Bad Brokers

According to FINRA, Stephen Michael Franko was fined $5,000, suspended from association with any FINRA member in all capacities for three months, and ordered to pay $5,640 plus interest in partial restitution to customers for willfully violating Regulation Best Interest by recommending speculative a...

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According to FINRA, Stephen Michael Franko was fined $5,000, suspended from association with any FINRA member in all capacities for three months, and ordered to pay $5,640 plus interest in partial restitution to customers for willfully violating Regulation Best Interest by recommending speculative and unrated corporate bonds that were not in customers' best interests.

The findings revealed that Franko recommended bonds totaling $195,000 to three senior retail customers whose investment objectives were income and did not include speculation. The bonds were speculative and unrated—characteristics that made them inappropriate for customers seeking income without speculative risk. Franko earned $5,640 in commissions from these recommendations, creating a financial incentive to recommend the unsuitable investments.

Regulation Best Interest (Reg BI) requires broker-dealers and their associated persons to act in the best interest of retail customers when making recommendations. This obligation includes exercising reasonable diligence, care, and skill to understand the potential risks, rewards, and costs of a recommendation and having a reasonable basis to believe the recommendation is in the customer's best interest based on the customer's investment profile.

Franko failed to meet these obligations. He did not exercise reasonable diligence, care, and skill to have a reasonable basis to believe that the bond recommendations were in his customers' best interests based on their investment profiles and the potential risks, rewards, and costs associated with the recommendations. The customers sought income-producing investments without speculation, but Franko recommended speculative, unrated bonds—a fundamental mismatch between the recommendations and the customers' stated objectives.

The fact that the customers were seniors makes the unsuitable recommendations particularly concerning. Senior investors often have limited ability to recover from investment losses, may be living on fixed incomes, and may have shorter investment time horizons. Recommending speculative investments to senior customers seeking income without speculation represents a serious breach of the duty to act in customers' best interests.

The three-month suspension, in effect from December 15, 2025, through March 14, 2026, along with the $5,000 fine and restitution order, reflects the seriousness of Reg BI violations, particularly when involving unsuitable recommendations to senior investors.

Investors should clearly communicate their investment objectives and risk tolerance to their financial professionals and should question recommendations that seem inconsistent with their stated goals. Unrated bonds carry significant risks and are generally unsuitable for investors seeking income without speculation.

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According to FINRA, Thomas Gregory Scheiman was fined $5,000, suspended from association with any FINRA member in all capacities for two months, and ordered to pay disgorgement of $2,600 in commissions plus interest for willfully violating Regulation Best Interest by recommending a speculative and u...

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According to FINRA, Thomas Gregory Scheiman was fined $5,000, suspended from association with any FINRA member in all capacities for two months, and ordered to pay disgorgement of $2,600 in commissions plus interest for willfully violating Regulation Best Interest by recommending a speculative and unrated corporate bond that was not in the customer's best interest.

The findings revealed that Scheiman recommended and sold a $100,000 bond to an elderly retail customer with an investment objective of income that did not include speculation. The bond was speculative and unrated, making it inappropriate for a customer seeking income without speculative risk. Scheiman earned $2,600 in commission from this recommendation—a substantial commission on a single transaction that created a financial incentive to recommend the unsuitable investment.

Like his colleague Stephen Michael Franko, Scheiman failed to exercise reasonable diligence, care, and skill required under Regulation Best Interest. He did not have a reasonable basis to believe that the bond recommendation was in his customer's best interest based on her investment profile and the potential risks, rewards, and costs associated with the recommendation.

The customer's elderly status and income-focused investment objective made the speculative bond particularly unsuitable. Elderly investors typically have limited ability to recover from losses, may depend on investment income for living expenses, and generally should not be exposed to speculative risks unless they have specifically requested such exposure and have the financial capacity to absorb potential losses.

Following the customer's complaint to Scheiman's member firm, the firm took responsibility for the unsuitable recommendation and returned the customer's principal amount. This firm action demonstrates the seriousness of the violation and the firm's recognition that the recommendation should never have been made.

The disgorgement of commissions is appropriate in this case because Scheiman should not profit from unsuitable recommendations. By ordering disgorgement of the $2,600 commission plus interest, FINRA ensures that Scheiman does not retain the financial benefit of his Reg BI violation.

The two-month suspension, in effect from December 15, 2025, through February 14, 2026, along with the $5,000 fine and disgorgement order, reflects the seriousness of violating Regulation Best Interest through unsuitable recommendations to elderly investors.

Investors, particularly seniors, should be cautious about recommendations for unrated bonds or other speculative investments when their stated objective is income without speculation. Questions about the appropriateness of any recommendation should be directed to the firm's compliance department or to regulators.

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According to FINRA, Robert Galloway was fined $5,000 and suspended from association with any FINRA member in all capacities for five months for falsifying expense reports by claiming he had already incurred expenses when he had not and by doubling the expected amounts of those expenses.

The findi...

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According to FINRA, Robert Galloway was fined $5,000 and suspended from association with any FINRA member in all capacities for five months for falsifying expense reports by claiming he had already incurred expenses when he had not and by doubling the expected amounts of those expenses.

The findings revealed systematic falsification of expense reports for personal financial gain. Through this falsification, Galloway obtained approximately $5,000 in reimbursements to which he was not entitled. This represents theft from his employer through fraudulent expense claims—conduct that demonstrates dishonesty and lack of integrity.

Expense reimbursement systems are based on trust. Employers trust that employees will submit accurate expense reports reflecting actual business expenses incurred on behalf of the firm. When employees abuse this trust by falsifying expense reports, they commit fraud against their employers and violate fundamental standards of honesty required in the securities industry.

The falsification took two forms: claiming to have already incurred expenses that he had not actually incurred, and doubling the expected amounts of expenses. Both forms of falsification demonstrate deliberate dishonesty rather than inadvertent errors. The systematic nature of the conduct—obtaining approximately $5,000 through false claims—indicates a pattern of fraudulent behavior rather than isolated mistakes.

The securities industry demands high standards of honesty and integrity from its professionals. Investors entrust their financial assets to registered representatives, relying on the assumption that these professionals will act honestly and ethically. When representatives demonstrate dishonesty in their dealings with their employers, it raises serious questions about whether they can be trusted to deal honestly with customers.

While the falsified expense reports did not directly involve customers, the conduct reflects on Galloway's character and fitness to serve in the securities industry. FINRA's disciplinary action recognizes that dishonest conduct in any aspect of a representative's professional activities undermines confidence in the integrity of the securities markets.

The five-month suspension, in effect from December 15, 2025, through May 14, 2026, along with the $5,000 fine, reflects the seriousness of dishonest conduct even when it does not directly harm customers.

Investors should research financial professionals through FINRA BrokerCheck before entrusting them with their assets. Disciplinary actions for dishonest conduct, including falsification of expense reports, should serve as warning signs about an individual's character and fitness.

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According to FINRA, Evan Von Scales was fined $5,000 and suspended from association with any FINRA member in all capacities for three months for operating an outside business activity involving marketing and selling an automated trading algorithm for the foreign exchange market without disclosing to...

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According to FINRA, Evan Von Scales was fined $5,000 and suspended from association with any FINRA member in all capacities for three months for operating an outside business activity involving marketing and selling an automated trading algorithm for the foreign exchange market without disclosing to or receiving approval from his member firm.

The findings revealed a substantial undisclosed outside business. Scales created a limited liability company for this business and actively promoted the automated trading algorithm on various social media platforms. This promotion resulted in nine individuals purchasing the algorithm for $2,000 each. While two customers later requested and received refunds, Scales still received approximately $13,000 from sales after deducting refunds and transaction fees.

The undisclosed nature of this business is particularly concerning given its connection to financial markets. Scales was marketing and selling a product designed to trade in foreign exchange markets—an activity closely related to his work in the securities industry. This created potential conflicts of interest that his firm needed to evaluate, including whether the algorithm worked as promised, whether customers were receiving suitable investment advice, whether Scales' outside business interfered with his duties to firm customers, and whether the activity created regulatory or reputational risks for the firm.

Outside business activity rules require registered representatives to disclose and receive approval for business activities conducted outside their employment with their firm. These rules exist to allow firms to supervise representatives' activities comprehensively, identify and manage conflicts of interest, ensure representatives are devoting appropriate time and attention to their firm duties, and protect firms from potential liability arising from representatives' outside activities.

The use of social media to promote the algorithm raises additional concerns. Social media communications by registered representatives are subject to securities regulations and firm supervision. By promoting the algorithm without firm knowledge or approval, Scales circumvented his firm's supervisory review of his social media communications.

To Scales' credit, he subsequently ceased operating the business. However, this voluntary cessation came only after the violations had occurred and does not erase the risks created during the period of undisclosed activity.

The three-month suspension, in effect from November 17, 2025, through February 16, 2026, along with the $5,000 fine, reflects the seriousness of operating a substantial outside business without firm disclosure and approval, particularly when the business involves financial markets.

Investors should verify that their financial professionals have disclosed all outside business activities to their firms and should be cautious about purchasing financial products or services from registered representatives outside the oversight of their firms.

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According to FINRA, Barry Luther Buchholz was fined $7,500, suspended from association with any FINRA member in all capacities for one month, and ordered to pay disgorgement of $7,480 in commissions plus interest for effecting unauthorized transactions totaling more than $590,000 in the accounts of ...

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According to FINRA, Barry Luther Buchholz was fined $7,500, suspended from association with any FINRA member in all capacities for one month, and ordered to pay disgorgement of $7,480 in commissions plus interest for effecting unauthorized transactions totaling more than $590,000 in the accounts of four customers.

The findings revealed unauthorized trading in the accounts of four adult daughters of a deceased senior customer. After their father passed away, each daughter opened a non-discretionary brokerage account at Buchholz's member firm with Buchholz as their assigned registered representative. Once the accounts were funded with proceeds from their father's estate, Buchholz placed trades to purchase $590,795 in mutual fund shares, generating $16,245.63 in commissions paid to Buchholz.

Critically, Buchholz did not seek or obtain written or oral authorization from the customers to place these trades. The customers learned of the trades only when they received their account statements—discovering that substantial transactions had occurred in their accounts without their knowledge or consent.

After learning of the unauthorized trades, one customer directed Buchholz to sell the mutual fund shares, which he did two business days later. Shortly thereafter, Buchholz sold all shares held in another customer's account without obtaining her written or oral authorization—compounding the unauthorized trading with an additional unauthorized liquidation. These liquidations collectively resulted in realized losses for both customers.

The remaining two customers did not liquidate their mutual fund shares and ultimately saw positive returns on the investments. However, the fact that some investments ultimately performed well does not excuse unauthorized trading. Customers have the right to control their own accounts and make their own investment decisions, regardless of whether unauthorized trades happen to be profitable.

Buchholz earned $7,480 in commissions from trades in the accounts of the two customers who retained the investments. FINRA ordered disgorgement of these commissions, ensuring that Buchholz does not profit from unauthorized trading.

All four customers filed complaints with Buchholz's firm about the unauthorized trades. The first two customers entered into settlements that repaid them for their losses, with Buchholz personally contributing $15,000 toward these settlements—a recognition of his wrongdoing.

The one-month suspension, in effect from December 1, 2025, through December 31, 2025, along with the $7,500 fine and disgorgement order, reflects the seriousness of unauthorized trading while recognizing Buchholz's personal contribution to making customers whole.

Investors should carefully review all account statements and immediately report any unauthorized transactions to their firms and regulators.

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According to FINRA, Mark Allen Carter was fined $20,000, suspended from association with any FINRA member in all capacities for nine months, and ordered to pay disgorgement of $6,773 in commissions plus interest for willfully violating Regulation Best Interest by recommending excessive options tradi...

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According to FINRA, Mark Allen Carter was fined $20,000, suspended from association with any FINRA member in all capacities for nine months, and ordered to pay disgorgement of $6,773 in commissions plus interest for willfully violating Regulation Best Interest by recommending excessive options trading to retail customers and exercising unauthorized discretion in their accounts.

The findings revealed devastating options trading that destroyed the customers' accounts. Carter recommended options trading to two retail customers, a married couple, whose investment objectives were capital appreciation with a long investment time horizon. However, Carter's options trading in their accounts resulted in annualized cost-to-equity ratios averaging 42 percent—meaning the customers stood little chance of making money or even breaking even due to the excessive costs generated by Carter's trading.

The results were catastrophic. Carter's trading resulted in losses of over $600,000, representing over 99 percent of the value of the customers' accounts. Meanwhile, Carter received $6,773 in commissions from the trades that destroyed the customers' wealth. This cost-to-equity ratio and the resulting losses demonstrate that the trading was not in the customers' best interests and was instead designed to generate commissions for Carter.

Carter violated Regulation Best Interest by failing to have a reasonable basis to conclude that the options transactions would be in the customers' best interest or suitable for them based on their investment profile and the potential risks of the transactions. The excessive trading and resulting losses speak for themselves in demonstrating the violation.

To Carter's credit, he self-disclosed his misconduct to his member firm. The firm subsequently reimbursed the customers for their losses after they complained. However, this restitution came only after the customers had suffered the distress of watching their accounts devastated by Carter's unsuitable recommendations.

Carter's misconduct extended beyond unsuitable recommendations. He exercised discretion in the customers' accounts without prior written authorization. Although the customers orally authorized Carter to use discretion for "low risk" trading, his firm prohibited discretion in any customer account without written authorization. Carter placed trades without speaking to customers about them, exercising unauthorized discretion. He also mismarked solicited trades as unsolicited, further concealing the nature of his trading from firm supervision.

The nine-month suspension, in effect from December 1, 2025, through August 31, 2026, along with the $20,000 fine and disgorgement order, reflects the severity of excessive trading that destroyed customers' accounts through unsuitable options recommendations.

Investors should be extremely cautious about options trading, which can be highly risky and costly, and should immediately question any trading that generates costs approaching or exceeding account value.

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According to FINRA, Luis S. Jean-Bart was fined $5,000 and suspended from association with any FINRA member in all capacities for 10 months for failing to timely respond to FINRA's requests for information and documents in connection with its investigation into his alleged involvement in investments...

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According to FINRA, Luis S. Jean-Bart was fined $5,000 and suspended from association with any FINRA member in all capacities for 10 months for failing to timely respond to FINRA's requests for information and documents in connection with its investigation into his alleged involvement in investments involving crypto assets away from his member firm.

The findings revealed prolonged delays and failures to provide complete responses to FINRA requests. After Jean-Bart's initial response did not provide all requested information and documents, FINRA sent additional requests for the missing information. However, Jean-Bart failed to provide all requested information and documents by the deadlines.

FINRA's response escalated appropriately. FINRA issued a notice of suspension pursuant to FINRA Rule 9552, notifying Jean-Bart that he would be suspended from associating with any FINRA member unless he complied with the outstanding requests. After Jean-Bart failed to comply, FINRA suspended him and notified him that failure to provide the requested material and request termination of his suspension would result in a bar.

More than ten months after the original due date for his response, Jean-Bart supplemented his response and later requested termination of his suspension. After FINRA terminated Jean-Bart's suspension and continued its investigation, FINRA learned of additional documents Jean-Bart had failed to provide. FINRA sent another request seeking those documents, which Jean-Bart provided more than 15 months after the original due date for his response.

This timeline demonstrates persistent failure to cooperate with FINRA's investigation. The delays were not minor oversights but extended over more than 15 months and required multiple follow-up requests, a suspension notice, actual suspension, and threat of a bar before Jean-Bart finally provided complete responses.

The investigation concerned Jean-Bart's alleged involvement in investments involving crypto assets away from his member firm—an important area of regulatory concern given the risks associated with crypto investments and the potential for undisclosed outside business activities or securities transactions away from firm supervision.

Timely cooperation with FINRA requests is a fundamental obligation of registered individuals. Delays in responding obstruct FINRA's ability to investigate potential misconduct, protect investors, and maintain market integrity. The extended delays in this case substantially impaired FINRA's investigation.

The ten-month suspension, in effect from December 1, 2025, through September 30, 2026, along with the $5,000 fine, reflects the seriousness of prolonged failure to respond timely and completely to FINRA requests, particularly after receiving a suspension notice and being actually suspended under Rule 9552.

Investors should understand that registered representatives have ongoing obligations to cooperate with regulatory investigations and that failure to meet these obligations raises serious questions about their commitment to regulatory compliance.

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According to FINRA, James Daniel Lang was fined $5,000 and suspended from association with any FINRA member in all capacities for four months for engaging in outside business activities without prior written disclosure to his two member firms.

The findings revealed complex undisclosed fiduciary r...

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According to FINRA, James Daniel Lang was fined $5,000 and suspended from association with any FINRA member in all capacities for four months for engaging in outside business activities without prior written disclosure to his two member firms.

The findings revealed complex undisclosed fiduciary roles involving a customer. Lang established two trusts for a long-time customer and was designated to serve as successor trustee. After the customer, a senior, passed away, Lang assumed the role of trustee. While Lang was not a beneficiary of either trust, he received compensation for serving as trustee—making this a compensated outside business activity requiring disclosure and approval.

Although Lang disclosed other outside business activities to his first employing firm, he did not disclose his trustee roles. After the firm discovered these activities during a branch audit, Lang disclosed the trustee roles. However, the firm rejected Lang's outside business request and instructed him to relinquish his trustee roles. Lang failed to comply with this instruction and continued serving as trustee.

Later, the firm discovered that Lang was continuing to serve as trustee despite being instructed to relinquish these roles and began an internal investigation. Lang then resigned from the firm. This pattern—discovery, instruction to cease, continued activity, and resignation—demonstrates knowing violation of firm policies rather than inadvertent non-disclosure.

When Lang associated with a new firm, he was still serving as trustee for one of the trusts. Although Lang disclosed other outside business activities to the new firm, he did not disclose his ongoing trustee role to the new firm until over two years later. Prior to disclosing his trustee roles to either firm, Lang inaccurately indicated on compliance questionnaires that he was not serving as a trustee for non-family members—false attestations that concealed his activities.

The findings also revealed that Lang was appointed and compensated for serving as executor for the same customer's estate. Lang did not disclose this executor role as an outside business activity in writing to either firm. He inaccurately stated in an annual questionnaire to the original firm that he had disclosed all outside activities and was not acting in a fiduciary capacity. After joining the new firm, Lang inaccurately represented that he had disclosed all outside business activities when he had not.

The four-month suspension, in effect from December 15, 2025, through April 14, 2026, along with the $5,000 fine, reflects the seriousness of multiple undisclosed outside business activities involving fiduciary roles, particularly when combined with false compliance attestations and refusal to comply with firm instructions to relinquish the roles.

Investors should exercise caution when financial professionals offer to serve in fiduciary capacities such as trustee or executor, and should verify that such activities have been disclosed to and approved by the professional's firm.

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According to FINRA, James Eugene Holmes III was fined $10,000 and suspended from association with any FINRA member in all capacities for eight months for willfully violating Regulation Best Interest by recommending unsuitable options transactions to a customer, causing his firm to maintain inaccurat...

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According to FINRA, James Eugene Holmes III was fined $10,000 and suspended from association with any FINRA member in all capacities for eight months for willfully violating Regulation Best Interest by recommending unsuitable options transactions to a customer, causing his firm to maintain inaccurate books and records, and exercising unauthorized discretion in customer accounts.

The findings revealed unsuitable options recommendations that disregarded the customer's risk tolerance and financial situation. The customer told Holmes that she could not afford to lose her principal in meeting her investment goals, did not have other funds to fall back on, and could not afford to be exposed to significant risk. Despite these clear statements about risk intolerance and financial constraints, Holmes recommended uncovered (or naked) put options transactions that created significant risk exposure in the customer's account, including in volatile securities.

Naked put options create potentially unlimited risk. When selling naked puts, the seller is obligated to purchase the underlying security at the strike price if the option is exercised, regardless of how far the security's price has fallen. For a customer who cannot afford to lose principal and lacks funds to fall back on, naked put options are fundamentally unsuitable regardless of the potential premium income they might generate.

The unsuitable transactions recommended by Holmes caused losses in the customer's account, which were later reimbursed by his member firm—another indication that the firm recognized the recommendations were inappropriate. However, the customer had to endure losses and complaints before receiving restitution.

Holmes also caused his firm to maintain inaccurate books and records by submitting account information for the same customer that inaccurately stated her financial circumstances, investment experience, and investment objectives. Accurate customer information is essential to suitability determinations and supervision. By submitting inaccurate information, Holmes undermined his firm's ability to supervise his recommendations and ensure they were appropriate for the customer.

Additionally, Holmes exercised discretionary authority in at least five non-discretionary customer accounts to effect at least 250 trades. Holmes did not have prior written authorization from the customers to exercise discretion, and the firm had not accepted the accounts as discretionary. Despite this unauthorized discretion, Holmes falsely attested in compliance attestations that he did not have accounts over which he exercised trading discretion, including time and price discretion, other than those approved by the firm as discretionary.

The eight-month suspension, in effect from December 1, 2025, through July 31, 2026, along with the $10,000 fine, reflects the cumulative seriousness of unsuitable options recommendations to a risk-averse customer, submission of inaccurate account information, unauthorized exercise of discretion in multiple accounts, and false compliance attestations.

Investors should clearly communicate their risk tolerance and financial situation to financial professionals and should immediately question recommendations for risky strategies like naked options that seem inconsistent with their stated objectives.

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According to FINRA, Timothy Richard Jones was fined $7,500 and suspended from association with any FINRA member in all capacities for eight months for initiating electronic transfers from his brokerage account to make payments on a credit card, knowing his brokerage account lacked funds to cover the...

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According to FINRA, Timothy Richard Jones was fined $7,500 and suspended from association with any FINRA member in all capacities for eight months for initiating electronic transfers from his brokerage account to make payments on a credit card, knowing his brokerage account lacked funds to cover the transfers.

The findings revealed a scheme to exceed credit card limits through unfunded transfers. Jones initiated 18 electronic transfers from his brokerage account held at his member firm to make payments on a credit card issued by the firm's affiliated bank. Jones initiated these transfers knowing that his brokerage account lacked funds to cover them.

These unfunded transfers reduced Jones' credit card balance below his credit limit, which enabled him to make additional charges totaling $29,096 on the credit card. Jones exploited the time lag between when transfers were initiated and when they were processed to artificially create available credit, allowing him to charge amounts that exceeded his actual credit limit.

All 18 transfers were eventually reversed due to lack of sufficient funds in Jones' brokerage account. However, by that time, Jones had already made $29,096 in charges that he would not have been able to make if his true credit card balance had been accurately reflected.

Jones has not repaid the affiliated bank for charges exceeding his credit limit. This failure to repay represents theft through deception—Jones obtained credit he was not entitled to through fraudulent transfers and has not made restitution.

This conduct demonstrates dishonesty and lack of integrity that is incompatible with the securities industry's requirement for trustworthiness. The securities industry depends on honesty and ethical conduct from its professionals. When registered individuals engage in fraudulent conduct in their personal financial dealings, particularly involving their own firms or affiliated entities, it raises serious questions about their fitness to handle customer assets and provide financial advice.

The deliberate nature of the conduct is particularly troubling. Jones initiated 18 separate unfunded transfers—a pattern that demonstrates systematic fraud rather than inadvertent error. Each transfer required Jones to knowingly initiate an electronic transfer from an account he knew lacked sufficient funds, demonstrating repeated, deliberate dishonest conduct.

The eight-month suspension, in effect from December 1, 2025, through July 31, 2026, along with the $7,500 fine, reflects the seriousness of fraudulent conduct involving unfunded transfers to exceed credit card limits, particularly when the individual has failed to make restitution for the resulting unauthorized charges.

Investors should understand that character and integrity are essential qualifications for financial professionals, and disciplinary actions involving dishonest conduct should be viewed as serious red flags when evaluating whom to trust with investment assets.

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