the customer to a third party with experience in these types of investments.

Beyond just making an introduction, Amman provided information about the customer to the third party, participated in phone calls with the customer and the third party, and facilitated the wire transfer out of the customer's account at the firm to fund the investment. The customer invested approximately $3.5 million in the investment, which was a security structured as a private placement.

These activities constituted participation in a private securities transaction. FINRA rules require registered representatives to provide prior written notice to their firms before participating in such transactions, even when no compensation is received. This requirement exists so that firms can supervise the transactions and assess whether they are appropriate.

Amman did not provide the required written notice to his firm. Additionally, he provided an incorrect answer to a question on an annual firm questionnaire that asked whether he had participated in a private securities transaction. This false certification prevented the firm from discovering and supervising the transaction.

Notably, the customer did not complain about the transaction, and as a sophisticated investor, may have understood the risks involved. However, the failure to disclose the transaction to the firm still violated FINRA rules.

Investors should understand that registered representatives must disclose all private securities transactions to their firms, even when dealing with sophisticated investors and even when the transactions turn out well. The disclosure requirement exists for investor protection and to ensure proper supervision. When evaluating investment opportunities, investors should verify that any transaction is properly disclosed to the broker's firm and documented in firm records.

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According to FINRA, Philip Marchese was suspended for 12 months and ordered to pay $50,000 in partial restitution to customers for excessively trading customer accounts.

Marchese exercised de facto control over customer accounts because he recommended high frequency trading and the customers rout...

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According to FINRA, Philip Marchese was suspended for 12 months and ordered to pay $50,000 in partial restitution to customers for excessively trading customer accounts.

Marchese exercised de facto control over customer accounts because he recommended high frequency trading and the customers routinely followed his recommendations. His trading in these accounts was excessive and unsuitable given the customers' investment profiles. As a result of Marchese's excessive trading, the customers suffered collective realized losses of $246,327 while paying total trading costs of $244,645, including commissions of $222,692.

The fact that trading costs of $244,645 approximately equaled the realized losses of $246,327 demonstrates the devastating impact of excessive trading. Essentially, the customers' investment losses were almost entirely due to the cost of the trading activity rather than poor market performance. The customers paid over $222,000 in commissions for trading activity that was unsuitable for their accounts.

Excessive trading, also known as churning, occurs when a broker engages in trading that is excessive in light of the customer's investment objectives and the character of the account. It typically reflects the broker's interest in generating commissions rather than pursuing suitable investment strategies for the customer.

De facto control exists when a customer routinely follows a broker's recommendations without independent analysis. When a broker has this level of control and recommends high frequency trading, they have essentially exercised discretion over the account and must ensure the trading is suitable. In this case, the high frequency trading was not suitable given the customers' investment profiles.

In light of Marchese's financial status, no monetary fine was imposed beyond the restitution. This suggests that financial sanctions would have been uncollectible, which is why the restitution is described as partial. The customers may not recover their full losses.

Investors should monitor their accounts for signs of excessive trading, including frequent trades, high commission charges relative to account value, and trading patterns that seem designed to generate commissions rather than achieve investment returns. If commissions and trading costs consume a significant portion of account value or investment gains, this is a warning sign of potential churning.

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According to FINRA, an Office of Hearing Officers decision found that Alpine Securities Corporation should be expelled from FINRA membership and ordered to pay $2,310,234 in restitution to customers. The firm appealed this decision to the NAC.

The firm was found to have converted and misused cust...

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According to FINRA, an Office of Hearing Officers decision found that Alpine Securities Corporation should be expelled from FINRA membership and ordered to pay $2,310,234 in restitution to customers. The firm appealed this decision to the NAC.

The firm was found to have converted and misused customer securities, engaged in unauthorized transactions, charged unfair prices, and charged unreasonable discriminatory fees. The firm increased its annual account fee from $100 to $60,000 per year ($5,000 monthly), an astronomical increase that was clearly designed to generate revenue at customer expense.

The firm applied this fee in a discriminatory manner, maintaining a list of favored customers who would not actually pay the fee. The firm immediately reversed the $5,000 monthly fee in accounts of customers it wanted to retain. Other customers who discovered the fee and complained also had it reversed. However, many customers were charged the fee without their knowledge.

To collect the unreasonable fee, the firm intentionally removed cash and securities from customer accounts without authorization. None of the customers authorized these transfers. Some customers paid the fee only because they were forced to do so to regain possession of their other holdings. The firm also moved securities positions worth less than $1,500 to a firm-owned account, unilaterally declaring them worthless and buying them for one penny per position, even though many were listed and marketable securities.

The firm then systematically moved remaining positions from customer accounts into escheat accounts, improperly declaring them abandoned. In total, the firm wrongfully declared 645 positions abandoned from 545 customer accounts. The estimated value of wrongfully seized securities was more than $54.5 million.

The firm also charged customers a two and one-half percent market-making fee which resulted in unfair prices exceeding five percent, and charged an illiquidity and volatility fee that was unreasonable. The firm collected approximately $1.5 million in these fees.

This case represents some of the most egregious customer abuse in recent FINRA enforcement history, involving systematic conversion of customer assets under the guise of unreasonable fees.

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