Bad Brokers

According to FINRA, Walter Charles Bish was fined $5,000 and suspended from association with any FINRA member firm for three months for recommending a trading strategy without understanding its features and risks.

Bish recommended a trading strategy to certain customers that primarily invested in...

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According to FINRA, Walter Charles Bish was fined $5,000 and suspended from association with any FINRA member firm for three months for recommending a trading strategy without understanding its features and risks.

Bish recommended a trading strategy to certain customers that primarily invested in a high-risk exchange-traded note (ETN) without having a reasonable basis to recommend the strategy to any customer. Prior to making recommendations, Bish did not conduct his own due diligence on either the strategy or the ETN.

The investigation revealed that Bish did not fully understand how the trading strategy worked or its potential risks and rewards. Critically, Bish was not aware that the ETN used in the strategy could be accelerated or terminated, or under what circumstances that could occur. This lack of understanding meant he could not properly evaluate or explain the risks to customers.

This case is related to the Smith, Brown & Groover action from the same month, which involved the firm's development of this problematic ETN strategy. Affected customers are receiving partial restitution through a separate settlement with the firm.

Brokers have an obligation to understand the products they recommend before making those recommendations to customers. This reasonable-basis suitability requirement exists to protect investors from being sold products that even their representatives do not understand. Investors should ask detailed questions about any complex product recommendations and be wary if representatives cannot fully explain the risks.

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According to FINRA, Tim Davidson Hemingway was fined $7,500 and suspended from association with any FINRA member firm for four months for recommending a trading strategy to customers without fully understanding its features and risks.

Hemingway recommended a trading strategy that primarily invest...

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According to FINRA, Tim Davidson Hemingway was fined $7,500 and suspended from association with any FINRA member firm for four months for recommending a trading strategy to customers without fully understanding its features and risks.

Hemingway recommended a trading strategy that primarily invested in a high-risk exchange-traded note (ETN) without having a reasonable basis for the recommendation. Prior to recommending the strategy to customers, Hemingway failed to conduct his own due diligence on either the strategy or the ETN.

The investigation found that Hemingway did not fully understand how the trading strategy worked or the potential risks and rewards associated with it. Specifically, he did not understand the risk/reward profile of the ETN or the conditions under which it could lose all its value.

This case is part of a cluster of actions related to a trading strategy developed at Smith, Brown & Groover, where Hemingway worked. Affected customers are receiving partial restitution through a separate settlement with the firm.

The slightly higher fine and longer suspension compared to his colleague Walter Bish may reflect differences in the scope of their respective recommendations or other factors considered by FINRA.

This case reinforces the importance of broker due diligence before making recommendations. Complex products like ETNs carry unique risks that brokers must understand before recommending them to customers. Investors should carefully consider whether their representatives truly understand the products they recommend.

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According to FINRA, James Clifford Stockton was fined $5,000 and suspended from association with any FINRA member firm for one month for failing to provide written notice of private securities transactions.

Stockton invested $1,430,000 through private securities transactions without providing adv...

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According to FINRA, James Clifford Stockton was fined $5,000 and suspended from association with any FINRA member firm for one month for failing to provide written notice of private securities transactions.

Stockton invested $1,430,000 through private securities transactions without providing advance written notice to his member firm. The investments were not made through the firm because the securities were not offered by the firm. The transactions did not involve firm customers.

FINRA rules require representatives to notify their firms before participating in any securities transaction outside of their firm, even personal investments. This requirement exists because outside transactions can create conflicts of interest and because firms need visibility into their representatives' securities activities.

Stockton compounded his violation by falsely responding to a question on a firm compliance questionnaire about whether he had participated in private securities transactions without prior written approval. This false response prevented the firm from discovering the undisclosed transactions through its compliance processes.

The one-month suspension has already been served. While the amount invested ($1,430,000) was substantial, the relatively modest sanction may reflect that no customers were harmed and the transactions did not involve fraud. However, the false compliance questionnaire response represents a serious integrity violation that could lead to more significant consequences in future matters.

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According to FINRA, Jessica Y. Jung was fined $5,000 and suspended from association with any FINRA member firm for one month for mismarking order tickets, causing her firm to maintain inaccurate books and records.

Jung mismarked order tickets in her firm's electronic order entry system for separa...

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According to FINRA, Jessica Y. Jung was fined $5,000 and suspended from association with any FINRA member firm for one month for mismarking order tickets, causing her firm to maintain inaccurate books and records.

Jung mismarked order tickets in her firm's electronic order entry system for separate customer accounts involving the purchase and/or sale of a speculative security. Had the tickets been marked correctly, the transactions would not have been permitted by the firm's systems.

By mismarking the orders, Jung circumvented the firm's controls designed to prevent certain speculative trades. One affected customer later complained after losing approximately $300 on one of the trades and was reimbursed by the firm. No other customers complained, and Jung did not earn commissions on any of the trades at issue.

This conduct caused the firm to maintain inaccurate books and records, as the order tickets did not accurately reflect the nature of the transactions. Accurate records are essential for regulatory oversight and for firms to monitor their representatives' activities.

While the customer losses were minimal and Jung did not personally benefit, the act of circumventing firm controls through false documentation is a serious violation. Firms rely on accurate order information to implement their compliance policies and protect customers from unsuitable investments.

The one-month suspension was served from December 2, 2024, through January 1, 2025.

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According to FINRA, Jordan Caleb Allen was assessed a deferred fine of $10,000 and suspended from association with any FINRA member firm for eight months for participating in undisclosed private securities transactions.

Allen placed trades in a customer's account held at another member firm witho...

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According to FINRA, Jordan Caleb Allen was assessed a deferred fine of $10,000 and suspended from association with any FINRA member firm for eight months for participating in undisclosed private securities transactions.

Allen placed trades in a customer's account held at another member firm without providing notice to his own firm. Allen and the customer had a personal relationship, and the customer provided Allen with login credentials to make transactions in the outside account.

In total, Allen executed 1,507 trades in the account, including options transactions, totaling $726,585 in gross value. Although Allen did not receive compensation for these transactions, the trading was done without his firm's knowledge or approval.

When the trading came to his firm's attention, Allen initially misled the firm by stating he had only been conducting paper trades (simulated trades) in the account, when in fact he was executing real transactions.

This case illustrates multiple violations: trading in an outside account without firm approval, and then making false statements when questioned about it. The eight-month suspension reflects the seriousness of both the unauthorized trading activity and the subsequent deception.

Representatives are prohibited from trading in customer accounts without proper authorization and firm oversight. This oversight exists to protect investors from potential misconduct and to ensure all trading activity is properly supervised. Even when personal relationships exist, the same rules apply.

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According to FINRA, Jacob Houlton Fournier was assessed a deferred fine of $5,000 and suspended from association with any FINRA member firm for 45 days for borrowing money from a customer.

Fournier borrowed a total of $25,000 in three separate disbursements from a senior customer who was also a f...

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According to FINRA, Jacob Houlton Fournier was assessed a deferred fine of $5,000 and suspended from association with any FINRA member firm for 45 days for borrowing money from a customer.

Fournier borrowed a total of $25,000 in three separate disbursements from a senior customer who was also a friend. At all relevant times, his member firm prohibited its registered representatives from lending to or borrowing from firm customers.

Although Fournier and the customer documented the loan with a promissory note and Fournier has been making partial repayments, the conduct still violated both firm policy and FINRA rules regarding borrowing arrangements with customers.

FINRA rules strictly regulate lending arrangements between representatives and customers because such arrangements can create conflicts of interest. A representative who owes money to a customer may make recommendations that benefit themselves rather than the customer, or may be tempted to engage in other misconduct to repay the debt.

The prohibition is particularly important when the customer is a senior investor, as elderly customers may be more vulnerable to financial exploitation or undue influence from their representatives.

The 45-day suspension has been served. While the documented promissory note and ongoing repayments may have mitigated the sanction, the violation remains on Fournier's record. Investors should be aware that borrowing from or lending to their financial representative is generally prohibited and should be reported to the firm.

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According to FINRA, Renee Catherine Lund was fined $5,000 and suspended from association with any FINRA member firm for 15 business days for falsifying customer signatures on documents.

Lund electronically signed the names of customers and reused previously obtained signatures on documents, doing...

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According to FINRA, Renee Catherine Lund was fined $5,000 and suspended from association with any FINRA member firm for 15 business days for falsifying customer signatures on documents.

Lund electronically signed the names of customers and reused previously obtained signatures on documents, doing so with the customers' permission. The documents included required firm records such as account applications, account transfer forms, and electronic prospectus delivery forms.

While the underlying transactions were authorized and no customers complained, Lund's actions caused her firm to maintain inaccurate books and records. The signatures on file did not accurately reflect when and how customers authorized specific transactions or documents.

Lund also falsely attested in a compliance questionnaire that she had not duplicated signatures, adding a false statement violation to the underlying signature falsification.

Even when done with customer permission and for convenience, signing customers' names or reusing signatures violates the integrity of the documentation process. Firms rely on properly executed documents to verify customer authorization and protect against disputes. When signatures are copied or falsified, it becomes impossible to verify that customers actually reviewed and approved specific documents.

The 15-business-day suspension was served in December 2024. This relatively brief suspension may reflect that the conduct was done for convenience rather than to defraud customers, but it still represents a serious violation of documentation requirements.

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According to FINRA, Rudy Ruben Mejia Jr. was assessed a deferred fine of $10,000 and suspended from association with any FINRA member firm for eight months for participating in undisclosed private securities transactions and maintaining undisclosed outside brokerage accounts.

Mejia co-founded a p...

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According to FINRA, Rudy Ruben Mejia Jr. was assessed a deferred fine of $10,000 and suspended from association with any FINRA member firm for eight months for participating in undisclosed private securities transactions and maintaining undisclosed outside brokerage accounts.

Mejia co-founded a pooled investment fund with an options trading strategy, along with a management company to serve as the fund's general partner. Mejia personally invested $100,000 in the fund's limited partnership interests. Additionally, seven other investors purchased a total of $738,000 of interests. The investors were friends or family of Mejia or the other co-founder, and none were customers of his firm.

Mejia failed to obtain his firm's approval for either his personal investment or his participation in the private securities transactions involving other investors.

Additionally, Mejia opened outside brokerage accounts for the investment fund and its general partner at another broker-dealer without disclosing these accounts to his firm. He controlled these accounts and had a beneficial interest in them. Mejia executed 304 transactions in these accounts while registered with his firm, without written consent and without notifying the executing firm of his association.

This case illustrates the comprehensive nature of outside activity disclosure requirements. Representatives must disclose not only personal investments but also their involvement in investment vehicles that raise capital from others, as well as any outside accounts they control. The eight-month suspension reflects the multiple violations and the significant amount of capital involved.

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According to FINRA, Bryan James Moskowitz was fined $5,000, suspended from association with any FINRA member firm for three months, and ordered to pay $13,145 plus interest in restitution to a customer for excessively and unsuitably trading the customer's account.

Moskowitz recommended high-frequ...

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According to FINRA, Bryan James Moskowitz was fined $5,000, suspended from association with any FINRA member firm for three months, and ordered to pay $13,145 plus interest in restitution to a customer for excessively and unsuitably trading the customer's account.

Moskowitz recommended high-frequency in-and-out trading to a customer, a veterinarian in his mid-60s, even when the prices of recommended securities did not materially change. The customer relied on Moskowitz's advice and routinely followed his recommendations, giving Moskowitz de facto control over the account.

This pattern of trading generated total trading costs of $16,902, including $13,145 in commissions, and caused $81,614 in total realized losses for the customer.

Excessive trading, also called churning, occurs when a broker trades a customer's account primarily to generate commissions rather than to benefit the customer. When a customer follows a broker's recommendations without meaningful independent evaluation, the broker effectively controls the account and has a heightened obligation to ensure trading is suitable.

The metrics in this case, particularly the substantial commissions relative to the trading pattern and the significant losses, are hallmarks of excessive trading. The three-month suspension and restitution order aim to both punish the misconduct and compensate the affected customer.

Investors should regularly review their account statements and question frequent trading, particularly if their account is generating losses while their representative continues to recommend additional transactions.

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According to FINRA, Leo Richard Vassallo was assessed a deferred fine of $5,000 and suspended from association with any FINRA member firm for two months for falsifying customer signatures on account documents.

Vassallo electronically signed the names of customers, with their permission, on accoun...

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According to FINRA, Leo Richard Vassallo was assessed a deferred fine of $5,000 and suspended from association with any FINRA member firm for two months for falsifying customer signatures on account documents.

Vassallo electronically signed the names of customers, with their permission, on account documents including account applications and account transfer forms. These documents were required books and records of the firm. While none of the customers complained and the transactions were authorized, Vassallo's actions caused the firm to maintain inaccurate books and records.

Vassallo also falsely attested to his firm in a compliance questionnaire that he had not signed or affixed another person's signature on a document, adding a false statement violation to the signature falsification.

This case is similar to several others in the January 2025 actions involving representatives who signed customer names with permission. While the practice may seem harmless when customers consent and transactions are legitimate, it undermines the documentation system that protects both investors and firms.

Properly executed signatures serve multiple purposes: they verify customer identity, confirm the customer reviewed the document, and create an audit trail. When representatives sign on behalf of customers, these protections are compromised, even if the customer verbally consented.

The two-month suspension is a meaningful sanction that should deter representatives from this convenience-driven but prohibited practice.

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