Bad Brokers

According to FINRA, SogoTrade, Inc. was censured, fined $75,000, and required to comply with undertakings for failing to establish, document, and maintain adequate risk management controls and supervisory procedures for its market access business.

The firm's market access controls were not reason...

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According to FINRA, SogoTrade, Inc. was censured, fined $75,000, and required to comply with undertakings for failing to establish, document, and maintain adequate risk management controls and supervisory procedures for its market access business.

The firm's market access controls were not reasonably designed to prevent customers from entering erroneous orders that exceeded appropriate price or size parameters. Specifically, SogoTrade's single-order quantity and single-order notional value controls were inadequate, and the firm failed to document its rationale for the thresholds it used. The firm also did not maintain a reasonable pre-trade price deviation control designed to reject orders priced more than a certain percentage away from a reference price.

The firm's single-order price deviation control was particularly deficient. Most of SogoTrade's price deviation limits were set at or above industry-wide execution guidelines under FINRA and applicable exchange rules. Setting controls at these extreme levels rendered them ineffective at preventing erroneous orders, as they would only trigger for orders that already violated industry-wide rules.

The firm's written supervisory procedures relating to market access were also inadequate. The procedures failed to describe the firm's market access controls, the thresholds applied by those controls, or the methodology and rationale for how the firm determined the thresholds. Without clear documentation, it becomes difficult to assess whether controls are appropriate or to maintain consistency in their application.

Market access rules require broker-dealers that provide customers direct market access to have risk management controls designed to prevent erroneous orders and other regulatory violations. These controls help prevent "fat finger" errors and other mistakes that could disrupt markets or cause significant losses. Notable market disruptions have resulted from inadequate market access controls, including the 2010 Flash Crash and the 2012 Knight Capital trading error that caused $440 million in losses.

Beyond the deficient controls, SogoTrade failed to conduct required annual reviews of its market access controls and supervisory procedures. The firm did not review the overall effectiveness of its risk management controls as designed, including the reasonableness of thresholds used. The firm's CEO certifications also failed to comply with applicable rules because they did not include required statements that controls complied with regulatory requirements or that the firm conducted reviews of market access business activity.

The firm conducted a review in December 2024 and obtained a proper certification from its CEO for 2024.

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According to FINRA, A.G.P. / Alliance Global Partners, LLC was censured, fined $145,000 (of which $88,079 is payable to FINRA), and required to comply with undertakings for failing to file timely and accurate notifications required under Regulation M and for inadequate supervision of these obligatio...

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According to FINRA, A.G.P. / Alliance Global Partners, LLC was censured, fined $145,000 (of which $88,079 is payable to FINRA), and required to comply with undertakings for failing to file timely and accurate notifications required under Regulation M and for inadequate supervision of these obligations.

Regulation M under the Securities Exchange Act of 1934 is designed to prevent manipulative practices in connection with securities distributions. When a broker-dealer participates in a distribution of securities, it must notify FINRA of certain activities, including restricted period notifications and trading notifications. These notifications help FINRA surveil for potential market manipulation during securities offerings.

A.G.P. submitted 21 untimely restricted period notifications, with delays ranging from one to 100 days late. The firm also submitted notifications that were inaccurate because they failed to identify all participants in distributions. This occurred when distribution participants joined after the initial notification was filed, and the firm did not amend its notifications to reflect the additional participants. Additionally, the firm completely failed to submit two restricted period notifications because it mistakenly believed one distribution qualified for an exception to Rule 101 and that its role in another distribution did not require a notification.

The firm's trading notification failures were similar in nature. A.G.P. submitted 23 untimely trading notifications, three inaccurate notifications that failed to identify all participants, and completely failed to submit three trading notifications due to mistaken beliefs about regulatory requirements.

The firm failed to reasonably supervise its Regulation M compliance. The firm's written supervisory procedures did not provide for any reviews to ensure notifications were filed timely, and the firm conducted no reviews of timeliness. The firm later implemented a supervisory system and procedures to identify and discipline persons responsible for untimely filings, but conducted unreasonably narrow reviews of notification accuracy.

Additionally, the firm's procedures did not provide for supervisory reviews to monitor whether it purchased or bid for covered securities during applicable restricted periods. As a result, when the firm bid for and purchased certain covered securities as principal to cover errors, it failed to review these activities for Rule 101 compliance. The firm implemented supervisory reviews of bids and purchases in its trading and error accounts in October 2022, but has not yet established written procedures for these reviews.

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According to FINRA, Penserra Securities, LLC was censured and fined $40,000 for sending trade confirmations to customers that failed to accurately disclose whether the price shown was an average price.

The firm sent approximately 38,000 trade confirmations that were inaccurate because they failed...

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According to FINRA, Penserra Securities, LLC was censured and fined $40,000 for sending trade confirmations to customers that failed to accurately disclose whether the price shown was an average price.

The firm sent approximately 38,000 trade confirmations that were inaccurate because they failed to disclose that the price identified was, in fact, an average price. These inaccuracies related to trades the firm executed for certain institutional customers who requested that the firm combine price information from multiple partial executions into an average price on the resulting confirmations. SEC rules require that when a confirmation shows an average price, this must be clearly disclosed.

Additionally, approximately 3,000 trade confirmations the firm issued in connection with single-execution, single-price transactions were inaccurate because they contained an average price disclosure when no averaging had occurred. This suggested multiple executions when there was only one, which is also misleading.

These inaccuracies were limited to trade confirmations generated by one business unit at the firm and resulted from outdated blotter codes embedded in a legacy order management system used to execute transactions through that specific unit. While the root cause was a technical issue, the firm's supervisory failures allowed the problem to persist.

Penserra failed to reasonably supervise trade confirmation requirements for compliance. The firm's written procedures failed to provide details on the processes, parameters, and documentation required when reviewing trade confirmations for accuracy. The procedures also failed to specify the frequency of reviews. Further, the procedures did not require reviews sufficiently broad in scope to identify potential errors in reporting both single-execution and multiple-execution trades across the firm's different platforms.

Trade confirmations serve critical functions for investors. They provide official documentation of transactions and must accurately reflect key details including price, quantity, and whether averaging occurred. Inaccurate confirmations can make it difficult for customers to properly track their transactions, reconcile accounts, and verify that trades were executed as expected.

After FINRA notified the firm of these issues, Penserra revised its supervisory system and procedures. The firm instituted new order entry procedures, adopted more detailed written procedures, and provided staff training to prevent future violations. This case illustrates the importance of firms maintaining current systems and conducting comprehensive supervisory reviews across all business units and platforms.

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According to FINRA, VSI Securities, Inc. was censured and fined $20,000 for willfully violating Section 17(a)(1) of the Securities Exchange Act of 1934 and Exchange Act Rule 17a-14 by failing to disclose its disciplinary history in its customer relationship summary (Form CRS).

Form CRS is a stand...

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According to FINRA, VSI Securities, Inc. was censured and fined $20,000 for willfully violating Section 17(a)(1) of the Securities Exchange Act of 1934 and Exchange Act Rule 17a-14 by failing to disclose its disciplinary history in its customer relationship summary (Form CRS).

Form CRS is a standardized disclosure document that broker-dealers and investment advisers must provide to retail investors. The form is designed to help investors understand the key differences between brokerage and advisory services, the fees they will pay, conflicts of interest, and the legal standard of conduct they can expect. One of the required items on Form CRS is disclosure of the firm's legal and disciplinary history.

When VSI Securities filed its initial Form CRS, the firm failed to respond "Yes" to the question concerning legal and disciplinary history, even though the firm had prior reportable legal or disciplinary history that should have been disclosed. This omission deprived investors of material information they are entitled to receive when deciding whether to open or maintain accounts with the firm.

In addition to the disciplinary history disclosure failure, VSI Securities omitted the required heading and conversation starters for Item 4 of the Form CRS. Form CRS uses a question-and-answer format with specific required headings and "conversation starters"—sample questions that investors can ask their financial professionals. These standardized elements are designed to facilitate meaningful conversations between investors and financial professionals about important topics like conflicts of interest and disciplinary history.

The violation was classified as willful, meaning the firm knew or should have known about the requirement and its failure to comply. In securities law, a willful violation does not require proof of intent to violate the law—rather, it means the firm intentionally committed the act that constituted the violation.

Form CRS became required in June 2020 as part of the SEC's Regulation Best Interest package of reforms. The form aims to make it easier for retail investors to compare services and make informed choices about their financial relationships. For the form to serve its intended purpose, firms must provide complete and accurate information.

Investors should review Form CRS documents carefully and ask questions about any disciplinary history or conflicts of interest disclosed. These disclosures can provide important insights into a firm's track record and business practices.

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According to FINRA, Standard Chartered Securities North America LLC was censured and fined $95,000 for failing to report approximately 700 transactions in TRACE-eligible corporate debt securities within 15 minutes of execution and for inadequate supervision of TRACE reporting compliance.

FINRA's ...

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According to FINRA, Standard Chartered Securities North America LLC was censured and fined $95,000 for failing to report approximately 700 transactions in TRACE-eligible corporate debt securities within 15 minutes of execution and for inadequate supervision of TRACE reporting compliance.

FINRA's Trade Reporting and Compliance Engine (TRACE) provides transparency to the corporate bond market by making trade data publicly available. Broker-dealers are required to report transactions in TRACE-eligible securities within 15 minutes of execution. Timely reporting is essential because market participants rely on TRACE data for pricing information and market analysis. Late reporting can distort market transparency and potentially allow information advantages that harm market fairness.

During an 18-month period, Standard Chartered failed to report approximately 700 TRACE-eligible corporate debt transactions within the required timeframe. These late reports represented approximately five percent of the firm's TRACE-eligible corporate debt transactions during that period. While five percent may seem modest, in absolute terms this represents a significant volume of late reports that undermined the transparency TRACE is designed to provide.

The firm's supervisory system for TRACE reporting compliance was inadequate. Although Standard Chartered's written supervisory procedures required the firm to conduct supervisory reviews for late TRACE reporting exceptions, the procedures lacked guidance on how to remediate TRACE reporting deficiencies during the relevant period. The firm also had no system or procedure to address repeated TRACE reporting failures.

Despite receiving multiple communications from FINRA identifying TRACE reporting deficiencies, the firm did not timely address its problems. This failure to respond to regulator-identified deficiencies demonstrates a serious supervisory weakness. When a regulator identifies compliance problems, firms should act promptly to investigate root causes and implement effective remediation.

Standard Chartered ultimately took appropriate corrective action. The firm updated its supervisory system and procedures related to TRACE reporting and established a working group comprised of compliance, operations, and other personnel to monitor the firm's TRACE reporting performance. The firm also implemented written procedures for tracking and escalating instances of late TRACE reporting.

For investors, this case illustrates the importance of trade reporting transparency to bond market functioning. Unlike stocks, which trade on centralized exchanges with publicly displayed prices, corporate bonds trade in a decentralized over-the-counter market. TRACE reporting helps level the playing field by making transaction data publicly available.

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According to FINRA, Douglas John McCauley was barred from association with any FINRA member in all capacities for refusing to provide information and documents requested during a FINRA investigation.

FINRA opened an investigation into McCauley's other business activities (OBAs). Securities regula...

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According to FINRA, Douglas John McCauley was barred from association with any FINRA member in all capacities for refusing to provide information and documents requested during a FINRA investigation.

FINRA opened an investigation into McCauley's other business activities (OBAs). Securities regulations require registered representatives to disclose outside business activities to their member firms, as these activities may present conflicts of interest or compliance risks. FINRA sought information about McCauley's OBAs as well as bank and other financial records pertaining to those activities.

McCauley initially submitted a response to FINRA's request, but the response was incomplete and did not provide all of the requested information and documents. After submitting the incomplete response, McCauley ultimately refused to provide the information or documents requested by FINRA.

FINRA rules require associated persons to cooperate with regulatory investigations. This includes providing documents and information when requested. The obligation to cooperate is fundamental to FINRA's ability to fulfill its regulatory mission of protecting investors and maintaining market integrity. When individuals refuse to cooperate with investigations, they impede FINRA's ability to examine potential misconduct and take appropriate action to protect investors.

A bar is FINRA's most severe sanction, effectively ending an individual's securities industry career. Bars are typically imposed for serious misconduct or, as in this case, for refusing to cooperate with regulatory investigations. The refusal to cooperate is treated severely because it suggests the individual may have something to hide and because it directly undermines the regulatory process.

For investors, this case demonstrates the importance of regulatory oversight. When choosing a financial professional, investors should verify registration and review disciplinary history through FINRA's BrokerCheck website. A bar means the individual is prohibited from working in the securities industry and cannot serve customers in any registered capacity.

The bar became effective December 8, 2025. McCauley can potentially apply for re-entry to the industry after two years, though bars for failure to cooperate with investigations are rarely successfully challenged, and firms are typically reluctant to sponsor individuals who have refused to cooperate with regulators.

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According to FINRA, William Klatoff Weinstein was barred from association with any FINRA member in all capacities for failing to provide documents and information requested during a FINRA investigation.

FINRA's investigation originated from its review of a Uniform Termination Notice for Securitie...

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According to FINRA, William Klatoff Weinstein was barred from association with any FINRA member in all capacities for failing to provide documents and information requested during a FINRA investigation.

FINRA's investigation originated from its review of a Uniform Termination Notice for Securities Industry Registration (Form U5) filed by Weinstein's member firm. The Form U5 stated that Weinstein was terminated for violations of firm policies related to off-channel communications and systems access. Off-channel communications refer to business-related communications conducted through unapproved channels, such as personal email accounts or text messages that are not captured by the firm's retention systems. Such communications can circumvent supervision and record-keeping requirements.

Systems access violations may involve unauthorized access to firm systems, improper use of credentials, or other activities that compromise system security or firm data. Given the nature of the termination reasons, FINRA sought to investigate the circumstances surrounding these policy violations.

When FINRA requested documents and information from Weinstein as part of its investigation, he failed to provide them. FINRA rules require all associated persons to cooperate fully with regulatory investigations, including providing any requested documents and information. This cooperation requirement is not optional—it is a fundamental obligation that supports FINRA's regulatory mission.

Weinstein's failure to cooperate prevented FINRA from completing its investigation and determining what, if any, regulatory violations occurred beyond the firm policy violations that led to his termination. This type of non-cooperation is treated very seriously because it obstructs the regulatory process and may allow misconduct to go undiscovered and unsanctioned.

The bar imposed on Weinstein represents the most severe sanction available and effectively ends his securities industry career. While individuals who are barred can apply for re-entry to the industry after two years, such applications are rarely granted, particularly for bars based on failure to cooperate with investigations. Firms are typically unwilling to sponsor individuals who have demonstrated unwillingness to cooperate with regulators.

For investors, this case underscores the importance of conducting due diligence on financial professionals. Investors can check the registration and disciplinary history of any broker or firm through FINRA's free BrokerCheck service at www.finra.org/brokercheck. A bar means the individual cannot work in any capacity in the securities industry.

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According to FINRA, Jennifer H. Ceterko was barred from association with any FINRA member in all capacities for refusing to provide documents and information and to appear for on-the-record testimony during a FINRA investigation.

FINRA's investigation focused on several serious matters: undisclos...

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According to FINRA, Jennifer H. Ceterko was barred from association with any FINRA member in all capacities for refusing to provide documents and information and to appear for on-the-record testimony during a FINRA investigation.

FINRA's investigation focused on several serious matters: undisclosed other business activities (OBAs), undisclosed private securities transactions, and whether Ceterko accessed the accounts of multiple customers from her former member firm while she was associated with a new firm.

Securities regulations require registered representatives to disclose all outside business activities to their member firms, as these activities may present conflicts of interest or supervision concerns. Similarly, representatives must provide prior written notice to their firms before participating in private securities transactions (also known as "selling away"). These requirements help firms supervise their representatives and protect investors from unsuitable investments or fraudulent schemes.

The allegation that Ceterko may have accessed customer accounts from her former firm while working at a new firm raises particularly serious concerns. Unauthorized access to customer accounts can involve identity theft, unauthorized trading, misappropriation of funds, or other forms of misconduct that directly harm investors.

When FINRA requested that Ceterko provide documents and information and appear for on-the-record testimony, she refused. On-the-record testimony is similar to a deposition, where the witness answers questions under oath with a court reporter present. This testimony is a critical tool for FINRA to investigate potential misconduct and gather facts.

FINRA rules require all persons associated with member firms to cooperate with regulatory investigations. This includes producing requested documents and appearing for testimony when asked. The duty to cooperate is absolute and fundamental to the regulatory framework. Without the ability to compel cooperation, FINRA cannot effectively investigate potential misconduct or protect investors.

Ceterko's refusal to cooperate prevented FINRA from determining what actually occurred with regard to the potential violations under investigation. The bar was imposed not as a sanction for the underlying conduct being investigated, but as a sanction for the failure to cooperate itself.

A bar is the most severe sanction and effectively ends an individual's ability to work in the securities industry. For investors, this case serves as a reminder to check the background of financial professionals through FINRA's BrokerCheck before entrusting them with investments.

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According to FINRA, Eric A. Fiallo was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested during a FINRA investigation into his potential involvement with borrowing from a customer.

FINRA rules strictly limit circumstances u...

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According to FINRA, Eric A. Fiallo was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested during a FINRA investigation into his potential involvement with borrowing from a customer.

FINRA rules strictly limit circumstances under which registered representatives can borrow money from or lend money to customers. These restrictions exist because borrowing/lending relationships between representatives and customers create significant conflicts of interest and opportunities for exploitation. Representatives generally may not borrow from customers unless the customer is a financial institution regularly engaged in the business of lending, the customer is an immediate family member, or the member firm has procedures allowing such arrangements and has approved the specific arrangement.

When FINRA received information suggesting that Fiallo may have borrowed money from a customer, it opened an investigation. As part of that investigation, FINRA requested documents and information from Fiallo. He refused to provide the requested materials.

All persons associated with FINRA member firms have an absolute obligation to cooperate with regulatory investigations. This cooperation requirement is codified in FINRA rules and is a fundamental aspect of securities industry registration. When FINRA requests documents and information, associated persons must provide them. There are very limited exceptions (such as valid assertions of Fifth Amendment privilege against self-incrimination), but a blanket refusal to cooperate is not permitted.

Fiallo's refusal prevented FINRA from completing its investigation into whether he improperly borrowed money from a customer. Without access to relevant documents and information, FINRA could not determine the facts surrounding the potential borrowing or assess what, if any, regulatory violations occurred.

The bar imposed on Fiallo represents the most severe sanction available. A bar effectively ends an individual's securities industry career, as the person cannot be employed by or associated with any FINRA member firm in any capacity. While barred individuals can apply for re-entry after two years, such applications are rarely granted, particularly for bars based on failure to cooperate with investigations.

For investors, this case highlights the importance of being cautious about financial relationships with registered representatives beyond standard brokerage relationships. Lending money to or borrowing money from a financial professional should generally be avoided and may violate securities regulations. Investors should also verify the registration status and history of financial professionals through FINRA's free BrokerCheck service.

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According to FINRA, Brian Boyer Davis was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested during a FINRA investigation.

FINRA's investigation originated from review of amended Forms U5 filed by Davis's former member firm...

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According to FINRA, Brian Boyer Davis was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested during a FINRA investigation.

FINRA's investigation originated from review of amended Forms U5 filed by Davis's former member firm. Form U5 is the uniform termination notice that firms must file when a registered person's employment ends. The firm filed an amended Form U5 disclosing that it had initiated an internal review of Davis's potential involvement in a private securities transaction. Subsequently, the firm filed an additional amended Form U5 disclosing that Davis was subject to an investment-related, customer-initiated civil litigation.

Private securities transactions, sometimes called "selling away," occur when registered representatives participate in securities transactions outside the scope of their employment with their member firm. FINRA rules require representatives to provide prior written notice to their firms before engaging in private securities transactions. This requirement allows firms to supervise these activities and assess whether they present conflicts of interest or suitability concerns. Participating in private securities transactions without firm approval violates FINRA rules and can result in serious disciplinary action.

The combination of an internal firm review into potential selling away and customer litigation suggests that Davis may have recommended or facilitated an investment outside his firm that resulted in customer harm. However, because Davis refused to appear for testimony, FINRA could not fully investigate what occurred.

On-the-record testimony, where a witness answers questions under oath with a court reporter present, is a critical investigative tool. FINRA uses testimony to gather facts, assess credibility, and determine whether rule violations occurred. All persons associated with FINRA member firms have an absolute obligation to cooperate with regulatory investigations, including appearing for testimony when requested.

Davis's refusal to testify prevented FINRA from completing its investigation and determining the full facts regarding the potential private securities transaction and related customer litigation. The bar was imposed for the failure to cooperate, which itself is a serious violation regardless of the underlying conduct being investigated.

A bar effectively ends an individual's securities industry career. While barred individuals can technically apply for re-entry after two years, such applications are rarely successful, particularly when the bar was imposed for refusing to cooperate with regulators.

For investors, this case underscores the importance of investigating financial professionals before investing. FINRA's BrokerCheck provides free access to registration and disciplinary information for all registered brokers.

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