Bad Brokers

According to FINRA, Roy Reese was fined $10,000 and suspended from association with any FINRA member in all capacities for nine months for forwarding approximately $12,000 to a third party located overseas despite red flags indicating the funds may have been related to illegal activity.

The findi...

Read More

According to FINRA, Roy Reese was fined $10,000 and suspended from association with any FINRA member in all capacities for nine months for forwarding approximately $12,000 to a third party located overseas despite red flags indicating the funds may have been related to illegal activity.

The findings revealed that Reese agreed to receive money on behalf of a third party in his bank account. His account received a $9,072 wire from the state of Arizona marked as a benefit payment for an individual unknown to Reese. The third party claimed the funds came from the sale of land for gold mining.

Reese withdrew the amount and transferred it to the third party. He later expressed concerns about the transactions' legality in text messages, stating he could not accept funds from improper sources because he worked in a highly regulated profession and did not want to be accused of money laundering or fraud.

Despite these concerns, when the third party revealed that the purported sender was blocked from sending money outside the United States, Reese agreed to receive additional funds after being assured they were legitimate. The state of New York subsequently sent wires totaling $3,218 in unemployment insurance payments for the benefit of another individual unknown to Reese. Despite his previously stated concerns, Reese transferred these funds to the third party as well.

Reese's bank account was eventually frozen and closed by the bank. A bank representative informed him the wires were unemployment funds for the benefit of other individuals. FINRA found that Reese was reckless, or at least negligent, in not knowing that the third party was not entitled to the funds and that they were likely the result of fraud or other illegal activity.

The suspension is in effect from June 16, 2025, through March 15, 2026. This case demonstrates that securities professionals are held to high standards and cannot ignore obvious red flags of potential fraud.

Show Less

According to FINRA, Mingzhe Du was fined $7,500, suspended from association with any FINRA member in all capacities for two months, and required to complete five hours of continuing education concerning recordkeeping responsibilities.

The findings revealed that Du caused his member firm to mainta...

Read More

According to FINRA, Mingzhe Du was fined $7,500, suspended from association with any FINRA member in all capacities for two months, and required to complete five hours of continuing education concerning recordkeeping responsibilities.

The findings revealed that Du caused his member firm to maintain incomplete books and records by being included on messages relating to the firm's business that were neither supervised nor retained by the firm. The conversations occurred on an unapproved social media platform and consisted of thousands of messages to or from other firm personnel, including senior executives, and firm customers.

The messages covered topics including customers' accounts and trading, trade surveillance and related compliance concerns, and regulatory requests. Because these communications occurred through unapproved channels, the firm failed to maintain these messages as required by the Exchange Act and FINRA rules.

Securities regulations require firms to retain business-related communications to enable regulatory oversight and to ensure that records exist if disputes arise between customers and firms. When communications occur through unapproved channels, these important protections are circumvented.

The fact that the messages included discussions of trade surveillance and compliance concerns is particularly troubling, as it suggests that matters relating to regulatory compliance were being discussed outside of proper channels. Similarly, communications with customers about their accounts and trading should occur through supervised channels to protect both the customer and the firm.

The suspension is in effect from July 21, 2025, through September 20, 2025. This case is part of a broader regulatory focus on off-channel communications in the securities industry, which has resulted in significant fines for many firms and individuals.

For investors, this case reinforces the importance of communicating with brokers through official firm channels, where communications are supervised and retained.

Show Less

According to FINRA, John Timothy Rice Sr. was assessed a deferred fine of $10,000, suspended from association with any FINRA member in all capacities for 18 months, and ordered to pay deferred disgorgement of $127,549 plus interest.

The findings revealed that Rice shared material nonpublic inform...

Read More

According to FINRA, John Timothy Rice Sr. was assessed a deferred fine of $10,000, suspended from association with any FINRA member in all capacities for 18 months, and ordered to pay deferred disgorgement of $127,549 plus interest.

The findings revealed that Rice shared material nonpublic information about imminent block order transactions with two institutional customers. After receiving this information from Rice, the customers submitted orders to the firm for execution in the same security prior to the completion of the block order. Rice received $127,549 in commissions for these transactions.

In 35 of the 111 transactions, the trades by the customers with whom Rice shared the block trade information resulted in unfavorable prices to the institutional customers who placed the block orders. These affected customers were harmed in the amount of approximately $71,000. The firm voluntarily reimbursed all affected customers during FINRA's investigation.

Block trades are large orders, typically from institutional investors, that can move market prices if not handled carefully. When information about pending block orders is leaked to others, those individuals can trade ahead of the block order and profit from the anticipated price movement. This practice, known as front-running, harms the customers placing the block orders because they receive worse execution prices.

Rice's conduct represents a serious breach of the duty owed to customers. By sharing confidential information about pending orders, he enabled others to trade at the expense of his firm's customers. The $127,549 in commissions he received came directly at the cost of customer harm.

The suspension is in effect from July 21, 2025, through January 20, 2027. The disgorgement order requires Rice to return the commissions he improperly earned. This case demonstrates that FINRA takes seriously the misuse of confidential customer information.

Show Less

According to FINRA, Bingshan Song was fined $25,000, suspended from association with any FINRA member in all capacities for one month, suspended in any principal capacity for an additional four months, and required to complete 10 hours of continuing education concerning supervisory and recordkeeping...

Read More

According to FINRA, Bingshan Song was fined $25,000, suspended from association with any FINRA member in all capacities for one month, suspended in any principal capacity for an additional four months, and required to complete 10 hours of continuing education concerning supervisory and recordkeeping responsibilities.

The findings revealed that Song failed to reasonably supervise his member firm's business-related electronic communications on a non-firm communications platform used by firm associated persons. Song used, and knew other firm personnel used, an unapproved social media platform for business-related communications, including pre-trade risk controls and personnel issues.

Song was also a member of group chats between the firm's associated persons and firm customers in which the customers' trading at the firm was discussed. Despite knowing about these messages, Song failed to stop the communications or ensure the firm captured, retained, and reviewed them.

When firm compliance personnel communicated concerns about the platform being used, Song still failed to take any reasonable supervisory steps to address the issue.

Additionally, Song caused the firm to maintain incomplete books and records by sending and receiving thousands of business communications that the firm failed to capture and review. The dual sanctions reflect both Song's individual conduct in using unapproved channels and his supervisory failures in not addressing the firm-wide problem.

The suspension in all capacities is in effect from July 21, 2025, through August 20, 2025. The suspension in any principal capacity will be in effect from August 21, 2025, through December 20, 2025.

This case illustrates that supervisors have a heightened responsibility not only to follow rules themselves but to ensure those they supervise do as well. Knowing about violations and failing to act can result in significant sanctions.

Show Less

According to FINRA, Donald Joe Everhart was assessed a deferred fine of $7,500, suspended from association with any FINRA member in all capacities for three months, and ordered to pay deferred partial restitution of $100,000 plus interest to a customer.

The findings revealed that Everhart willful...

Read More

According to FINRA, Donald Joe Everhart was assessed a deferred fine of $7,500, suspended from association with any FINRA member in all capacities for three months, and ordered to pay deferred partial restitution of $100,000 plus interest to a customer.

The findings revealed that Everhart willfully violated Regulation Best Interest (Reg BI) by recommending that a retail customer invest in speculative, unrated corporate bonds sold by a publicly traded financial services company. The recommendation resulted in at least 40 percent of the customer's net worth, not including her primary residence, being invested in these bonds.

FINRA found that the recommendation was not in the customer's best interest based on her investment profile. The customer had a conservative risk tolerance, did not include speculation as an investment objective, and had a stated investment objective of income and conservation of capital. A recommendation to concentrate 40 percent of net worth in speculative, unrated bonds is fundamentally inconsistent with these stated objectives.

Everhart earned $7,500 in commissions in connection with this recommendation. After the customer made her investment, the selling company defaulted on its obligations to bondholders and suspended further sales of the bonds. The company ultimately filed for bankruptcy, causing significant losses to the customer.

The suspension is in effect from July 7, 2025, through October 6, 2025. The $100,000 restitution order represents partial compensation for the customer's losses.

Regulation Best Interest, which became effective in 2020, requires broker-dealers and their representatives to act in the best interest of retail customers when making recommendations. This case demonstrates that FINRA will enforce these requirements, particularly when unsuitable recommendations result in significant customer harm.

Show Less

According to FINRA, Kim Ray Kunz was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in all capacities for seven months for associating with his member firm while statutorily disqualified and subject to a prior suspension.

The findings revealed that Kunz h...

Read More

According to FINRA, Kim Ray Kunz was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in all capacities for seven months for associating with his member firm while statutorily disqualified and subject to a prior suspension.

The findings revealed that Kunz had previously entered into a FINRA settlement in which he consented to a three-month suspension from associating with any member firm in all capacities. That suspension rendered him statutorily disqualified for its duration. The prior settlement also included findings that Kunz willfully violated Regulation Best Interest, which separately rendered him statutorily disqualified.

Despite these restrictions, Kunz continued to engage in securities business throughout his suspension period and did not inform his customers that he was suspended. On approximately 20 occasions, Kunz relayed customer orders by telephone and email to another registered representative at his firm, who then placed the requested trades in the customers' accounts.

This conduct represents a serious violation of the regulatory framework. Suspensions are imposed as sanctions for misconduct, and their effectiveness depends on compliance. When suspended individuals continue to conduct business, it undermines the disciplinary process and potentially exposes customers to individuals who have been found to have violated industry rules.

Statutory disqualification is a serious status that typically requires specific approval for an individual to associate with a member firm. Kunz's continued business activity without disclosure to customers deprived them of information material to their relationship with him.

The suspension is in effect from July 7, 2025, through February 6, 2026. This case demonstrates that violations of suspension orders will result in additional sanctions, compounding the original consequences.

Show Less

According to FINRA, Shaheen Ladhani was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for two months for maintaining undisclosed brokerage accounts and making inaccurate representations to his firm.

The findings revealed that Ladhani hel...

Read More

According to FINRA, Shaheen Ladhani was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for two months for maintaining undisclosed brokerage accounts and making inaccurate representations to his firm.

The findings revealed that Ladhani held a beneficial interest in two brokerage accounts maintained at another member firm in his wife's name without obtaining prior written consent from his member firm. FINRA rules require registered persons to obtain firm approval before opening or maintaining accounts at other broker-dealers, and to arrange for the firm to receive duplicate statements and confirmations.

Additionally, Ladhani submitted a personal activity questionnaire to his firm that inaccurately represented that he had disclosed all outside brokerage accounts. Ladhani belatedly disclosed both accounts to his firm only in response to inquiries from it, rather than proactively.

The requirement to disclose outside brokerage accounts serves important purposes. It allows firms to monitor for potential conflicts of interest, insider trading, or other problematic trading activity by their registered persons. When accounts are held in a spouse's name but the registered person has a beneficial interest, the same concerns apply.

False attestations on compliance questionnaires compound the underlying violation because they represent active efforts to conceal information from the firm. Firms rely on these questionnaires to identify potential compliance issues, and false responses undermine this oversight function.

The suspension is in effect from July 7, 2025, through September 6, 2025. This case illustrates the importance of full disclosure of financial relationships by registered representatives and the consequences of providing inaccurate information to member firms.

Show Less

According to FINRA, Paul Xavier Nannicelli was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for eight months for circumventing his member firm's procedures regarding beneficiary designations.

The findings revealed that Nannicelli assist...

Read More

According to FINRA, Paul Xavier Nannicelli was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for eight months for circumventing his member firm's procedures regarding beneficiary designations.

The findings revealed that Nannicelli assisted a customer, to whom he was not related, with designating his immediate family members as beneficiaries on six of the customer's accounts held at the firm. The firm's procedures prohibited registered representatives or their immediate family members from being named as beneficiaries on customer accounts without the firm's approval.

Following the death of the customer's husband, the customer signed and submitted forms changing the beneficiaries on her accounts. The primary beneficiary on each account was changed to Nannicelli's wife, and the contingent beneficiaries were changed to Nannicelli's four children. Nannicelli prepared the forms, which identified each new beneficiary as a "family friend," despite the fact that his wife and children had never met the customer in person.

Nannicelli did not seek the firm's approval for the beneficiary designations and certified on firm compliance questionnaires that he was not aware of an immediate family member being a beneficiary on any client accounts.

After Nannicelli resigned from the firm, the customer complained about the beneficiary designations and closed all of her accounts. Nannicelli and his family did not benefit financially from the designations.

The suspension is in effect from July 7, 2025, through March 6, 2026. This case highlights why firms have procedures limiting representatives' ability to be named as beneficiaries on customer accounts, as such arrangements create significant potential for conflicts of interest and customer harm.

Show Less

According to FINRA, Thomas Sapio was fined $5,000, suspended from association with any FINRA member in any principal capacity for two months, and required to complete ten hours of continuing education concerning supervisory responsibilities.

The findings revealed that Sapio failed to reasonably s...

Read More

According to FINRA, Thomas Sapio was fined $5,000, suspended from association with any FINRA member in any principal capacity for two months, and required to complete ten hours of continuing education concerning supervisory responsibilities.

The findings revealed that Sapio failed to reasonably supervise two traders who were inaccurately marking the value of positions on their trading books to conceal millions of dollars in unrealized losses from their member firm. Sapio failed to reasonably investigate or respond to red flags that the traders were mismarking their positions.

Sapio was aware that market events could have reduced the value of each trader's forward start reverse repurchase positions. However, Sapio did not see the traders' profit and loss decrease in the wake of these market events, which should have raised concerns. When Sapio spoke with the traders, one of them admitted that his marks were incorrect. The trader assured Sapio that he would correct his marks but failed to do so.

Despite this admission, Sapio did not check the marks in the system or take any subsequent steps to ensure that the traders entered correct marks going forward. Eventually, one of the traders informed Sapio of the full scope of the unrealized losses on his trading book, and Sapio raised the issue to senior management.

The firm then corrected the inaccurate marks, terminated one of the traders, and permitted the other to resign.

The suspension is in effect from July 7, 2025, through September 6, 2025. This case demonstrates that supervisors must follow up on red flags and cannot simply accept assurances from those they supervise without verification. When market events suggest positions should have decreased in value but reported values remain unchanged, that discrepancy requires investigation.

Show Less

According to FINRA, Michael Cheng Ning was named as a respondent in a FINRA complaint alleging that he failed to provide documents and information requested in connection with an investigation into whether certain securities recommendations were in customers' best interests.

Ning served as Presid...

Read More

According to FINRA, Michael Cheng Ning was named as a respondent in a FINRA complaint alleging that he failed to provide documents and information requested in connection with an investigation into whether certain securities recommendations were in customers' best interests.

Ning served as President, CEO, and custodian of records for a former member firm. On March 29, 2024, Ning filed an amended Form BDW (Uniform Request for Broker-Dealer Withdrawal) with FINRA naming himself as the designated custodian of records for the withdrawing firm.

As custodian of records, Ning was required to make requested records available to FINRA upon request. The complaint alleges that FINRA sought documents regarding certain identified securities and the firm's recommendations of, and communications regarding, those securities to specified customers of two former firm representatives.

FINRA has stated that the requested documents and information are material to its investigation because they directly relate to whether recommendations of certain securities by the firm's representatives were in customers' best interest and whether those individuals and the firm violated securities laws, regulations, or FINRA rules.

It is important to note that the issuance of a disciplinary complaint represents FINRA's initiation of a formal proceeding in which findings have not been made. The complaint does not represent a decision as to any of the allegations contained therein. Because this complaint is unadjudicated, readers should consider contacting the respondent before drawing any conclusions regarding the allegations.

This case underscores the ongoing obligations of those who serve as custodians of records for former member firms. Even after a firm withdraws from FINRA membership, the custodian must maintain and provide access to records that may be relevant to regulatory investigations.

Show Less