Bad Brokers

According to FINRA, Madison Global Partners LLC was censured and fined $20,000 for conducting a securities business while failing to maintain required minimum net capital and for failing to seek approval for a material change in its business.

The Hauppauge, New York firm's membership agreement wi...

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According to FINRA, Madison Global Partners LLC was censured and fined $20,000 for conducting a securities business while failing to maintain required minimum net capital and for failing to seek approval for a material change in its business.

The Hauppauge, New York firm's membership agreement with FINRA prohibited it from participating in firm commitment offerings in any capacity and required it to maintain minimum net capital of $5,000. However, the firm participated in firm commitment offerings on a best-efforts basis, which required minimum net capital of $50,000. Prior to engaging in this activity, the firm had not filed an application for, or received, approval of this material change in its business operations.

On the days of some of these offerings, the firm's net capital fell below required levels, creating deficiencies that ranged from approximately $1,000 to $33,000. After receiving notice from FINRA, the firm corrected its net capital deficiency and obtained approval to participate in firm commitment underwritings.

Net capital requirements are fundamental to the financial stability of broker-dealers and the protection of their customers. These requirements ensure that firms have sufficient liquid assets to meet their obligations to customers and counterparties. When a firm operates below required net capital levels, it may not be able to fulfill its obligations if financial difficulties arise.

The requirement to obtain approval for material business changes ensures that FINRA can assess whether a firm has the resources, expertise, and supervisory infrastructure to engage in new activities safely. By expanding into firm commitment offerings without approval, Madison Global Partners bypassed this important regulatory safeguard.

This case serves as a reminder to securities firms that they must carefully monitor their net capital positions and obtain proper approvals before expanding into new business areas. Investors should be aware that firms are required to maintain minimum capital levels as a protection against firm insolvency.

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According to FINRA, Oak Hills Securities, Inc. was censured and fined $125,000 for willfully violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-9 in connection with seven private placements.

The Oklahoma City-based firm distributed private placement memoranda to investors...

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According to FINRA, Oak Hills Securities, Inc. was censured and fined $125,000 for willfully violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-9 in connection with seven private placements.

The Oklahoma City-based firm distributed private placement memoranda to investors stating that specified minimum amounts of securities would be sold by certain dates in order for the offerings to close. However, the firm later reduced the contingency amounts and continued to accept subscriptions through the initial offering expiry dates without terminating any of the offerings or issuing refunds to investors as required.

FINRA also found that the firm failed to place investor funds in six of the private placements into an unaffiliated bank escrow account. Instead, the funds were deposited into a bank checking account controlled by the issuer. While FINRA noted there was no customer harm and no customer complained, this practice violated securities regulations designed to protect investors.

Additionally, the firm failed to timely file required documents with FINRA for two offerings, with filings being made 61 and 153 days late.

Rule 10b-9 is designed to protect investors by ensuring that when securities are offered on a contingency basis, investors receive refunds if the contingency is not met. The requirement to hold funds in escrow with an unaffiliated bank provides an important safeguard against issuers misusing investor funds before an offering closes.

This case highlights the importance of firms following proper procedures in private placements. Even when no customer harm results, violations of these protective rules undermine investor confidence and the integrity of the securities markets. Investors considering private placements should understand that these offerings are subject to specific rules designed to protect their investments, including contingency requirements and escrow provisions.

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According to FINRA, ANZ Securities, Inc. was censured, fined $50,000, and required to comply with certain undertakings for inaccurately reporting transactions in TRACE-eligible securities.

The New York-based firm failed to include required indicators on its Trade Reporting and Compliance Engine (...

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According to FINRA, ANZ Securities, Inc. was censured, fined $50,000, and required to comply with certain undertakings for inaccurately reporting transactions in TRACE-eligible securities.

The New York-based firm failed to include required indicators on its Trade Reporting and Compliance Engine (TRACE) reports. Specifically, due to the firm's misinterpretation of FINRA rules, it failed to include the No Remuneration (NR) Indicator in TRACE reports for transactions executed without a mark-up, mark-down, or commission. The firm also failed to include the Non-Member Affiliate-Principal Transaction (NMA-PT) Indicator on certain transaction reports.

These reporting failures had real consequences for market transparency. Transactions that were missing the required indicators were publicly disseminated when they should not have been. The NMA-PT Indicator is specifically designed to identify transactions between affiliated entities that should not be included in public dissemination, as they do not represent true market activity.

FINRA also found that the firm's supervisory system, including its written supervisory procedures, were not reasonably designed to achieve compliance with FINRA Rule 6730(d). The firm had no process to review, or procedures addressing, the accuracy of indicators on the firm's TRACE reports.

The firm remediated the issues after FINRA made it aware of its misinterpretations of the reporting requirements.

TRACE reporting is essential to bond market transparency. Accurate reporting allows investors, regulators, and market participants to understand trading activity and prices in the fixed income markets. When firms fail to properly report transactions, it can distort the public's view of market activity.

This case illustrates the importance of firms carefully understanding their regulatory reporting obligations and implementing adequate supervisory systems to ensure compliance. Investors benefit from accurate trade reporting through better price transparency and market integrity.

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According to FINRA, TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. were censured and fined a combined $550,000 for failing to report and untimely reporting millions of trades to FINRA reporting facilities.

The Omaha, Nebraska-based firms, which have since been acquired by Charles Schwab & C...

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According to FINRA, TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. were censured and fined a combined $550,000 for failing to report and untimely reporting millions of trades to FINRA reporting facilities.

The Omaha, Nebraska-based firms, which have since been acquired by Charles Schwab & Co., failed to report transactions to the FINRA/Nasdaq Trade Reporting Facility (FNTRF) and Over-the-Counter Reporting Facility (ORF). The firms did not appreciate they had an obligation to report certain fractional share and error correction transactions, and consequently did not pay the Section 31 regulatory transaction fees associated with these trades.

Additionally, the firms failed to transmit transactions in national market system (NMS) securities to the FNTRF within 10 seconds after execution, and TD Ameritrade Clearing failed to transmit transactions in OTC Equity securities to the ORF within the required timeframe.

TD Ameritrade Clearing also failed to report positions to the Large Options Positions Reporting (LOPR) system. The firm failed to report equity and index options position changes to LOPR when positions were added, modified, or deleted on the expiration date of the option, and also failed to report certain accounts acting in concert due to a system update designed to increase processing speed.

FINRA found that the firms failed to establish a supervisory system reasonably designed to achieve compliance with reporting rules. Neither firm had written supervisory procedures concerning the reporting of fractional share trades or error correction transactions.

The firms ultimately self-reported both issues and implemented remedial measures, and the reporting failures were resolved by system modifications.

This case underscores the importance of accurate and timely trade reporting, even for seemingly minor transaction types like fractional shares. Investors should understand that trade reporting requirements help maintain market transparency and regulatory oversight.

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According to FINRA, Interactive Brokers LLC was censured and fined $125,000 for failing to provide required disclosures to customers purchasing municipal bonds trading at a market discount.

The Greenwich, Connecticut firm failed to establish and maintain a supervisory system reasonably designed t...

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According to FINRA, Interactive Brokers LLC was censured and fined $125,000 for failing to provide required disclosures to customers purchasing municipal bonds trading at a market discount.

The Greenwich, Connecticut firm failed to establish and maintain a supervisory system reasonably designed to achieve compliance with its obligation to provide time of trade disclosures regarding municipal bonds traded at a market discount. Specifically, the firm was required to disclose that all or a portion of the investor's investment return represented by accretion of the market discount might be taxable as ordinary income rather than as capital gains.

Although the firm used a third-party vendor to provide time of trade disclosures, the firm's written procedures did not specify how it would supervise this vendor. The firm did not have any process to verify that purchasers of bonds with non-de minimis market discounts received adequate disclosures.

FINRA found that the firm failed to disclose non-de minimis market discounts in transactions involving customers with a total principal value of approximately $40 million. The tax implications of this failure are significant, as the difference between ordinary income tax rates and capital gains tax rates can substantially affect an investor's after-tax return.

Following the discovery of these deficiencies, the firm provided the required disclosures to impacted customers and offered to compensate them for demonstrated adverse tax consequences resulting from the belated disclosures. The firm and its third-party vendor implemented an automated notification requiring customers to acknowledge the potential tax consequences before completing transactions.

This case highlights the importance of proper disclosure in municipal bond transactions. Investors should understand that bonds purchased at a market discount may have different tax treatment than expected, and firms have an obligation to clearly communicate these tax implications at the time of trade.

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According to FINRA, Stockpile Investments, Inc. was censured and fined $50,000 for distributing retail communications concerning crypto assets that failed to provide required disclosures and balanced presentations.

The San Francisco-based firm distributed communications including a webpage, email...

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According to FINRA, Stockpile Investments, Inc. was censured and fined $50,000 for distributing retail communications concerning crypto assets that failed to provide required disclosures and balanced presentations.

The San Francisco-based firm distributed communications including a webpage, email, and mobile application interface that discussed crypto assets and crypto asset-related services. Most of these communications failed to prominently disclose that the crypto assets were not offered by the firm, but were offered by a separate entity that, unlike the firm, was not a registered broker-dealer or member of FINRA or SIPC.

FINRA found that certain statements made by the firm could potentially have confused retail investors about which entity was offering the services and what regulations and protections applied. This distinction is critical because investments through a FINRA member broker-dealer may have certain protections, including SIPC coverage for certain assets, that investments through non-member entities do not have.

Additionally, some of the violative communications discussed crypto assets offered through the affiliated entity without a balanced description of both the benefits and the associated risks of investing in those assets. FINRA rules require that communications with the public present a fair and balanced picture, including both potential benefits and risks.

This case reflects the increasing regulatory attention on how crypto assets are marketed to retail investors. As crypto products become more prevalent, firms must ensure that their communications clearly distinguish between regulated and unregulated offerings and provide balanced information about the risks involved.

Investors should carefully evaluate any communications about crypto assets and understand which entity is actually offering the product, what regulatory protections apply, and whether they are receiving complete information about both the benefits and risks of their investment.

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According to FINRA, United Capital Markets, Inc. was censured and fined $25,000 for failing to establish and maintain a supervisory system to oversee trading by a firm senior executive and for distributing unapproved retail communications.

The Miami, Florida firm's written supervisory procedures ...

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According to FINRA, United Capital Markets, Inc. was censured and fined $25,000 for failing to establish and maintain a supervisory system to oversee trading by a firm senior executive and for distributing unapproved retail communications.

The Miami, Florida firm's written supervisory procedures did not expressly designate the senior executive as responsible for supervising his own trading, nor did they document how that self-supervision complied with FINRA Rule 3110(a). The firm did not have procedures or guidance for the supervision of trading in equities and options, which the senior executive traded on behalf of the firm.

This lack of supervision created a significant compliance gap. When the senior executive supervised his own activities, he had no procedures to rely on for such trading. Ultimately, the firm discontinued trading in equity securities and options.

FINRA also found that the firm distributed eight retail communications to investors or potential investors that had not been subject to prior review and approval by an appropriately qualified principal. These communications contained exaggerated language and were not fair and balanced as required by FINRA rules.

The failure to properly supervise a senior executive's trading activities represents a fundamental breakdown in firm oversight. FINRA rules recognize that self-supervision presents inherent conflicts and require firms to document how they address these conflicts.

The requirement for principal review of retail communications exists to protect investors from misleading or exaggerated claims. When communications bypass this review process, investors may receive information that does not accurately represent the risks and potential returns of investment products.

This case demonstrates that firms of all sizes must have proper supervisory systems in place, including for senior personnel, and must ensure that all customer communications are reviewed and approved before distribution.

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According to FINRA, Velocity Clearing, LLC was censured and fined $1,000,000 for failing to establish, maintain, and enforce a supervisory system reasonably designed to achieve compliance with rules prohibiting manipulative trading activity by its customers.

The Hazlet, New Jersey firm's written ...

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According to FINRA, Velocity Clearing, LLC was censured and fined $1,000,000 for failing to establish, maintain, and enforce a supervisory system reasonably designed to achieve compliance with rules prohibiting manipulative trading activity by its customers.

The Hazlet, New Jersey firm's written supervisory procedures required monitoring customer trading activity for fraudulent schemes but provided no guidance on what factors to consider when assessing surveillance alerts or customer explanations for trading under review. The procedures did not address whether the aggregate activity or number of alerts generated by a particular customer was relevant, how to document alert review, or when to escalate alerts for secondary review.

While the firm used an automated surveillance system to identify potentially manipulative trading such as spoofing, layering, cross trades, wash trading, and prearranged trading, it had not enabled the prearranged trading surveillance even after receiving inquiries from other broker-dealers about potential prearranged trading by more than 40 of its customers.

When the firm finally enabled prearranged trading surveillance, it never reviewed the more than 10,000 alerts generated over a two-month period. The firm closed more than 147,000 alerts identifying potentially manipulative trading without conducting any investigation. The firm lacked adequate staffing, and compliance personnel received no written guidance or training on reviewing surveillance alerts.

After implementing a new surveillance system, the firm generated approximately 15.2 million alerts for potentially manipulative trading, closing nearly all without investigation. As of early 2025, over 5.2 million alerts remained unreviewed.

This case highlights the critical importance of not just having surveillance systems, but actually reviewing and acting on the alerts they generate. Manipulative trading harms all market participants by distorting prices and undermining market integrity. Investors should understand that clearing firms play a vital role in detecting and preventing such manipulation.

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According to FINRA, Andrew Buckanavage was barred from association with any FINRA member firm in all capacities for converting funds from his employer and failing to provide testimony to FINRA.

Buckanavage converted $177,962.80 by charging personal, non-business expenses to a corporate credit car...

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According to FINRA, Andrew Buckanavage was barred from association with any FINRA member firm in all capacities for converting funds from his employer and failing to provide testimony to FINRA.

Buckanavage converted $177,962.80 by charging personal, non-business expenses to a corporate credit card without his employer's authorization. While employed by a private equity firm affiliated with his member firm, Buckanavage used a corporate credit card provided for business expenses to repeatedly transfer funds to an intermediary PayPal account he created using his corporate email address, and then to his personal PayPal account. He also directly charged non-business expenditures totaling $1,123.18 to the corporate card.

To conceal his conduct, Buckanavage submitted false expense reports identifying personal charges as business expenses or failed to notify his employer that charges were for personal expenses. When questioned by a financial analyst about PayPal transactions on his corporate card, Buckanavage initially lied, claiming the transactions were for purchasing marketing apparel. He then falsely claimed his PayPal account had been hacked and he was working with PayPal to reverse certain charges.

Buckanavage later disclosed his conduct to the private equity firm and ultimately resigned from both the member firm and the private equity firm. He subsequently failed to appear for and provide on-the-record testimony requested by FINRA in connection with its investigation, which impeded FINRA's ability to investigate the matter.

This case illustrates the serious consequences of converting employer funds and lying to regulators. The bar from the securities industry is one of the most severe sanctions FINRA can impose. Investors should be aware that individuals who engage in dishonest conduct with their employers may also pose risks to customers.

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According to FINRA, Willnard Edwrence Love was barred from association with any FINRA member firm in all capacities for providing false information about his examination results and producing an altered score report.

Love took FINRA's Securities Industry Essentials (SIE) examination and failed. H...

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According to FINRA, Willnard Edwrence Love was barred from association with any FINRA member firm in all capacities for providing false information about his examination results and producing an altered score report.

Love took FINRA's Securities Industry Essentials (SIE) examination and failed. However, he told his supervisor that he had passed the exam. When his firm informed him that his official score report showed that he had failed, Love agreed to provide the firm with the passing score report he claimed he had received from the testing center.

After a delay of more than two weeks, Love produced an altered passing score report, falsely showing that he had passed the examination when he had in fact failed.

The SIE examination is a fundamental qualification requirement in the securities industry, testing basic knowledge of securities products, regulatory agencies, and prohibited practices. Passing this examination is a prerequisite for obtaining other securities licenses.

FINRA takes examination integrity extremely seriously. The qualification examination system exists to ensure that individuals working in the securities industry have demonstrated minimum competency to serve investors. When individuals falsify examination results, they undermine this protective system and may be placed in positions where they lack the knowledge necessary to properly serve customers.

This case also demonstrates the consequences of dishonesty in the securities industry. Even conduct that does not directly harm customers, such as falsifying internal documents, can result in the most severe sanction: a permanent bar from the industry.

Investors should be reassured that FINRA actively investigates and takes action against individuals who attempt to circumvent qualification requirements, helping to ensure that only qualified individuals serve in the securities industry.

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