Bad Brokers

According to FINRA, William Lawrence Groeneveld was barred from the securities industry for refusing to provide on-the-record testimony in connection with a FINRA investigation.

Groeneveld served as director of trading and chief risk officer at his member firm. FINRA initiated an investigation in...

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According to FINRA, William Lawrence Groeneveld was barred from the securities industry for refusing to provide on-the-record testimony in connection with a FINRA investigation.

Groeneveld served as director of trading and chief risk officer at his member firm. FINRA initiated an investigation into ten of the firm's investment banking transactions and the firm's execution of cross trades involving those and other securities. The investigation sought testimony from Groeneveld regarding his role in the solicitation of aftermarket orders during the offerings and the supervision of cross trading activity.

Rather than appearing for testimony, Groeneveld refused FINRA's request. This refusal represents a fundamental breach of regulatory cooperation obligations. When individuals register with FINRA, they agree to cooperate with regulatory inquiries as a condition of registration. Refusing to provide information or testimony obstructs FINRA's ability to investigate potential violations and protect investors.

FINRA Rule 8210 requires associated persons to provide information and testimony with respect to any matter involved in an investigation. Failure to comply with this rule typically results in a bar from the industry because without cooperation, regulators cannot effectively investigate misconduct or protect investors. The severity of this sanction reflects how critical truthful cooperation is to the regulatory framework.

The underlying investigation involved investment banking transactions and cross trades, both areas where conflicts of interest and potential misconduct can harm investors. Cross trades involve executing trades between two of a firm's own customers, which can be problematic if not properly supervised. Aftermarket order solicitation during offerings can raise questions about whether the offering was properly conducted.

For investors, this case illustrates that regulatory investigations serve an important investor protection function, and individuals who refuse to cooperate face severe consequences. The bar prevents Groeneveld from working in any capacity in the securities industry. Investors should verify their financial professionals' regulatory status and check for any history of refusing to cooperate with regulators.

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According to FINRA, Edric Michael McSween was barred from the securities industry for refusing to provide information and documents during a FINRA investigation into the circumstances of his resignation.

McSween's member firm filed an amended Form U5 stating that he had resigned while under inves...

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According to FINRA, Edric Michael McSween was barred from the securities industry for refusing to provide information and documents during a FINRA investigation into the circumstances of his resignation.

McSween's member firm filed an amended Form U5 stating that he had resigned while under investigation for compliance policy violations related to undisclosed outside business activities and business relationships with clients. These are serious compliance matters that can create conflicts of interest and harm investors. Outside business activities that aren't disclosed to a firm prevent the firm from evaluating whether those activities conflict with the representative's duties to clients.

Rather than cooperating with FINRA's investigation into these matters, McSween refused to provide requested information and documents. This refusal made it impossible for FINRA to complete its investigation and determine whether McSween violated securities laws or FINRA rules, or whether clients were harmed.

Cooperation with regulatory investigations is not optional. FINRA Rule 8210 requires registered persons and those subject to FINRA's jurisdiction to provide information orally, in writing, or electronically and to testify at a location specified by FINRA. The rule exists because effective regulation depends on obtaining information from those involved in potential misconduct.

The sanction of a bar is severe but appropriate when someone completely refuses to cooperate. Without the ability to compel cooperation, FINRA cannot investigate potential violations or protect investors. The bar prevents McSween from working in any capacity in the securities industry, effectively ending his career in the field.

The underlying conduct being investigated, undisclosed outside business activities and business relationships with clients, represents potential conflicts of interest. When representatives have business dealings with clients outside of their registered firm activities, it can lead to unsuitable recommendations, fraud, or other misconduct.

For investors, this case emphasizes the importance of checking a financial professional's regulatory background through FINRA BrokerCheck. A refusal to cooperate with regulators is a major red flag that suggests an individual may be hiding misconduct. Investors should be wary of financial professionals who leave firms under investigation and should ask direct questions about any disclosed regulatory matters.

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According to FINRA, Roger Bruce Braxton II was barred from the securities industry after an Office of Hearing Officers decision became final finding he failed to produce information and documents during an investigation.

FINRA's investigation focused on Braxton's expense reporting after his membe...

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According to FINRA, Roger Bruce Braxton II was barred from the securities industry after an Office of Hearing Officers decision became final finding he failed to produce information and documents during an investigation.

FINRA's investigation focused on Braxton's expense reporting after his member firm terminated his registration. Submitting false expense reports can constitute conversion, which is essentially theft from the firm. When representatives fabricate or inflate expense reports to obtain reimbursements they aren't entitled to receive, they are stealing firm funds.

Despite the seriousness of the investigation, Braxton provided only a partial response to FINRA's first request and failed to respond at all to three subsequent requests. Each request sought information about expense reimbursement requests he had submitted to his firm. His failure to respond prevented FINRA from determining whether conversion occurred and whether investor funds may have been impacted.

The case proceeded to FINRA's Office of Hearing Officers, which conducts formal proceedings similar to court trials. The OHO found that Braxton violated his obligation to cooperate with the investigation and imposed a bar. The decision became final, meaning Braxton can no longer work in any capacity in the securities industry.

Cooperation obligations exist throughout a person's association with a FINRA member firm and can extend beyond that association for matters that occurred during registration. Even though Braxton was no longer registered when FINRA made its requests, he remained obligated to respond regarding conduct that occurred while he was registered.

Expense reimbursement fraud may seem like a matter between an employee and employer, but it reflects on an individual's honesty and integrity, which are critical qualities for anyone handling customer investments. If a representative will steal from their employer through false expense reports, it raises serious questions about whether they would steal from or mislead clients.

For investors, this case illustrates that financial professionals' integrity matters across all aspects of their conduct, not just in customer-facing activities. Investors should review their financial professional's disclosure record through BrokerCheck and be alert for any indications of dishonest conduct.

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According to FINRA, Marco Antonio Rivera was barred from the securities industry after an Office of Hearing Officers decision became final finding he failed to timely and fully provide information and documents during a regulatory investigation.

Rivera's member firm terminated him, and FINRA laun...

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According to FINRA, Marco Antonio Rivera was barred from the securities industry after an Office of Hearing Officers decision became final finding he failed to timely and fully provide information and documents during a regulatory investigation.

Rivera's member firm terminated him, and FINRA launched an investigation into the circumstances of his termination and whether he violated any federal securities laws or FINRA rules. The investigation included specific concerns about potential COVID-19 relief fraud. FINRA requested applications or documents Rivera submitted to the Small Business Administration or other governmental entities regarding financial aid under the Coronavirus Preparedness and Response Supplemental Appropriations Act, the CARES Act, and the Paycheck Protection Program and Health Care Enhancement Act.

FINRA also requested bank and brokerage account statements, tax returns, and information about any outside business activities Rivera had. While Rivera initially provided some information, he ceased cooperating with the investigation before providing critical documents. The information he failed to provide was material to FINRA's investigation and necessary to complete its regulatory mandate to fully investigate potential rule violations and protect the investing public.

The investigation's focus on potential PPP and CARES Act fraud is significant. During the COVID-19 pandemic, some individuals falsely claimed to operate businesses or inflated their financial situations to obtain government aid they weren't entitled to receive. Such fraud not only constitutes theft of taxpayer funds but also raises serious questions about an individual's honesty and fitness to work in the securities industry.

The case proceeded to a formal hearing before FINRA's Office of Hearing Officers, which found that Rivera violated his obligation to cooperate and imposed a bar. This sanction prevents him from working in any capacity in the securities industry.

For investors, this case highlights multiple red flags. First, termination from a firm should prompt questions about why the termination occurred. Second, potential pandemic relief fraud indicates serious dishonesty. Third, refusal to cooperate with regulators suggests an individual is hiding misconduct. Investors should always check BrokerCheck before working with a financial professional and should be particularly cautious about individuals with termination disclosures or regulatory investigations.

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According to FINRA, Stephanie Jing Wen Xiao was barred from the securities industry for refusing to provide information and documents requested during a regulatory investigation.

FINRA's investigation concerned Xiao's trading in a brokerage account that was not disclosed to her member firm. Regis...

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According to FINRA, Stephanie Jing Wen Xiao was barred from the securities industry for refusing to provide information and documents requested during a regulatory investigation.

FINRA's investigation concerned Xiao's trading in a brokerage account that was not disclosed to her member firm. Registered representatives are required to disclose personal securities accounts to their firms so the firm can supervise their trading activity. This supervision helps prevent conflicts of interest, insider trading, and other misconduct. When representatives maintain undisclosed accounts, it raises serious concerns about what they may be trying to hide.

Rather than cooperating with FINRA's investigation into this undisclosed account, Xiao refused to provide the requested information and documents. This refusal prevented FINRA from determining what trades occurred in the account, whether those trades involved conflicts of interest or prohibited conduct, and whether customers were harmed.

Undisclosed brokerage accounts can be used for various types of misconduct. Representatives might use such accounts to engage in insider trading, front-run customer orders, or conduct prohibited trading strategies. Even absent actual misconduct, the failure to disclose the account itself violates firm policies and regulatory requirements because it prevents appropriate supervision.

The complete refusal to cooperate with a regulatory investigation represents a severe breach of the obligations that come with registration in the securities industry. FINRA cannot effectively regulate the industry and protect investors if registered persons refuse to provide information about their activities. For this reason, refusals to cooperate typically result in bars from the industry.

For investors, this case illustrates the importance of supervision and disclosure requirements. Financial professionals must be transparent about their personal trading and other activities that might create conflicts of interest. When individuals refuse to provide information to regulators, it suggests they are hiding something serious. Investors should check their financial professional's BrokerCheck record and be wary of anyone with a history of undisclosed accounts or refusal to cooperate with regulators.

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According to FINRA, Jesus Jose Alvidrez was barred from the securities industry for refusing to produce information and documents during a regulatory investigation.

The investigation originated from a Form U5 filed by Alvidrez's member firm stating that he resigned while under review for potentia...

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According to FINRA, Jesus Jose Alvidrez was barred from the securities industry for refusing to produce information and documents during a regulatory investigation.

The investigation originated from a Form U5 filed by Alvidrez's member firm stating that he resigned while under review for potential undisclosed outside business activities. Outside business activities (OBAs) that aren't disclosed to a firm create significant compliance and supervisory concerns. When representatives engage in business activities their firm doesn't know about, it prevents the firm from evaluating conflicts of interest, time commitment issues, or whether the activities involve firm customers.

Initially, Alvidrez made a partial production of documents and cooperated with FINRA's investigation. However, he subsequently ceased cooperating without providing complete responses to FINRA's requests. This partial cooperation followed by cessation suggests that as the investigation deepened, Alvidrez may have become unwilling to provide information that could be harmful to him.

The pattern of initial cooperation followed by refusal to continue cooperating is particularly concerning. It suggests that the individual may have realized the investigation was uncovering information they wanted to conceal. Complete cooperation throughout a regulatory investigation is required, not optional cooperation when convenient.

FINRA Rule 8210 requires persons associated with member firms to provide information and documents in connection with investigations. This rule is critical to FINRA's ability to investigate potential violations and protect investors. When individuals refuse to cooperate, they prevent FINRA from determining what happened and whether customers were harmed. The sanction of a bar reflects how seriously FINRA treats failures to cooperate.

For investors, this case demonstrates the importance of checking whether financial professionals have undisclosed outside business activities. Such activities can create conflicts of interest or indicate that the representative is not fully focused on serving clients. When combined with a refusal to cooperate with regulators, it suggests serious problems. Investors should review their financial professional's BrokerCheck record and ask direct questions about any outside business activities and how they might impact the professional's ability to serve clients.

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According to FINRA, Kaival Patel was barred from the securities industry for failing to produce information and documents during a regulatory investigation concerning his discharge from a member firm.

Patel's firm filed a Form U5 disclosing that it discharged him following a loss of confidence re...

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According to FINRA, Kaival Patel was barred from the securities industry for failing to produce information and documents during a regulatory investigation concerning his discharge from a member firm.

Patel's firm filed a Form U5 disclosing that it discharged him following a loss of confidence related to issues stemming from his being named in an indictment filed in the U.S. District Court for the District of New Jersey. Being named in a criminal indictment is a serious matter that can reflect on an individual's fitness to work in the securities industry. Such indictments often lead to terminations because firms cannot afford the regulatory and reputational risks of employing someone facing criminal charges.

When FINRA requested information and documents about the circumstances of his discharge and the underlying indictment, Patel provided only a partial response that did not substantially comply with the request. The information and documents he failed to provide were material to FINRA's investigation. Material information is information that would be important to a reasonable regulator in making decisions about the matter under investigation.

Partial compliance with regulatory requests is not sufficient. FINRA's rules require full and complete responses to information requests. When individuals provide only some of the requested information, they prevent FINRA from conducting a thorough investigation and may be selectively providing only information favorable to themselves while withholding damaging information.

Criminal indictments, especially when they result in discharge from a firm, are serious red flags for investors. They suggest potential dishonest or illegal conduct that could extend to how the individual handles customer accounts. The additional refusal to fully cooperate with FINRA's investigation compounds these concerns by suggesting the individual is hiding something.

For investors, this case emphasizes the importance of reviewing a financial professional's complete regulatory and criminal background through BrokerCheck and other public records. Investors should be extremely cautious about working with anyone who has been criminally indicted or who has refused to cooperate with regulatory investigations. These are among the most serious red flags that can appear on a broker's record.

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According to FINRA, Jeffrey Ernest Marburger was barred from the securities industry for refusing to appear for on-the-record testimony during a regulatory investigation.

The investigation concerned serious allegations disclosed in a Form U5 filed by Marburger's previous member firm. According to...

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According to FINRA, Jeffrey Ernest Marburger was barred from the securities industry for refusing to appear for on-the-record testimony during a regulatory investigation.

The investigation concerned serious allegations disclosed in a Form U5 filed by Marburger's previous member firm. According to the Form U5, the firm terminated Marburger after its parent company concluded that he paid off a life insurance client's loan, changed that client's address to a mailbox under his control, and then shredded the same client's mail.

These allegations describe what appears to be a scheme to defraud the client. Paying off a client's loan, changing their address, and destroying their mail suggests an attempt to gain control over the client's financial affairs without their knowledge or to hide unauthorized transactions. Such conduct, if proven, would constitute serious financial exploitation.

Rather than appearing to provide testimony about these serious allegations, Marburger refused FINRA's request for on-the-record testimony. On-the-record testimony is sworn testimony, similar to a deposition, where individuals answer questions under oath and the testimony is transcribed by a court reporter. Refusing to provide such testimony when facing allegations of client fraud is extremely concerning because it prevents regulators from investigating what happened and determining whether the client or other clients were harmed.

The refusal to testify is particularly problematic given the seriousness of the underlying allegations. When facing accusations of paying off a client's loan, controlling their mail, and destroying documents, an innocent person would typically want to cooperate fully to clear their name. The refusal to testify suggests an unwillingness to answer questions about these serious matters.

For investors, this case highlights multiple red flags. First, the underlying allegations involve direct financial harm to a client through what appears to be fraud. Second, the refusal to testify suggests guilt or an unwillingness to explain the conduct. Investors should always check BrokerCheck before working with a financial professional and should be extremely cautious about anyone terminated for potential fraud or who refused to cooperate with investigators.

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According to FINRA, Timothy John Prouty was barred from the securities industry for refusing to produce information and documents during a regulatory investigation.

FINRA's investigation concerned the circumstances giving rise to Prouty's discharge from his member firm. The firm filed a Form U5 d...

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According to FINRA, Timothy John Prouty was barred from the securities industry for refusing to produce information and documents during a regulatory investigation.

FINRA's investigation concerned the circumstances giving rise to Prouty's discharge from his member firm. The firm filed a Form U5 disclosing that it discharged Prouty due to concerns that he submitted transactions under production numbers inconsistent with an agreement with another representative, resulting in a shortfall of revenue credited to that representative.

This conduct describes what appears to be internal fraud or commission theft. When representatives enter transactions under production codes or numbers, those codes determine how commissions are allocated. By allegedly submitting transactions under production numbers inconsistent with his agreement with another representative, Prouty appears to have diverted commissions away from a colleague who was entitled to receive them. This represents theft from a fellow representative and a violation of firm policies.

While this conduct might seem like an internal firm matter, it reflects directly on an individual's honesty and integrity. If a representative will steal commissions from a colleague, it raises serious questions about whether they would also engage in misconduct affecting customers, such as unauthorized trading, excessive trading, or other forms of fraud.

Rather than cooperating with FINRA's investigation into these allegations, Prouty refused to produce the requested information and documents. This refusal prevented FINRA from determining exactly what happened, whether Prouty's conduct violated securities laws or FINRA rules, and whether similar conduct may have occurred in customer accounts.

The bar prevents Prouty from working in any capacity in the securities industry, reflecting the seriousness with which FINRA treats both the underlying dishonest conduct and the refusal to cooperate with the investigation.

For investors, this case illustrates that a financial professional's conduct toward their firm and colleagues can be a strong indicator of their integrity in dealing with customers. Commission theft or manipulation of production codes reflects dishonest character. Combined with a refusal to cooperate with regulators, these factors represent serious red flags. Investors should check BrokerCheck and inquire about any terminations or regulatory matters before entrusting their investments to a financial professional.

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According to FINRA, Barbara Ann Bernatzky was barred from the securities industry for refusing to appear for on-the-record testimony during a regulatory investigation.

FINRA's investigation concerned potential misconduct that occurred at Bernatzky's member firm branch office. When FINRA investiga...

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According to FINRA, Barbara Ann Bernatzky was barred from the securities industry for refusing to appear for on-the-record testimony during a regulatory investigation.

FINRA's investigation concerned potential misconduct that occurred at Bernatzky's member firm branch office. When FINRA investigates branch office misconduct, it typically seeks testimony from branch personnel to understand what occurred, who was involved, and whether customers were harmed. Branch-level misconduct can include supervisory failures, sales practice violations, fraud, or other regulatory violations.

Rather than appearing to provide testimony about the potential misconduct at her branch office, Bernatzky refused FINRA's request for on-the-record testimony. This refusal prevented FINRA from gathering information about what happened at the branch and whether investors were harmed. The investigation may have involved other representatives or supervisors at the branch, and Bernatzky's testimony could have been critical to understanding the full scope of any misconduct.

On-the-record testimony is a fundamental tool FINRA uses to investigate potential violations. During such testimony, individuals answer questions under oath, and the testimony is transcribed. This creates a sworn record that can be used in disciplinary proceedings or referred to other authorities. Refusing to provide such testimony obstructs FINRA's regulatory function and prevents the agency from fulfilling its investor protection mandate.

The sanction of a bar is severe but necessary when individuals completely refuse to cooperate with regulatory investigations. Without the ability to compel cooperation, FINRA cannot investigate potential violations, determine whether customers were harmed, or take action to prevent future harm. The bar prevents Bernatzky from working in any capacity in the securities industry.

For investors, this case highlights the importance of cooperation with regulatory investigations. When financial professionals refuse to answer questions about potential misconduct, it prevents regulators from protecting investors and suggests the individual may be hiding something serious. Investors should check their financial professional's BrokerCheck record and be extremely cautious about anyone who has refused to cooperate with regulators, as this is one of the most serious red flags that can appear on a regulatory record.

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