Bad Brokers

According to FINRA, Michael Ryan Petruska has been fined $5,000 and suspended from association with any FINRA member for one month for willfully failing to amend his Form U4 to disclose a felony charge.

After his arrest and arraignment, Petruska did not contact his member firm to inform them of t...

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According to FINRA, Michael Ryan Petruska has been fined $5,000 and suspended from association with any FINRA member for one month for willfully failing to amend his Form U4 to disclose a felony charge.

After his arrest and arraignment, Petruska did not contact his member firm to inform them of the pending criminal charge and did not update his Form U4 as required. By his own testimony, Petruska did not report the charge at least in part because he was afraid his firm would terminate him. He also believed the charge might be reduced or dismissed.

When his firm became aware of the charges and approached him, Petruska reported his arrest but did not disclose the nature of the allegations or that the charge was a felony. He never updated his Form U4 prior to leaving the firm.

Petruska was ultimately exonerated of the felony charge. However, the disclosure requirement exists regardless of the outcome. Investors and employers have a right to know about pending charges, and the obligation to disclose cannot be avoided by hoping charges will be dismissed.

Form U4 disclosure requirements ensure transparency about financial professionals' backgrounds. Investors can review this information through FINRA's BrokerCheck to make informed decisions about who manages their money.

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According to FINRA, Anthony J. Seifert has been fined $5,000 and suspended from association with any FINRA member for 20 business days for exercising discretion in customer accounts without proper authorization.

Seifert placed transactions in customer accounts without their written authorization ...

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According to FINRA, Anthony J. Seifert has been fined $5,000 and suspended from association with any FINRA member for 20 business days for exercising discretion in customer accounts without proper authorization.

Seifert placed transactions in customer accounts without their written authorization for each trade and without his member firm having accepted the accounts as discretionary. While the customers knowingly permitted Seifert to exercise discretion, proper documentation is still required.

Discretionary authority allows a broker to make trading decisions without obtaining specific approval for each transaction. Because this gives significant control to the broker, FINRA rules require explicit written authorization from customers and firm acceptance of the arrangement.

Even when customers informally agree to let their broker make trading decisions, the failure to obtain proper written authorization violates securities rules. These requirements exist to ensure customers clearly understand and formally consent to giving up control over individual trading decisions.

Investors should understand the difference between discretionary and non-discretionary accounts. If you want your broker to make trading decisions without your approval for each trade, ensure you have signed appropriate discretionary authorization documents. If you have not signed such documents, your broker should be contacting you before executing trades.

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According to FINRA, Donald Philip McCarthy has been fined $10,000 and suspended from association with any FINRA member for two months for improperly sharing confidential information protected by the Bank Secrecy Act (BSA).

McCarthy shared confidential BSA-protected information with an individual ...

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According to FINRA, Donald Philip McCarthy has been fined $10,000 and suspended from association with any FINRA member for two months for improperly sharing confidential information protected by the Bank Secrecy Act (BSA).

McCarthy shared confidential BSA-protected information with an individual not authorized to view it. The Bank Secrecy Act requires financial institutions to assist government agencies in detecting and preventing money laundering and other financial crimes. Information gathered pursuant to these requirements is highly confidential.

BSA-related information includes suspicious activity reports and other data that financial institutions must maintain but cannot disclose outside of authorized channels. When this information is improperly shared, it can compromise investigations and tip off subjects of regulatory scrutiny.

The confidentiality of BSA information is critical to the effectiveness of anti-money laundering efforts. Financial professionals have strict obligations to protect this information, and violations are treated seriously even when the underlying information may not have been misused.

This case illustrates that securities professionals have confidentiality obligations extending beyond customer account information. Violations of these obligations, even without evidence of broader harm, result in significant sanctions including suspensions from the industry.

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According to FINRA, Joseph Arthur Ondris has been fined $5,000 and suspended from association with any FINRA member for one month for causing his firm to maintain incomplete books and records.

Ondris used an unauthorized personal email account to send and receive securities-related business commu...

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According to FINRA, Joseph Arthur Ondris has been fined $5,000 and suspended from association with any FINRA member for one month for causing his firm to maintain incomplete books and records.

Ondris used an unauthorized personal email account to send and receive securities-related business communications with firm customers without providing copies of those emails to the firm. This prevented the firm from preserving the communications as required by securities regulations.

Ondris signed firm compliance attestations stating that he used only his assigned firm email address for securities business communications with customers, making his use of personal email a violation of both his attestations and firm policy.

Securities firms are required to maintain records of business communications, including emails with customers. When representatives use personal channels, these communications cannot be supervised or retained, potentially hiding misconduct or unsuitable recommendations.

This requirement exists to protect investors by ensuring firms can review communications for compliance and regulators can examine them if problems arise. Using personal email defeats these protections.

Investors should be aware that communications with their financial professionals through firm channels are retained and supervised. If your advisor suggests communicating through personal email or text, this may indicate an attempt to avoid oversight.

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According to FINRA, Devon Freeman has been fined $10,000 (deferred) and suspended from association with any FINRA member for eight months for forging and backdating variable insurance applications and other documents.

Freeman forged one customer's signature on a document cancelling a life insuran...

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According to FINRA, Devon Freeman has been fined $10,000 (deferred) and suspended from association with any FINRA member for eight months for forging and backdating variable insurance applications and other documents.

Freeman forged one customer's signature on a document cancelling a life insurance policy and forged another customer's signature nine times on a life insurance application. He also forged a third customer's signature three times on documents relating to variable insurance policies.

For a fourth customer, Freeman forged signatures eight times on a variable insurance application and backdated the document to create the false impression that the customer had applied when they were at an age qualifying for lower premiums.

None of the customers authorized Freeman to sign documents on their behalf or were aware of the forgeries or backdating. After the firm informed customers of the conduct, three chose to remain invested in their policies while one received a refund of premiums.

Freeman also exchanged securities-related text messages with customers using his personal cell phone without firm knowledge or permission, causing the firm to maintain incomplete records.

Forgery is a serious violation regardless of whether customers suffer financial harm. Investors should carefully review all documents before signing and verify the accuracy of dates and other information.

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According to FINRA, Rod Eric Hurowitz has been fined $5,000 and suspended from association with any FINRA member for one month for falsely certifying that he had completed continuing education required for his state insurance license.

Hurowitz certified to the State of New York that he had person...

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According to FINRA, Rod Eric Hurowitz has been fined $5,000 and suspended from association with any FINRA member for one month for falsely certifying that he had completed continuing education required for his state insurance license.

Hurowitz certified to the State of New York that he had personally completed 15 hours of continuing education when, in fact, another person had completed that continuing education on his behalf.

Continuing education requirements exist to ensure that licensed professionals maintain current knowledge of regulations, products, and best practices. When professionals falsely certify completion, they may lack the knowledge needed to properly serve their clients.

This violation involves both dishonesty and a failure to maintain professional competency. The certification Hurowitz signed was false, and he did not actually complete the educational requirements designed to ensure he could properly perform his licensed activities.

Investors trust that their financial professionals meet licensing requirements, including continuing education. When professionals circumvent these requirements through fraud, it undermines the licensing system designed to protect investors.

While this violation involved state insurance licensing rather than securities licensing, it reflects on Hurowitz's integrity across all his professional activities. Dishonesty in any professional context is relevant to fitness for the securities industry.

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According to FINRA, Jin Yi Lim has been fined $17,500 (deferred) and suspended from association with any FINRA member for 12 months for engaging in 32 instances of spoofing in U.S. Treasury Securities in violation of Section 17(a)(3) of the Securities Act.

Spoofing is a manipulative trading pract...

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According to FINRA, Jin Yi Lim has been fined $17,500 (deferred) and suspended from association with any FINRA member for 12 months for engaging in 32 instances of spoofing in U.S. Treasury Securities in violation of Section 17(a)(3) of the Securities Act.

Spoofing is a manipulative trading practice where traders place orders they intend to cancel before execution in order to move market prices. Lim entered large, fully displayed orders on one side of the market, generally for $25 or $50 million in 5- or 10-year Treasury notes, while simultaneously maintaining smaller iceberg orders on the opposite side.

Other market participants would react to Lim's large displayed orders by moving their prices, withdrawing orders, or placing aggressive orders. In 15 of the 32 instances, Lim received executions on his smaller iceberg orders while his larger orders were still in the market.

Because Lim intended to cancel each larger order at the time he placed it, these orders falsely signaled a shift in buy or sell interest. This type of manipulation harms other market participants who make trading decisions based on false signals.

Spoofing undermines market integrity by creating artificial impressions of supply and demand. While individual investors may not trade Treasury securities directly, manipulation in these markets can affect prices and liquidity across the financial system.

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According to FINRA, Kenneth H. Nahrstedt has been fined $5,000 and suspended from association with any FINRA member for two months for submitting a false attestation that enabled a $500,000 fraudulent wire transfer.

The firm received an email from an imposter posing as a customer requesting a wir...

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According to FINRA, Kenneth H. Nahrstedt has been fined $5,000 and suspended from association with any FINRA member for two months for submitting a false attestation that enabled a $500,000 fraudulent wire transfer.

The firm received an email from an imposter posing as a customer requesting a wire transfer to a bank in Mexico for the purported purpose of purchasing an apartment. To initiate the transfer, Nahrstedt signed a Change of Ownership form falsely attesting that he had spoken with the customer as required by firm policy.

In fact, Nahrstedt had not spoken with the customer. As a result of his false statement, the firm processed the $500,000 wire transfer from the customer's account to an unknown third party.

Wire fraud schemes targeting brokerage accounts are common. Firms implement verification procedures, including requiring verbal confirmation with customers, specifically to prevent unauthorized transfers. When representatives bypass these controls by making false attestations, they enable fraud.

This case illustrates both the importance of verification procedures and the consequences when they are circumvented. Investors should be aware that their firms should verify wire requests directly with them. If you receive confirmation of a wire you did not request, contact your firm immediately.

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According to FINRA, Angelo Julius Piccone has been fined $10,000 (deferred), suspended from association with any FINRA member for five months, and ordered to pay $23,905.81 plus interest in disgorgement for willfully violating Regulation Best Interest.

Piccone recommended 11 sales of speculative,...

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According to FINRA, Angelo Julius Piccone has been fined $10,000 (deferred), suspended from association with any FINRA member for five months, and ordered to pay $23,905.81 plus interest in disgorgement for willfully violating Regulation Best Interest.

Piccone recommended 11 sales of speculative, illiquid alternative investments totaling $457,000 to a retail customer with a moderate risk tolerance, annual income of no more than $25,000, and net worth of $587,438. The customer's investment objectives were preservation of capital, current income, and funding retirement - not speculation.

As a result of Piccone's recommendations, the customer became 77% concentrated in alternative investments, including a 15% concentration in speculative bonds. Piccone earned $23,905.81 in commissions from these unsuitable recommendations.

The customer brought and settled an arbitration claim against Piccone's firm relating to these investments. Piccone also used his personal mobile device to exchange text messages about securities business, including making unbalanced, promissory, and misleading statements about recovery prospects for one investment.

This case demonstrates the importance of ensuring investment recommendations align with your stated objectives. A customer seeking capital preservation should not end up 77% concentrated in speculative alternatives. Investors should question recommendations that seem inconsistent with their goals.

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According to FINRA, Raeshoun Rashidi has been fined $5,000 (deferred) and suspended from association with any FINRA member for two years for receiving and transferring funds despite red flags of illegal activity.

Rashidi agreed to receive and send funds via digital payment networks at the request...

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According to FINRA, Raeshoun Rashidi has been fined $5,000 (deferred) and suspended from association with any FINRA member for two years for receiving and transferring funds despite red flags of illegal activity.

Rashidi agreed to receive and send funds via digital payment networks at the request of a childhood friend. He accepted deposits totaling $54,054 into his personal checking account from an individual he did not know. At his friend's direction, Rashidi then made outgoing transfers totaling $48,718 to multiple individuals he also did not know.

Rashidi did not question his friend's explanation for the deposits and payments, conducted no due diligence on any counterparties, and raised no questions about the pattern of suspicious deposits. He retained approximately $5,300 of the deposited funds for his personal use.

This type of activity - receiving funds from unknown sources and forwarding them to unknown recipients - is characteristic of money laundering schemes. Securities professionals are expected to be alert to suspicious financial activity and should not participate in transactions with obvious red flags.

Investors should be wary of anyone, including financial professionals, who asks them to receive and transfer funds for unclear purposes. Such requests are common elements of fraud schemes and can expose participants to criminal liability.

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