To help detect potential securities law and money laundering violations, broker-dealers are required to file Suspicious Activity Reports (SARs) that describe suspicious transactions that take place through their firms. The SEC’s complaint alleges that Alpine Securities Corporation routinely and systematically failed to file SARs for stock transactions that it flagged as suspicious. When it did file SARs, Alpine Securities allegedly frequently omitted the very information that formed the bases for Alpine knowing, suspecting, or having reason to suspect that a transaction was suspicious. As noted in the complaint, guidance for preparing SARs from the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) clearly states that “[e]xplaining why the transaction is suspicious is critical.”
Alpine Securities Fails to Comply to Anti-Money Laundering Law
On June 5, 2017, the Securities and Exchange Commission (“SEC”) charged Alpine Securities Corporation, a Salt Lake City-based brokerage firm, with securities law violations related to its alleged practice of clearing transactions for microcap stocks that were used in manipulative schemes to harm investors.
Larry Holley Charged with Fraud
On March 30, 2017, the Securities and Exchange Commission (“SEC”) announced fraud charges and an emergency asset freeze obtained against Larry Holley, a Michigan-based pastor, accused of exploiting church members, retirees, and laid-off auto workers who were misled to believe they were investing in a successful real estate business.
The SEC alleges that Larry Holley, the pastor of Abundant Life Ministries in Flint, Mich., cloaked his solicitations in faith-based rhetoric, replete with references to scripture and biblical figures. Holley allegedly told prospective investors that as a person who “prayed for your children,” he was more trustworthy than a “banker” with their money. According to the SEC’s complaint, Larry Holley held financial presentations masked as “Blessed Life Conferences” at churches nationwide during which he asked congregants to fill out cards detailing their financial holdings, and he promised to pray over the cards and invited attendees to have one-on-one consultations with his team. He allegedly called his investors “millionaires in the making.”
LottoNet Accused of Conducting Boiler Room Scheme
On March 27, 2017, the Securities and Exchange Commission (“SEC”) announced charges against LottoNet Operating Corp., a Florida-based company, its CEO, and its top sales agent accused of conducting a boiler room scheme that solicits investments in a business purportedly facilitating online and cell phone sales of lottery tickets in various states.
The SEC has obtained an emergency court order freezing the assets of LottoNet Operating Corp., David Gray, and Joseph A. Vitale. The SEC’s complaint alleges that they misrepresented to investors that their money would be used to develop and market LottoNet and that sales agents did not receive commissions. At least 35 percent of investor proceeds were allegedly paid to boiler room sales agents in the form of commissions, and LottoNet allegedly siphoned investor funds for personal spending on clothing, wedding-related expenses, and strip clubs.
Lawson Financial Corporation Settles Fraud Charges
On April 5, 2017, the Securities and Exchange Commission (“SEC”) announced that Lawson Financial Corporation, an Arizona-based brokerage firm, its CEO, and its former underwriter’s counsel have agreed to settle charges related to municipal bond offerings they were underwriting that turned out to be fraudulent.
The SEC’s order finds that Lawson Financial Corporation failed in its role as a gatekeeper to conduct reasonable due diligence when underwriting bond offerings to purchase and renovate nursing homes and senior living facilities. The offerings were managed by Atlanta-based businessman Christopher Brogdon, who was later charged by the SEC with fraud and faces a court order to repay $85 million to investors. Lawson Financial failed to ensure Brogdon and his related borrowers were in compliance with their continuing disclosure undertakings as required by Rule 15c2-12, which generally prohibits underwriters from purchasing or selling municipal securities unless the issuer or obligated person has committed to providing continuing disclosure information, such as annual financial materials and operating data.
John Bocchino Barred by FINRA
On June 1, 2017, the Financial Industry Regulatory Authority (“FINRA”) announced that it has barred former Morgan Stanley Smith Barney registered representative John Bocchino for concealing approximately $190 million in Venezuelan bond trades from the firm, which had restricted such trading due to the regulatory, anti-money laundering and reputational risks it posed. Instead, John Bocchino continued to trade in Venezuelan bonds on behalf of his customers, but hid the trades from the firm by using several nominee accounts in the names of well-known U.S. financial institutions, and directing the trades through those accounts. Unbeknownst to these financial institutions, John Bocchino executed approximately 300 Venezuelan bond trades in the accounts opened in their names. To further conceal his customers’ trading, John Bocchino created hundreds of firm documents, including new account forms and trade tickets, that contained false information.
Susan Schroeder, FINRA Acting Head of Enforcement, said, “Mr. Bocchino concealed his customers’ identities in order to engage in trading his firm prohibited. FINRA will always pursue misconduct such as Mr. Bocchino’s, who evaded the appropriate scrutiny of his firm’s AML and compliance departments by falsely creating the appearance of compliance.” Read More
Medbox Charged by the SEC
On March 9, 2017, the Securities and Exchange Commission (“SEC”) charged Medbox, a California-based company, and its founder with falsely touting “record” revenue numbers to investors and claiming to be a leader in the marijuana industry while some of its earnings came from sham transactions with a secret affiliate.
According to the SEC’s complaint, Medbox provided marijuana consulting services and claimed to sell vending machines known as “Medbox” devices capable of dispensing marijuana on the basis of biometric identification. The SEC alleges that Vincent Mehdizadeh created a shell company called New-Age Investment Consulting to carry out illegal stock sales and used the proceeds from those sales to boost Medbox’s revenue. Medbox allegedly issued press releases headlining the phony revenues as record earnings to legitimize itself as a viable commercial operation when in fact nearly 90 percent of the company’s revenue in the first quarter of 2014 stemmed from sham transactions with New-Age. Mehdizadeh allegedly acknowledged in a text message that “the only thing we are really good at is public company publicity and stock awareness. We get an A+ for creating revenue off sheer will but that won’t continue.”
Verto Capital Settles Charges for Ponzi-like Scheme
On May 4, 2017, the Securities and Exchange Commission (“SEC”) announced that Verto Capital Management, a New Jersey-based firm, and its CEO have agreed to pay more than $4 million to settle charges that they used new investor money to repay earlier investors in Ponzi-like fashion and tapped investor funds for the CEO’s personal use.
According to the SEC’s complaint, Verto Capital Management and William Schantz III raised approximately $12.5 million selling promissory notes to purportedly fund Verto Capital’s purchase and sale of life settlements, which are life insurance policies sold in the secondary market. The SEC alleges that they misrepresented to investors that Verto Capital was a profitable company and investor funds would be used for general working capital purposes. Verto Capital and other Schantz businesses had been unprofitable for several years, according to the SEC’s complaint, and Schantz resorted to taking disproportionately large distributions of investor funds for himself and using new investor money to repay earlier investors.
Desarrolladora Homex Settle Fraud Charges
On March 3, 2017, the Securities and Exchange Commission (“SEC”) announced that Mexico-based homebuilding company Desarrolladora Homex S.A.B. de C.V. has agreed to settle charges that it reported fake sales of more than 100,000 homes to boost revenues in its financial statements during a three-year period.
MagnaChip & CFO Settle Accounting Fraud Charges
On May 1, 2017, the Securities and Exchange Commission (“SEC”) announced that MagnaChip, a South Korea-based semiconductor manufacturer, and its former CFO have agreed to settle charges related to an accounting scheme to artificially boost revenue and manipulate the financial results reported to investors.
The SEC’s order finds that MagnaChip Semiconductor Corp. overstated revenues for nearly two years in response to immense pressure placed on employees each quarter to meet revenue and gross margin targets that had been communicated to the public. Then-CFO Margaret Sakai directed or approved several fraudulent accounting practices to make it falsely appear the company had met those targets. For example, MagnaChip recognized revenue on sales of incomplete or unshipped products, and the company delayed booking obsolete or aged inventory to manipulate its reported gross margin. MagnaChip also engaged in roundtrip transactions to manipulate accounts receivable balances, and concealed from auditors that there were side agreements with distributors to induce them to accept products early.
Centers for Medicare and Medicaid Services Employees Charged with Insider Trading
On May 24, 2017, the Securities and Exchange Commission (“SEC”) announced charges in an alleged insider trading scheme involving tips of nonpublic information about government plans to cut Medicare reimbursement rates by former Centers for Medicare and Medicaid Services employees, which affected the stock prices of certain publicly traded medical providers or suppliers.
The SEC’s complaint alleges that David Blaszczak, a former government employee turned political intelligence consultant, obtained key confidential details about upcoming decisions by the Centers for Medicare and Medicaid Services (CMS) from his close friend and former colleague at the agency, Christopher Worrall. According to the SEC’s complaint, Worrall serves as a health insurance specialist in the Center for Medicare and tipped Blaszczak about at least three pending Centers for Medicare and Medicaid Services decisions that affected the amount of money that companies receive from Medicare to provide services or products related to cancer treatments or kidney dialysis.
SEC Files Fraud Charges Against Robert Murray
On May 19, 2017, the Securities and Exchange Commission (“SEC”) filed fraud charges against Robert Murray, a Virginia-based mechanical engineer accused of scheming to manipulate the price of Fitbit stock by making a phony regulatory filing.
According to the SEC’s complaint, Robert Murray purchased Fitbit call options just minutes before a fake tender offer that he orchestrated was filed on the SEC’s EDGAR system purporting that a company named ABM Capital LTD sought to acquire Fitbit’s outstanding shares at a substantial premium. Fitbit’s stock price temporarily spiked when the tender offer became publicly available on Nov. 10, 2016, and Murray sold all of his options for a profit of approximately $3,100.
SEC Charges David Humphrey with Securities Fraud
On May 9, 2017, the Securities and Exchange Commission (“SEC”) charged David Humphrey, a former employee, with securities fraud in connection with his trading of options and other securities.
The SEC’s complaint alleges that David Humphrey, who worked at the SEC from 1998 to 2014, concealed his personal trading from the SEC’s ethics office and later misrepresented his trading activities to the SEC’s Office of Inspector General when questioned during an investigation.
Barclays Capital Required to Refund Advisory Fees by SEC
On May 10, 2017, the Securities and Exchange Commission (“SEC”) announced an enforcement action requiring Barclays Capital to refund advisory fees or mutual fund sales charges to clients who were overcharged.
In a settlement of more than $97 million, Barclays agreed to settle three sets of violations that resulted in clients being overbilled by nearly $50 million. The SEC’s order finds that two Barclays advisory programs charged fees to more than 2,000 clients for due diligence and monitoring of certain third-party investment managers and investment strategies when in fact these services weren’t being performed as represented. Barclays also collected excess mutual fund sales charges or fees from 63 brokerage clients by recommending more expensive share classes when less expensive share classes were available. Another 22,138 accounts paid excess fees to Barclays due to miscalculations and billing errors by the firm.
Miles Nadal Settles $5.5 Million for SEC Case
On May 11, 2017, the Securities and Exchange Commission (“SEC”) announced that Miles Nadal, the former CEO of a marketing company, has agreed to pay $5.5 million to settle charges that his perks were not properly disclosed to shareholders. Public companies must properly disclose perks, benefits, and other forms of compensation paid to CEOs and certain other highly compensated executive officers.
According to the SEC’s order, shareholders were informed in annual filings that Miles Nadal received an annual perquisite allowance of $500,000 in addition to other benefits as the chairman and CEO of MDC Partners. But the SEC’s investigation found that without disclosing information to investors as required, MDC Partners paid for Miles Nadal’s personal use of private airplanes as well as charitable donations in his name, yacht and sports car expenses, cosmetic surgery, and a wide range of other perks. All total, Miles Nadal improperly obtained an additional $11.285 million in perks beyond his disclosed benefits and $500,000 annual allowances. He has since resigned and returned $11.285 million to the company.
SEC Charges Nomura Securities International Inc. Head Traders
On May 15, 2017, the Securities and Exchange Commission (“SEC”) charged a pair of former head traders who ran the commercial mortgage-backed securities (CMBS) desk at Nomura Securities International Inc. with deliberately lying to customers in order to inflate the profits of the CMBS desk and line their own pockets as a result.
The SEC alleges that James Im and Kee Chan each misrepresented price information while acting as intermediaries on trades with Nomura’s customers who sought to buy and sell CMBS on the secondary market. In certain instances, Im and Chan allegedly pretended they were still negotiating bond purchases with a third-party seller at higher prices when Nomura had already acquired the bonds at a lower price.
Walter Little and Neighbor Charged by SEC for Insider Trading
On May 11, 2017, the Securities and Exchange Commission (“SEC”) charged Walter Little, a former partner at an international law firm, and his neighbor with making more than $1 million in illicit profits by insider trading around corporate announcements.
The SEC alleges that Walter Little accessed confidential documents on his law firm’s internal computer network related to at least 11 impending announcements involving law firm clients, none of which he personally advised or billed for services. Walter Little then allegedly traded in advance of each announcement and often tipped his neighbor Andrew Berke with material nonpublic information so he could similarly trade in company stocks before the announcements were made publicly. According to the SEC’s complaint, the insider trading occurred from February 2015 to February 2016.
Axesstel Fails to Comply with Exchange Act
On April 24, 2017, the Securities and Exchange Commission (“SEC”) deemed it necessary and appropriate for the protection of investors that public administrative proceedings be, and hereby are, instituted pursuant to Section 12(j) of the Securities Exchange Act of 1934 (“Exchange Act”) against Axesstel, Inc.
After an investigation, the Division of Enforcement alleges that Axesstel, Inc., a Nevada corporation located in San Diego, California with a class of securities registered with the SEC pursuant to Exchange Act Section 12(g). Axesstel, Inc. is delinquent in its periodic filings with the SEC, having not filed any periodic reports since it filed a Form 10-Q for the period ended September 30, 2013, which reported a net loss of $7.5 million for the prior nine months. As of April 5, 2017, the company’s stock was quoted on OTC Link operated by OTC Markets Group, Inc., had six market makers, and was eligible for the “piggyback” exception of Exchange Act Rule 15c2-11(f)(3). Axesstel has repeatedly failed to meet its obligations to file timely periodic reports, and failed to heed a delinquency letter sent by the Division of Corporation Finance requesting compliance with Axesstel’s periodic filing obligations. Read More
Jared Galanis Pleads Guilty, SEC Suspends Him
On April 24, 2017, the Securities and Exchange Commission (“SEC”) deemed it appropriate to issue an order of forthwith suspension of Jared Galanis pursuant to Rule 102(e)(2) of the Commission’s Rules of Practice (17 C.F.R. § 200.102(e)(2)), which states that “any person who has been convicted of a felony . . . shall be forthwith suspended from appearing or practicing before the Commission.”
The SEC found that Jared Galanis was an attorney admitted to practice law in the state of New York until he resigned on March 2, 2017. He became an inactive member of the State Bar of California on August 29, 2016. On September 24, 2015, the SEC filed a civil action against multiple defendants, including Jared Galanis, for violations of the federal securities laws. The SEC alleged that Jared Galanis contributed to a fraudulent scheme to dump millions of shares of Gerova Financial Group, Ltd. (“Gerova”) stock in an unregistered offering and distribution by, inter alia, assisting in the depositing of Gerova stock in U.S. brokerage accounts, placing orders to sell the stock into the public U.S. markets, and allowing access to his attorney trust account for the transfer of proceeds from the sales. Read More
SEC Suspends Mark McKinnies
On April 21, 2017, the Securities and Exchange Commission (“SEC”) deemed it appropriate and in the public interest that public administrative proceedings are instituted against Mark McKinnies pursuant to Rule 102(e)(3)(i) of the Commission’s Rules of Practice. Rule 102(e)(3)(i) provides that: The SEC, with due regard to the public interest and without preliminary hearing, may, by order, . . . suspend from appearing or practicing before it any . . . accountant . . . who has been by name . . . permanently enjoined by any court of competent jurisdiction, by reason of his or her misconduct in an action brought by the SEC, from violating or aiding and abetting the violation of any provision of the Federal securities laws or of the rules and regulations thereunder.
In anticipation of the institution of these proceedings, Mark McKinnies has submitted an Offer of Settlement which the SEC has determined to accept. Mark McKinnies consents to the entry of this Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the SEC’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions (“Order”), as set forth below. Read More
SEC Charges Matthew Krimm with Defrauding Investors
On April 25, 2017, the Securities and Exchange Commission (“SEC”) charged Matthew Krimm, a former mortgage loan officer, with defrauding investors, including mortgage loan customers of his former employer.
The SEC’s complaint, filed in federal court in Wilmington, Delaware, charges Matthew Krimm and the company he owned, Krimm Financial Services, LLC (KFS), with fraudulently inducing at least 25 investors to invest more than $1.69 million with Matthew Krimm and KFS in an unregistered offering of promissory notes. The complaint alleges that Krimm and KFS falsely claimed that they owned and operated their own highly successful mortgage loan business. The complaint also alleges that Matthew Krimm and KFS deceived investors by providing them with misleading offering documents, false income statements and false revenue and profit projections, all of which gave the false impression that KFS was operating a profitable business. According to the complaint, Krimm and KFS also falsely claimed that the monies raised would be used by KFS to expand its mortgage loan business, including opening new offices, hiring new loan officers and expanding its reverse mortgage lending business. The complaint alleges that, contrary to what investors were told, Matthew Krimm and KFS operated no mortgage lending business of their own, and they used over 75% of the money from new investors to pay Matthew Krimm’s personal expenses and to pay back prior investors to maintain the appearance that KFS was performing profitably.
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SEC Charges Demitrios Hallas for Defrauding Customers
On April 25, 2017, the Securities and Exchange Commission (“SEC”) charged Demitrios Hallas, a former broker, with knowingly or recklessly trading unsuitable investment products in the accounts of five customers and misappropriating more than $170,000 from one of those customers.
The SEC’s complaint alleges that Demitrios Hallas repeatedly traded unsuitable investments in his customers’ accounts, exposing customers who were unsophisticated with limited or no investing experience and modest incomes, net worth levels, and assets to a significant degree of volatility and risk. In a little more than a year, Demitrios Hallas allegedly traded 179 daily leveraged exchange traded funds (ETFs) and exchange traded notes (ETNs) – products that the SEC alleges are inherently risky, complex and volatile, and only appropriate for sophisticated investors – in the customers’ accounts, generating commissions and fees of approximately $128,000. The net loss across all 179 positions was approximately $150,000. The SEC’s complaint further alleges that Hallas misappropriated more than $170,000 in funds from one customer. Instead of investing the funds on the customer’s behalf, Demitrios Hallas allegedly deposited the funds into his own personal bank accounts and spent them on personal expenses, including significant bar and restaurant bills, credit card and student loan payments, and rent.
Whistleblower Awarded Almost $4 Million by SEC
On April 25, 2017, the Securities and Exchange Commission (“SEC”) announced an award of nearly $4 million to a whistleblower who tipped the agency with detailed and specific information about serious misconduct and provided additional assistance during the ensuing investigation, including industry-specific knowledge and expertise.
“Not only did this whistleblower step forward and report suspicious conduct, but continued to help after we opened our investigation,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “Whistleblowers with specialized experience or expertise can help us expend fewer resources in our investigations and bring enforcement actions more efficiently.”
SEC Charges Avaneesh Krishnamoorthy with Insider Trading
On April 24, 2017, the Securities and Exchange Commission (“SEC”) charged Avaneesh Krishnamoorthy, a vice president in the risk management department of a New York-based investment bank, with insider trading on confidential information he learned in advance of a private equity firm’s acquisition of a publicly-traded technology company.
The SEC alleges that Avaneesh Krishnamoorthy learned that Golden Gate Capital planned to acquire Neustar Inc., and he then began trading in Neustar securities. The trading took place in two brokerage accounts that Avaneesh Krishnamoorthy allegedly kept hidden from his employer, which had been approached by Golden Gate Capital to finance the transaction. According to the SEC’s complaint, Avaneesh Krishnamoorthy made approximately $48,000 in illicit profits.
SEC Charges Kevin Amell with Fraud
On April 24, 2017, the Securities and Exchange Commission (“SEC”) announced fraud charges against Kevin Amell, a Massachusetts-based portfolio manager accused of diverting at least $1.95 million to his personal brokerage account from a fund over which he had trading authority.
The SEC’s complaint alleges that Kevin Amell carried out a fraudulent matched-trades scheme in which he prearranged the purchase or sale of call options between his own account and the brokerage accounts of the fund at prices that were disadvantageous to the fund and advantageous to him. In one series of trades involving Amazon securities, for example, Kevin Amell allegedly generated a $23,000 profit for himself in less than 23 minutes at the fund’s expense.
Magyar Telekom Executives Agree to Pay Penalties
On April 24, 2017, the Securities and Exchange Commission (“SEC”) announced that two former executives at Hungarian-based telecommunications company Magyar Telekom have agreed to pay financial penalties and accept officer-and-director bars to settle a previously-filed SEC case alleging they violated the Foreign Corrupt Practices Act (FCPA).
Magyar Telekom paid a $95 million penalty in December 2011 to settle parallel civil and criminal charges that the company bribed officials in Macedonia and Montenegro to win business and shut out competition in the telecommunications industry. The SEC’s complaint also charged the company’s former CEO Elek Straub and former chief strategy officer Andras Balogh with orchestrating the use of sham contracts to funnel millions of dollars in corrupt payments. The two executives were set to stand trial this month.
SEC Charges Brothers for Hydrocarb Fraud Scheme
On April 21, 2017, the Securities and Exchange Commission (“SEC”) has charged two brothers – Kent and Mike Watts – with orchestrating a fraudulent scheme to qualify the stock of Hydrocarb Energy Corporation for listing on a major stock exchange, which supposedly would assist the Watts in raising capital for the company and facilitate their profitable exit strategy.
The SEC’s complaint, filed in federal court on February 17, 2017 in Houston, Tex., alleges that Kent Watts signed and filed a misleading Schedule 13D with SEC, which failed to disclose the brothers’ plan to take control of Hydrocarb. The complaint further alleges that both Watts executed sham transactions – including one with Kent Watts’s nephew, Kirby Caldwell – which allowed them to secretly control millions of shares of Hydrocarb stock. The SEC contends that Kent Watts misled Hydrocarb’s outside auditor about key details of these transactions, including the Watts’s continued control over the shares transferred to Caldwell. The SEC alleges that Watts’s machinations ultimately were unsuccessful, since Hydrocarb was never listed on a major exchange and filed bankruptcy in April 2016. Read More
Robert Stewart Fined & Suspended by FINRA
On February 2, 2017, Robert Stewart (CRD #5746657, Dewey, Arizona) submitted a Letter of Acceptance, Waiver and Consent (“AWC”) in which he was assessed a deferred fine of $7,500 and suspended from association with any FINRA member in any capacity for four months.
Without admitting or denying the findings, Robert Stewart consented to the sanctions and to the entry of findings that he falsified documents and caused his member firm to have inaccurate books and records by submitting customer account transfer forms using photocopied signatures. The findings stated that Robert Stewart obtained customer signatures on blank account transfer forms and attached photocopies of the corresponding signature pages to other account transfer forms he completed and submitted to the firm. Stewart submitted to the firm customer account transfer forms that these customers did not actually sign (or review) and caused the firm to maintain documents that inaccurately appeared to have been signed by customers. The findings also stated that Robert Stewart exercised discretion by accepting the instructions of unauthorized third-parties and failing to confirm the customer orders. Read More
Brian Scarpellini Named Respondent in Check-Kiting Scheme
On February 9, 2017, Brian Scarpellini (CRD #6320844, Plainsboro, New Jersey) was named a respondent in a FINRA complaint alleging that he converted funds totaling $1,158 from his member firm’s bank affiliate by engaging in a check-kiting scheme.
The complaint alleges that Brian Scarpellini wrote checks totaling $1,167 from a personal bank account and deposited those checks into his personal accounts at his firm’s bank affiliate knowing that he had insufficient funds in his personal bank account at the other bank to cover those checks. Brian Scarpellini then used the funds generated from cashing the checks for his personal use, overdrawing his bank account at the affiliate by $1,158. Brian Scarpellini has not repaid the affiliate even though he has received sufficient funds to do so.
FINRA’s initiation of a formal proceeding in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint. Because these complaints are unadjudicated, you may wish to contact the respondents before drawing any conclusions regarding the allegations in the complaint. Read More
Austin Morton Named Respondent In FINRA Complaint
On February 24, 2017, Austin Morton (CRD #5538108, Spiro, Oklahoma) was named a respondent in a FINRA complaint alleging that he converted a total of $36,000 from a former elderly customer with dementia.
The complaint alleges that Austin Morton first took $20,000 in cash from the customer shortly after the customer, accompanied by Morton, had withdrawn the cash from his bank account. The customer then agreed to loan Austin Morton $6,000 for medical expenses that were never incurred. In accepting the loan, Morton took a signed but otherwise blank check from the customer and made the check out for $22,000 instead of the agreed-upon $6,000, thus converting $16,000 the customer had not authorized. The complaint also alleges that Morton engaged in an undisclosed outside business activity. Without providing his member firm with prior written notice, he accepted $2,000 in cash from the customer as compensation for assisting the customer with locating and surrendering an annuity he held at another firm.
Issuance of a disciplinary complaint represents FINRA’s initiation of a formal proceeding in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint. Because these complaints are unadjudicated, you may wish to contact the respondents before drawing any conclusions regarding the allegations in the complaint. Read More
Rosemary McGinley Suspended From Association with FINRA
On February 1, 2017, Rosemary McGinley (CRD #2435216, Doylestown, Pennsylvania) submitted a Letter of Acceptance, Waiver and Consent (“AWC”) in which she was suspended from association with any FINRA member in any capacity for 10 business days.
In determining the sanction, FINRA considered the fact that Rosemary McGinley’s member firm separately suspended and fined her for the same conduct. Without admitting or denying the findings, McGinley consented to the sanction and to the entry of findings that she failed to follow her firm’s procedures when, in order to facilitate two separate wire transfer requests made by an individual posing as a firm customer, she accepted trade orders from an imposter via email and failed to obtain the customer’s verbal authorization to place the trades. The findings stated that a firm branch office received four email requests to transfer funds from the customer’s account to multiple outside bank accounts. Unbeknownst to the registered representative for the account, these requests did not come from the customer but from the imposter who had gained unlawful access to the customer’s email. Read More
