Bad Brokers

According to FINRA, Timothy Patrick Higgins was barred from association with any FINRA member in all capacities after he failed to appear and provide testimony requested by FINRA in connection with an investigation into potential excessive trading in customer accounts.

This case demonstrates a fu...

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According to FINRA, Timothy Patrick Higgins was barred from association with any FINRA member in all capacities after he failed to appear and provide testimony requested by FINRA in connection with an investigation into potential excessive trading in customer accounts.

This case demonstrates a fundamental principle of securities regulation: cooperation with regulatory investigations is mandatory. FINRA's investigative authority is essential to its mission of protecting investors and maintaining market integrity. When FINRA finds evidence of potential misconduct - in this case, indications that Higgins may have engaged in excessive trading - it has the authority to compel testimony from associated persons.

Excessive trading, also known as churning, occurs when a broker makes trades in a customer's account primarily to generate commissions rather than to serve the customer's investment objectives. It's one of the most serious forms of broker misconduct because it directly harms investors through unnecessary fees and can destroy account value. FINRA's investigation into Higgins was triggered by evidence suggesting this type of activity.

The information FINRA sought from Higgins was deemed important and necessary to the investigation. By refusing to testify, Higgins stymied the investigation and prevented FINRA from fully examining the potential misconduct. This refusal to cooperate is itself a serious violation of FINRA rules, which require associated persons to cooperate with investigations.

The bar imposed on Higgins is permanent absent successful application for reentry, effectively ending his career in the securities industry. This severe sanction reflects the seriousness with which regulators view obstruction of investigations. Without the ability to compel testimony and gather information, FINRA would be unable to effectively investigate potential wrongdoing and protect investors.

For investors, this case serves as a reminder that regulatory oversight depends on cooperation from industry participants. When brokers refuse to cooperate with investigations, it raises serious questions about what they may be trying to hide and undermines confidence in the regulatory system.

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According to FINRA, Mitchell Scott Biernick was barred from association with any FINRA member in all capacities after he refused to appear for on-the-record testimony requested by FINRA in connection with its investigation into the suitability of securities transactions he recommended to customers.
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According to FINRA, Mitchell Scott Biernick was barred from association with any FINRA member in all capacities after he refused to appear for on-the-record testimony requested by FINRA in connection with its investigation into the suitability of securities transactions he recommended to customers.

FINRA's investigation focused on whether the securities transactions Biernick recommended to his customers were suitable given their investment profiles. Suitability is a cornerstone obligation in securities regulation - brokers must have a reasonable basis to believe that recommendations are suitable for customers based on their financial situation, investment objectives, risk tolerance, and other factors. When FINRA receives information suggesting that a broker may have made unsuitable recommendations, it has the authority to investigate and compel testimony.

By refusing to appear for testimony, Biernick violated a fundamental obligation of all securities industry professionals: the duty to cooperate with regulatory investigations. This cooperation is not optional - it's a condition of being licensed to work in the industry. FINRA's ability to protect investors depends on its power to gather information and testimony from the individuals it regulates.

The refusal to testify is particularly concerning in the context of a suitability investigation. Unsuitable recommendations can cause significant harm to investors, particularly when they involve complex securities or strategies inappropriate for a customer's risk tolerance or investment timeline. Biernick's refusal prevented FINRA from fully investigating whether his customers received suitable recommendations.

The permanent bar imposed on Biernick represents the most severe sanction FINRA can impose, effectively ending his securities industry career. This sanction reflects the regulatory principle that obstruction of investigations will not be tolerated. The securities industry operates under a regulatory framework that depends on transparency and accountability. When individuals refuse to participate in investigations, they undermine that framework.

For investors, this case demonstrates FINRA's commitment to investigating potential suitability violations and its willingness to impose severe sanctions on those who obstruct such investigations. It also highlights the importance of investors understanding whether recommendations they receive are truly suitable for their individual circumstances.

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According to FINRA, Richard Marion Blosser was barred from association with any FINRA member in all capacities after refusing to appear for on-the-record testimony in FINRA's investigation into his trading in customer accounts and his firm's supervision of such activity.

FINRA's investigation con...

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According to FINRA, Richard Marion Blosser was barred from association with any FINRA member in all capacities after refusing to appear for on-the-record testimony in FINRA's investigation into his trading in customer accounts and his firm's supervision of such activity.

FINRA's investigation concerned Blosser's trading practices in customer accounts, specifically his purchasing and selling of preferred stock and closed-end funds. These types of securities have specific characteristics that may make them suitable or unsuitable for different investors. Preferred stocks typically offer fixed dividend payments but limited price appreciation potential, while closed-end funds trade on exchanges and can trade at premiums or discounts to their net asset values. The suitability of these investments depends heavily on individual customer circumstances.

The investigation also encompassed the firm's supervision of Blosser's activities - examining whether the firm had adequate supervisory systems in place to oversee his trading recommendations and ensure they were appropriate for customers. Effective supervision is a critical safeguard that helps prevent unsuitable recommendations and excessive trading.

By refusing to provide testimony, Blosser violated his obligation to cooperate with FINRA's investigation. This cooperation requirement is fundamental to securities regulation. Registered representatives and other associated persons must assist regulators in investigating potential misconduct. Without the ability to compel testimony, FINRA would be unable to effectively investigate complaints and protect investors.

Blosser's refusal prevented FINRA from fully examining his trading practices and determining whether customers received suitable recommendations. It also prevented investigation into whether his firm properly supervised his activities. The permanent bar imposed on Blosser reflects the seriousness of obstructing regulatory investigations.

For investors, this case highlights several important points. First, it demonstrates that FINRA actively investigates trading patterns that may harm investors. Second, it shows that regulators examine not just individual broker conduct but also firm supervision. Finally, it underscores that refusal to cooperate with investigations results in the most severe sanctions. Investors should be reassured that FINRA has tools to investigate potential misconduct and is willing to permanently bar individuals who obstruct those investigations.

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According to FINRA, Carlos Leston was barred from association with any FINRA member in all capacities after refusing to provide information and documents requested by FINRA in an investigation that originated from a tip.

Tips to FINRA from whistleblowers, customers, or other sources play a crucia...

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According to FINRA, Carlos Leston was barred from association with any FINRA member in all capacities after refusing to provide information and documents requested by FINRA in an investigation that originated from a tip.

Tips to FINRA from whistleblowers, customers, or other sources play a crucial role in regulatory oversight of the securities industry. They often provide the first indication of potential misconduct that warrants investigation. When FINRA receives credible tips, it has the authority to investigate and can request information and documents from individuals associated with member firms. This investigative power is essential to FINRA's mission of protecting investors and maintaining market integrity.

The obligation to respond to FINRA requests for information is absolute and non-negotiable. It's a condition of being registered and working in the securities industry. When individuals refuse to provide requested information or documents, they prevent FINRA from investigating potential misconduct and protecting investors. This obstruction undermines the entire regulatory framework.

Leston's refusal to provide information and documents represented a complete failure to cooperate with FINRA's investigation. Without access to the requested materials, FINRA was unable to fully investigate the matters raised in the tip. This type of obstruction is viewed extremely seriously because it directly impairs regulatory oversight.

The permanent bar imposed on Leston is the most severe sanction available and is reserved for the most serious violations. It effectively ends his career in the securities industry and serves as a strong deterrent to others who might consider refusing to cooperate with regulatory investigations. The bar can only be lifted if Leston successfully applies for reentry to the industry, a process that requires demonstrating rehabilitation and fitness.

For investors, this case demonstrates FINRA's reliance on tips to identify potential misconduct and its commitment to investigating those tips thoroughly. It also shows that FINRA will impose severe sanctions on individuals who obstruct investigations. The regulatory system depends on transparency and cooperation - when individuals refuse to provide information, they remove themselves from the industry.

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According to FINRA, Keith Todd Ashley was barred from association with any FINRA member in all capacities after failing to respond to FINRA's requests for information in connection with an investigation into the circumstances of his termination from his member firm.

The case has particularly conc...

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According to FINRA, Keith Todd Ashley was barred from association with any FINRA member in all capacities after failing to respond to FINRA's requests for information in connection with an investigation into the circumstances of his termination from his member firm.

The case has particularly concerning facts. Ashley's firm filed a Uniform Termination Notice (Form U5) stating it had terminated him for cause. Subsequently, Ashley was indicted by a federal grand jury on six counts of wire fraud and was arrested and detained in the Bowie County Correctional Center in Texas pending trial. FINRA then began investigating the allegations set forth in the federal indictment.

Wire fraud is a serious federal crime involving a scheme to defraud using electronic communications. When securities industry professionals face criminal charges, particularly for fraud-related offenses, FINRA has a strong interest in investigating the underlying conduct to determine whether it relates to their securities activities and whether they remain fit to work in the industry.

Despite being detained and aware of FINRA's investigation, Ashley failed to respond to FINRA's requests for information. This failure to cooperate prevented FINRA from fully investigating the circumstances of his termination and the criminal allegations against him. While individuals facing criminal charges have Fifth Amendment rights against self-incrimination in criminal proceedings, the obligation to respond to FINRA requests is a civil regulatory matter and a condition of industry participation.

The permanent bar imposed on Ashley reflects both the seriousness of the underlying criminal charges and his failure to cooperate with FINRA's investigation. Even though the bar is based on his failure to respond rather than the underlying fraud allegations, the context of criminal charges for fraud raises serious questions about his fitness to work in an industry built on trust and fiduciary obligations.

For investors, this case illustrates how FINRA coordinates with criminal authorities and responds when securities professionals face serious criminal charges. It also demonstrates that FINRA will bar individuals who fail to cooperate with investigations, ensuring that those who don't meet basic cooperation obligations cannot continue working in the industry.

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According to FINRA, Stacee Lei Bradley was fined $5,000 and suspended for six months after she willfully failed to disclose on her Form U4 that she had been charged with felonies for grand larceny and falsifying business records.

The Form U4 (Uniform Application for Securities Industry Registrati...

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According to FINRA, Stacee Lei Bradley was fined $5,000 and suspended for six months after she willfully failed to disclose on her Form U4 that she had been charged with felonies for grand larceny and falsifying business records.

The Form U4 (Uniform Application for Securities Industry Registration or Transfer) is the fundamental disclosure document that every securities industry professional must file and keep current. It requires disclosure of various matters including criminal charges, regulatory actions, customer complaints, and financial issues. This information is critical because it helps firms, regulators, and investors assess an individual's fitness to work in an industry that requires trust and integrity.

Bradley's violations were particularly serious because they were willful. After learning of the felony charges against her, she filed a Form U4 for the purpose of registering with FINRA through association with a member firm. When asked whether she had ever been charged with any felony, she falsely answered no. This false statement meant that her firm, FINRA, and potentially customers were unaware of the serious criminal charges she faced.

The charges themselves - grand larceny and falsifying business records - are directly relevant to fitness to work in the securities industry. Grand larceny involves theft of significant value, while falsifying business records involves making false entries in business documents to conceal wrongdoing. Both offenses raise serious questions about an individual's honesty and integrity.

Bradley did not disclose the felony charges until several years later, meaning she worked in the industry for years while her Form U4 contained materially false information. This concealment prevented her firm from making an informed decision about her employment and prevented FINRA from properly evaluating her registration.

The six-month suspension and $5,000 fine reflect the seriousness of willfully providing false information on Form U4. For investors, this case highlights the importance of checking a broker's background through FINRA BrokerCheck, which relies on accurate Form U4 disclosures. It also demonstrates that FINRA takes disclosure violations seriously and will sanction those who attempt to hide relevant information.

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According to FINRA, Robert Paul Barberis was fined $2,500 and suspended for one month after he caused his member firm to maintain inaccurate books and records by changing representative codes on trades, resulting in trade confirmations showing incorrect representative codes.

The case arose from a...

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According to FINRA, Robert Paul Barberis was fined $2,500 and suspended for one month after he caused his member firm to maintain inaccurate books and records by changing representative codes on trades, resulting in trade confirmations showing incorrect representative codes.

The case arose from a joint production agreement Barberis entered with a retired representative. Under this agreement, Barberis agreed to service certain customer accounts, including executing trades, under joint representative codes he shared with the retired representative. The agreement specified what percentages of commissions each would earn on trades placed using the joint codes.

Although the firm's system correctly prepopulated trades with the applicable joint representative codes, Barberis entered transactions under his personal representative code instead. This caused the firm's trade confirmations to inaccurately reflect Barberis's personal code rather than the joint code. As a result, Barberis received higher commissions than he was entitled to receive under the agreement.

Accurate books and records are fundamental to securities regulation. They provide the foundation for regulatory oversight, customer dispute resolution, and firm management. When representative codes are inaccurate, it creates confusion about who serviced accounts and who earned what compensation. This can lead to commission disputes and makes it difficult to track individual representatives' activities for supervisory purposes.

FINRA found that Barberis acted negligently - he failed to verify whether the transactions were subject to the joint production agreement before changing the codes. This wasn't intentional fraud, but rather a failure to exercise adequate care. Nonetheless, his negligence caused recordkeeping violations and resulted in him being unjustly enriched at the retired representative's expense.

The firm has since reimbursed the retired representative for the commission shortfall. The relatively modest fine of $2,500 and one-month suspension reflect that this was negligent rather than intentional conduct and that restitution was made.

For those in the securities industry, this case serves as a reminder to carefully track joint production arrangements and ensure that trades are properly coded. It also illustrates that even negligent recordkeeping violations can result in sanctions.

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