Bad Brokers

According to FINRA, Jason Patrick Hamby was barred from association with any FINRA member in all capacities for failing to provide on-the-record testimony requested by FINRA in connection with its investigation into his termination from his member firm.

Hamby was found in violation of FINRA's rul...

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According to FINRA, Jason Patrick Hamby was barred from association with any FINRA member in all capacities for failing to provide on-the-record testimony requested by FINRA in connection with its investigation into his termination from his member firm.

Hamby was found in violation of FINRA's rule requiring cooperation with regulatory investigations. FINRA's investigation stemmed from a Form U5 filed by Hamby's member firm stating that his registration had been terminated after allegations that he involved an unregistered person in activities that required securities registration. This allegation raised serious regulatory concerns because securities registration requirements exist to ensure that individuals selling securities or providing investment advice meet minimum qualifications, pass examinations, and are subject to regulatory oversight.

Involving unregistered persons in securities activities undermines investor protection by allowing individuals who have not demonstrated competence or passed background checks to engage in securities transactions. FINRA requested that Hamby appear for on-the-record testimony to investigate these allegations and determine the facts surrounding his termination. Although Hamby initially cooperated with FINRA's investigation, he later ceased cooperating and failed to provide the requested testimony.

The pattern of initial cooperation followed by cessation of cooperation suggests that Hamby may have decided to stop cooperating when the investigation became more focused or when he realized the potential consequences of his testimony. Regardless of the reason, failure to provide testimony obstructs FINRA's ability to investigate and protect investors. The regulatory requirement to cooperate with investigations is not optional, and registered persons cannot choose to cooperate only when it is convenient or advantageous to them.

A bar for failure to cooperate removes individuals from the industry who refuse to be held accountable for their conduct. This protects investors by ensuring that only those willing to submit to regulatory oversight can work in securities. Investors should verify their financial advisor's registration status through FINRA's BrokerCheck and be wary of anyone who has been barred for failure to cooperate, as such conduct often indicates an attempt to hide misconduct. This case reinforces that cooperation with regulatory investigations is mandatory and that those who refuse to cooperate will be permanently barred from the securities industry.

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According to FINRA, Scott Alan Kaufman was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA in connection with its investigation of the circumstances giving rise to a Form U5 filed by his member firm.

Kaufman was...

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According to FINRA, Scott Alan Kaufman was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA in connection with its investigation of the circumstances giving rise to a Form U5 filed by his member firm.

Kaufman was found in violation of FINRA's rule requiring cooperation with regulatory investigations. The firm filed a Form U5 stating that it had terminated Kaufman's registration due to his use of a fixed income trading strategy designed to increase bond ratings at the expense of lowering yield to customers. This allegation raised serious concerns about whether Kaufman prioritized his own interests or the firm's interests over customer interests, potentially violating the duty to recommend suitable investments and act in customers' best interests.

Fixed income securities, such as bonds, involve a trade-off between risk and return. Bond ratings reflect credit quality, with higher-rated bonds generally offering lower yields because they carry less risk of default. A trading strategy designed to increase bond ratings while lowering yields could benefit a representative or firm by making portfolios appear more conservative or by generating trading commissions, but would harm customers by reducing their investment returns. Such a strategy could constitute unsuitable recommendations if it did not align with customers' investment objectives and risk tolerance.

FINRA requested that Kaufman appear for on-the-record testimony to investigate the trading strategy and determine whether his recommendations violated suitability or other securities rules. However, Kaufman refused to appear for testimony, preventing FINRA from questioning him about his conduct and the allegations in the Form U5. This refusal obstructed FINRA's investigation into whether customers were harmed by unsuitable bond trading recommendations.

The failure to cooperate is particularly concerning in this case because the allegations involve a systematic trading strategy that could have affected multiple customers over an extended period. By refusing to appear for testimony, Kaufman prevented FINRA from understanding the full scope of the conduct and assessing potential customer harm. The bar protects investors by removing from the industry someone who refused to answer questions about a potentially harmful trading strategy.

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According to FINRA, David Khezri was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested by FINRA in connection with its investigation of whether he made unsuitable securities recommendations in customer accounts.

Khezri was ...

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According to FINRA, David Khezri was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested by FINRA in connection with its investigation of whether he made unsuitable securities recommendations in customer accounts.

Khezri was found in violation of FINRA's rule requiring cooperation with regulatory investigations. FINRA initiated an investigation into whether Khezri made unsuitable securities recommendations to customers. Suitability is a fundamental obligation requiring registered representatives to have a reasonable basis to believe that a recommended transaction or investment strategy is suitable for the customer based on the customer's investment profile, including age, financial situation, investment objectives, risk tolerance, and other relevant factors.

Unsuitable recommendations can take many forms, including recommending securities that are too risky for a customer's profile, excessive trading (churning), unsuitable concentration in a particular security or sector, or recommending complex products that customers do not understand. FINRA requested documents and information from Khezri to investigate whether his recommendations violated suitability requirements. This might have included customer account records, correspondence, order tickets, new account documents, and other materials showing the nature of Khezri's recommendations and customers' investment profiles.

However, Khezri refused to provide the requested documents and information, preventing FINRA from obtaining evidence necessary to evaluate whether his recommendations were suitable. This refusal obstructed FINRA's ability to protect investors by investigating potential suitability violations. The documents FINRA sought were likely in Khezri's possession or control, and he had an obligation to produce them regardless of whether they showed misconduct.

A bar for failure to cooperate in a suitability investigation is particularly significant because it suggests that Khezri may have had unsuitable recommendations to hide. Those with nothing to hide typically cooperate with investigations to clear their names. By refusing to provide documents, Khezri prevented FINRA from making findings about the underlying suitability allegations, but his failure to cooperate itself warranted removal from the industry. Investors should understand that individuals who refuse to cooperate with investigations into customer harm pose significant risks and do not belong in positions of trust.

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According to FINRA, Amy Marjorie O'Brien was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested by FINRA in connection with its investigation into her potential improper receipt of funds from an elderly customer.

O'Brien was...

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According to FINRA, Amy Marjorie O'Brien was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested by FINRA in connection with its investigation into her potential improper receipt of funds from an elderly customer.

O'Brien was found in violation of FINRA's rule requiring cooperation with regulatory investigations. FINRA initiated an investigation into O'Brien's potential improper receipt of funds from an elderly customer. Financial exploitation of seniors is a serious and growing problem in the securities industry. Registered representatives occupy positions of trust, and elderly customers may be particularly vulnerable to exploitation due to cognitive decline, isolation, or excessive trust in their financial advisors.

FINRA rules generally prohibit registered representatives from borrowing money from or lending money to customers unless specific conditions are met, and prohibit representatives from receiving inappropriate gifts or sharing in customer accounts without firm approval. When FINRA receives information suggesting that a representative may have improperly received funds from a customer, particularly an elderly customer, it investigates to determine whether the representative exploited the customer's trust for personal gain.

FINRA requested documents and information from O'Brien regarding the alleged improper receipt of funds. This might have included bank statements, correspondence with the customer, agreements or promissory notes, and other records showing the nature and circumstances of any funds transferred from the customer to O'Brien. However, O'Brien refused to provide the requested documents and information, preventing FINRA from investigating whether she improperly obtained money from an elderly customer.

The refusal to cooperate in an investigation involving potential financial exploitation of a senior is particularly troubling. If O'Brien had a legitimate explanation for receiving funds from the customer—such as a properly disclosed and approved loan or a gift that complied with FINRA rules—she could have provided documentation to establish the legitimacy of the transaction. Her refusal to provide documents suggests she may have had something to hide. The bar protects investors, particularly vulnerable seniors, by removing from the industry someone who refused to answer questions about potential financial exploitation.

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According to FINRA, Kyle Zachary Wittgren was barred from association with any FINRA member in all capacities for refusing to provide on-the-record testimony to FINRA in connection with its investigation following his resignation from his member firm.

Wittgren was found in violation of FINRA's ru...

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According to FINRA, Kyle Zachary Wittgren was barred from association with any FINRA member in all capacities for refusing to provide on-the-record testimony to FINRA in connection with its investigation following his resignation from his member firm.

Wittgren was found in violation of FINRA's rule requiring cooperation with regulatory investigations. The investigation began after FINRA received a Form U5 filed by Wittgren's member firm. The Form U5 disclosed that the firm had permitted Wittgren to resign after he admitted to serious misconduct, including signing clients' names without their knowledge or consent, submitting unfunded variable annuity rollover applications, and altering client email addresses in violation of company policy.

These allegations describe multiple types of serious misconduct. First, signing clients' names without authorization constitutes forgery and falsification of documents, which undermines the integrity of customer records and can facilitate unauthorized transactions. Second, submitting unfunded variable annuity rollover applications suggests potential fraud, as it implies that Wittgren submitted applications for annuity transactions without customers having provided the necessary funds. This conduct could have been intended to generate commissions for Wittgren or to create the appearance of sales activity. Third, altering client email addresses raises concerns about potential misappropriation of customer communications, which could have been done to intercept customer correspondence and hide misconduct from customers or the firm.

FINRA requested that Wittgren appear for on-the-record testimony to investigate these serious allegations and determine the full scope of his misconduct. However, Wittgren refused to provide testimony, preventing FINRA from questioning him under oath about the forgeries, unfunded applications, and altered email addresses. His refusal obstructed FINRA's investigation into conduct that likely harmed customers and violated multiple securities rules.

The allegations disclosed in the Form U5, combined with Wittgren's refusal to testify, suggest a pattern of dishonest conduct. By refusing to cooperate, Wittgren prevented FINRA from determining how many customers were affected and whether criminal conduct occurred. The bar protects investors by permanently removing from the industry someone who engaged in forgery and fraud and then refused to answer questions about his misconduct.

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According to FINRA, Roger Oakley Waite was barred from association with any FINRA member in all capacities for refusing to respond to FINRA's requests for documents and information during the course of its investigation into a matter that originated from a tip to FINRA.

Waite was found in violati...

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According to FINRA, Roger Oakley Waite was barred from association with any FINRA member in all capacities for refusing to respond to FINRA's requests for documents and information during the course of its investigation into a matter that originated from a tip to FINRA.

Waite was found in violation of FINRA's rule requiring cooperation with regulatory investigations. FINRA's investigation originated from a tip, which is a common source of information about potential securities violations. Tips can come from various sources, including customers, firm employees, whistleblowers, or other market participants. FINRA relies on tips to identify potential misconduct that might not be detected through routine examinations or surveillance. When FINRA receives a tip suggesting potential violations, it investigates to determine whether the allegations have merit and whether regulatory action is warranted.

FINRA requested documents and information from Waite in connection with its investigation of the matter described in the tip. While the specific allegations are not disclosed in the disciplinary action, FINRA's document requests would have sought information relevant to investigating the potential violations. Although Waite initially cooperated with FINRA's investigation, he ceased doing so, refusing to respond to FINRA's continuing requests for documents and information.

The pattern of initial cooperation followed by cessation of cooperation is significant. It suggests that Waite may have been willing to cooperate when the investigation was in its early stages but stopped cooperating when it became more focused or when he realized the potential consequences. Alternatively, he may have provided some materials but refused to provide additional documents that would have been more incriminating. Regardless of the reason, the obligation to cooperate with FINRA investigations does not end until the investigation is complete, and individuals cannot choose to stop cooperating when it becomes inconvenient or potentially harmful to their interests.

The refusal to respond to requests for documents and information obstructed FINRA's ability to investigate the potential violations described in the tip. This obstruction prevented FINRA from determining whether misconduct occurred and whether customers were harmed. The bar protects investors by removing from the industry someone who refused to cooperate with an investigation into potential securities violations, ensuring that only those willing to be held accountable can work in securities.

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According to FINRA, Robert Patrick Foley was fined $5,000, suspended from association with any FINRA member in any principal capacity for four months, and required to complete 40 hours of continuing education concerning supervisory responsibilities for failing to reasonably supervise registered repr...

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According to FINRA, Robert Patrick Foley was fined $5,000, suspended from association with any FINRA member in any principal capacity for four months, and required to complete 40 hours of continuing education concerning supervisory responsibilities for failing to reasonably supervise registered representatives at his member firm.

Foley was found in violation of his supervisory obligations. As a principal, Foley failed to reasonably supervise two registered representatives who excessively traded customer accounts, charging those customers more than $300,000 in commissions and fees in less than six months. Additionally, Foley failed to supervise a third representative who falsified the firm's books and records. Foley did not reasonably review orders or conduct periodic reviews to identify potentially unsuitable recommendations or excessive trading. Although he signed off on weekly trade reviews, he did not focus on red flags of potentially unsuitable or excessive trading, such as frequent trading, large trades placed on margin, in-and-out trading, and high commission charges.

Foley also failed to investigate red flags that the two representatives were recommending securities transactions in accounts despite not being registered in the customers' home states. Securities registration requirements exist to ensure that representatives are properly licensed in the states where their customers reside. Foley knew that the third representative listed as the representative of record for the accounts in question was only 20 years old with virtually no experience. He also knew that the two representatives who introduced the customers to the firm had been unable to obtain registrations in the customers' home states and that the third representative became their representative of record shortly thereafter. These circumstances presented obvious red flags suggesting that the two experienced representatives were using the young, inexperienced representative as a nominee to circumvent state registration requirements.

Foley did not take reasonable steps to investigate these red flags, such as contacting the customers. Had he done so, he would have learned that the two experienced representatives—not the third representative—were making securities recommendations to the customers. This supervisory failure allowed excessive trading to continue, causing significant customer harm. Principals have a critical responsibility to supervise representatives and detect misconduct. This case demonstrates that merely signing off on reviews is insufficient; principals must actually analyze the information and investigate red flags. The suspension in principal capacity prevents Foley from supervising others until he completes additional education.

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According to FINRA, Peter N. Girgis was fined $7,500, suspended from association with any FINRA member in all capacities for nine months, and ordered to pay $169,677 in restitution to customers for engaging in excessive and quantitatively unsuitable trading in customer accounts.

Girgis was found ...

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According to FINRA, Peter N. Girgis was fined $7,500, suspended from association with any FINRA member in all capacities for nine months, and ordered to pay $169,677 in restitution to customers for engaging in excessive and quantitatively unsuitable trading in customer accounts.

Girgis was found in violation of FINRA's suitability rule through a practice known as churning. He recommended high-frequency trading in customer accounts, with each customer often holding concentrated positions in one or two securities for short periods of time. Girgis' customers routinely followed his recommendations, giving him de facto control over the accounts. This means that while the accounts were technically non-discretionary, the customers consistently accepted Girgis' recommendations without question, effectively giving him control over trading decisions.

The trading resulted in high turnover rates and cost-to-equity ratios, which are key metrics for identifying excessive trading. Turnover rate measures how frequently the securities in an account are replaced, while cost-to-equity ratio measures the total trading costs as a percentage of the account's equity. High values for these metrics indicate that an account must generate substantial returns just to break even, suggesting that the trading is excessive and unsuitable. As a result of Girgis' excessive trading, his customers suffered collective realized losses of $224,573 while paying total trading costs of $199,622, including commissions of $181,877.

This case illustrates a classic churning scenario where a representative generates substantial commissions for himself while causing significant losses for customers. The high-frequency trading strategy benefited Girgis through commissions on each trade but was unsuitable for the customers given the costs involved. Churning is one of the most serious sales practice violations because it represents a clear conflict of interest—the representative profits from trading activity regardless of whether customers benefit.

Investors should be alert to warning signs of excessive trading, including frequent buy and sell recommendations, high commissions relative to account size, and account values that decline despite normal market conditions. Regular review of account statements and confirmations can help identify these red flags. The restitution order requires Girgis to compensate customers for a portion of their losses, though customers suffered substantial harm. This case demonstrates that representatives who engage in churning face significant sanctions including lengthy suspensions and restitution obligations.

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According to FINRA, Douglas Jarrett Rosenberg was suspended from association with any FINRA member in all capacities for seven months and ordered to pay $25,000 in partial restitution to customers for excessively and unsuitably trading customer accounts. No monetary fine was imposed in light of Rose...

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According to FINRA, Douglas Jarrett Rosenberg was suspended from association with any FINRA member in all capacities for seven months and ordered to pay $25,000 in partial restitution to customers for excessively and unsuitably trading customer accounts. No monetary fine was imposed in light of Rosenberg's financial status.

Rosenberg was found in violation of FINRA's suitability rule by engaging in excessive trading. All of Rosenberg's customers accepted his recommendations, giving him de facto control over their accounts even though the accounts were not formally designated as discretionary. This pattern of customers routinely following recommendations without question effectively gave Rosenberg control over trading decisions and subjected him to the heightened scrutiny applied to discretionary accounts.

As a result of Rosenberg's excessive trading recommendations, his customers suffered more than $154,000 in realized losses and paid a total of $89,652 in commissions, trading costs, and margin interest. The use of margin—borrowing money to purchase securities—likely amplified both the trading activity and the losses. Margin trading involves additional costs in the form of margin interest, and margin loans can magnify losses when securities decline in value. The combination of excessive trading and margin use is particularly harmful to customers.

Excessive trading, or churning, violates suitability rules because it is inconsistent with the customer's best interests. The trading serves primarily to generate commissions for the representative rather than to achieve the customer's investment objectives. The key indicators of churning include high turnover rates, high cost-to-equity ratios, and trading patterns inconsistent with the customer's investment objectives and risk tolerance. In this case, the substantial losses and costs incurred by customers demonstrate the harm caused by Rosenberg's excessive trading.

The restitution order of $25,000 represents partial restitution, meaning it does not fully compensate customers for all their losses. The limitation to partial restitution may reflect Rosenberg's financial status, which also resulted in no monetary fine being imposed. However, the seven-month suspension prevents Rosenberg from earning income in the securities industry during that period, serving as a significant sanction. Investors should carefully monitor trading activity in their accounts and question representatives about the necessity and suitability of frequent trading recommendations.

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According to FINRA, Eric Carl Willer was suspended from association with any FINRA member in all capacities for nine months for recommending potential investors purchase bonds in two private placement offerings without having a reasonable basis to believe the bonds were suitable for any investor and...

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According to FINRA, Eric Carl Willer was suspended from association with any FINRA member in all capacities for nine months for recommending potential investors purchase bonds in two private placement offerings without having a reasonable basis to believe the bonds were suitable for any investor and for negligently distributing misleading communications concerning the offerings. No monetary sanction was imposed in light of Willer's financial status.

Willer was found in violation of suitability and communications rules. He recommended that potential investors purchase bonds in two private placement offerings without conducting adequate due diligence. Willer performed no investigation of the issuer or its management in connection with the offerings, other than reviewing offering documents prepared by the issuers and promoters. This minimal level of due diligence was inadequate for a reasonable basis suitability determination, which requires representatives to have a reasonable basis to believe that a recommendation is suitable for at least some investors.

Furthermore, the offering documents Willer used and distributed to potential investors contained multiple material misrepresentations that he failed to recognize. As a result of his failure to conduct reasonable due diligence of the issuer, its management, and the offerings, Willer had no reasonable basis to believe that the offerings were suitable. Additionally, Willer negligently misrepresented and omitted material facts when he distributed the misleading offering documents to potential investors, who collectively invested $460,000 in the offerings.

Private placement offerings involve securities that are not registered with the SEC and are typically sold to a limited number of investors. These investments often carry significant risks, including illiquidity, lack of public information, and heightened risk of fraud. Representatives recommending private placements have a heightened obligation to conduct thorough due diligence because these investments lack the disclosure and regulatory protections of registered securities. At a minimum, this due diligence should include investigating the issuer's business, financial condition, management team, use of proceeds, and risks.

Willer's reliance solely on offering documents prepared by the issuers and promoters was inadequate because these parties have obvious conflicts of interest and incentives to present the offerings in the most favorable light. Independent verification and investigation are essential. The fact that the offering documents contained material misrepresentations underscores the danger of taking promotional materials at face value. This case serves as a warning that representatives must conduct independent due diligence before recommending private placements, and that negligently distributing misleading materials can result in significant sanctions.

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