FINRA

John Carris Investments Expelled by FINRA

Published on: February 9, 2015 | by Shepherd Smith Edwards & Kantas, LLP

A FINRA panel has expelled John Carris Investments LLC, along with Chief Executive Officer George Carris from the securities industry. Bot are accused of suitability violations and fraud.

According to the panel, Carris and JCI were reckless when selling shares of stock and promissory notes. They purportedly left out material facts and used misleading statements. Both have been barred for manipulating Fibrocell’s stock price via the unfunded purchases of big stock blocks and engaging in trading that was pre-arranged through matched limit orders.

The FINRA panel said that JCI and Carris acted fraudulently when they did not reveal the poor financial state of parent company Invictus Capital yet sold the latter’s stock and notes. Material facts were purportedly left out of offering documents. Rather than shutting down operations when it ran out of net capital compliance, JCI kept selling Bridge Offering notes to investors and using money from the sales to remedy its net cap deficiency, all the while not telling customers that was were the money went. Offering sales were also used by Carris to cover his personal spending.

PFS Investments, Ex-Broker Under Investigation for Securities Fraud that Bilked At Least Twenty Customers

Published on: January 30, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is accusing former broker Barkley Lundy, who worked with PFS Investments, of defrauding at least 20 customers. The self-regulatory organization claims that from at least 1/11 through 3/14, Lundy took these clients’ funds and placed the money in his own bank accounts. He also purportedly generated fake investments, issuing monthly payments to customers to conceal the securities fraud. FINRA says that Lundy violated FINRA Rule 2010 when he comingled customer monies.

The SRO said that Lundy kept a list of customers, setting up a payment schedule for them to receive monthly payments. PFS Investments was unaware of the payment schedule and the list. Lundy moved the money of a few of his customers from his account into their bank accounts and then moved the funds into their PFS accounts. He also worked it out so that these customers bought mutual fund shares that were customer-held. Lundy explained the fund movements as “dividend reinvestments.”

He gave one customer, per that client’s request, tax forms to track the monthly payments. FINRA, however, says that the documents were fabricated and contained falsified information. Meantime, Lundy made it appear as if PFS Investments not only provided the documents but also created them.

John Carris Investments Expelled by FINRA

Published on: January 27, 2015 | by Shepherd Smith Edwards & Kantas, LLP

A FINRA panel has expelled John Carris Investments LLC, along with Chief Executive Officer George Carris from the securities industry. Both are accused of suitability violations and fraud.

According to the panel, Carris and JCI were reckless when selling shares of stock and promissory notes. They purportedly left out material facts and used misleading statements. Both have been barred for manipulating Fibrocell’s stock price via the unfunded purchases of big stock blocks and engaging in trading that was pre-arranged through matched limit orders.

The FINRA panel said that JCI and Carris acted fraudulently when they did not reveal the poor financial state of parent company Invictus Capital yet sold the latter’s stock and notes. Material facts were purportedly left out of offering documents. Rather than shutting down operations when it ran out of net capital compliance, JCI kept selling Bridge Offering notes to investors and using money from the sales to remedy its net cap deficiency while not telling customers that was were the money went. Offering sales were also used by Carris to cover his personal spending.

FINRA Fines Fidelity $350K for Overcharging More than 20,000 Clients $2.4M

Published on: January 20, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority says that Fidelity Investments must pay $350,000 for overcharging thousands of clients $2.4 million for transactions involving fee-based accounts in its Institutional Wealth Services Group. The overcharges are said to have occurred from 1/06 to 9/13. The group offers brokerage and trading services to investment advisers and their clients.

According to the self-regulatory organization, the inappropriate charges happened because of a supervisory oversight involving the way that Fidelity applies fees under its asset-based pricing model. The model typically charges according to assets, not transactions.

FINRA says that until 2013, the financial firm did not have a designated supervisory principal to oversee the group’s asset-based pricing program. As a result, a number of clients may have been charged excess commissions beyond the asset-based management fee or were double billed.

FINRA Orders Pershing to Pay $3M Fine for Customer Protection Rule Violations

Published on: January 7, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority Inc. says that Pershing, a Bank of New York Mellon Corp. (BK) unit, must pay $3 million for violations involving the Customer Protection Rule. According to the self-regulatory organization, for about nine months between ’10 and ’11, the clearing firm did not put aside the money needed for a reserve account, per FINRA’s deposit requirements.

The SRO said that deficiencies, from $4 million to $220 million, came from Pershing’s “misinterpretation” of aspects of the rule, as well as inadequate supervision over the way the firm calculated what needed to be put in reserve. Also, over a certain time period, Pershing did not promptly get or keep up physical possession or control of certain customers’ margin securities. This resulted in nearly four dozen new control or possession deficits, while significantly raising the number of existing control or possession deficits.

The Customer Protection Rule mandates that brokerage firms maintain custody of customer cash and securities in order to comply with the following requirements: keep a cash reserve or qualified securities in a bank account that has at least the equivalent value of the net cash the broker-dealer owes customers, as well as obtain and keep up control or physical possession over customers’ excess and fully paid margin securities.

FINRA Releases Priorities for 2015, Gets SEC Approval for Background Check Rule

Published on: January 6, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission has approved a Financial Industry Regulatory Authority proposal mandating that broker-dealers conduct more rigorous background checks on new hires. Per the new rule, brokerage firms must implement written procedures for confirming the completeness and accuracy of a broker’s registration data on a Form U4.

Firms will have to search “reasonably available public records” of both new hires and new registrants within 30 days of a U4’s submission to FINRA.

In other FINRA news, the self-regulatory organization has just released its exam and regulatory priorities for 2015. The regulator stated that the majority of compliance problems could be worked out if only broker-dealers always acted in their clients’ best interests. The statement was a significant one, considering that brokers are currently just obligated to make sure that they investments they recommend are suitable for clients.

Financial Firm News: NH Regulator Fines Merrill Lynch $400K for Telemarketing Compliance Shortfalls, Court Orders Vasquez Global Investments to Pay More Than $1.3M for Commodity Pool Fraud, and FINRA Sanctions Monex Securities Inc.

Published on: December 29, 2014 | by Shepherd Smith Edwards & Kantas, LLP

New Hampshire Says Merrill Lynch Must Pay $400,000 For Not Complying with Telemarketing Rules

Bank of America (BAC) Merrill Lynch has consented to pay $400,000 to resolve claims made by the New Hampshire Bureau of Securities Regulation accusing the firm of improperly soliciting business when it called people who were on do-not-call lists and were not clients. As part of the deal, Merrill Lynch will improve its telemarketing procedures and policies. A spokesperson for the brokerage firm says it has already enhanced internal controls to avoid making inappropriate calls moving forward.

According to the regulator, not only did the broker-dealer fail to fully comprehend how to comply with the state’s rules for telemarketing but also the firm did not reasonably supervise its agents’ telemarketing activities in New Hampshire.

FINRA Orders Wells Fargo Units to Pay $1.5M For Anti-Money Laundering-Related Lapses

Published on: December 23, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is ordering Wells Fargo Advisors Financial Network (WFAFN) and Wells Fargo Advisors (WFA) to collectively pay $1.5M for anti-money laundering (AML) failures. According to the self-regulatory organization, the two brokerage firms did not comply with a main component of the anti-money laundering compliance program when it did not require some 220,000 new customer accounts to go through an identity verification process. The failures purportedly occurred from 2003 to 2012.

The anti-money laundering compliance program mandates that brokerage firms set up and keep up a written Customer Identification Program that lets them confirm the identity of every customer setting up an account. The broker-dealer should use the CIP to get and verify a minimum amount of identifying data before opening a new customer account. The firms must also keep records of the verification process and let customers know that data is being gathered to confirm their identities.

FINRA said that the firms had a CIP system but it was deficient because of the electronic systems involved. Of the 220,000 new accounts that never had to undergo customer identify verification, some 120,000 of them were closed by the time the problem was identified.

WGF Investments, Deutsche Bank Securities, Royal Bank of Canada Subject to Fines for Securities Violations and Misconduct

Published on: December 22, 2014 | by Shepherd Smith Edwards & Kantas, LLP

FINRA Fines WGF Investments $700,000 for Supervisory Failures

The Financial Industry Regulatory Authority is fining WGF Investments $700,000 for failing to commit the attention, time, and resources to certain duties related to supervising registered representatives. WGF is a midsize independent brokerage firm.

According to the self-regulatory organization, from 3/07-1/14, WGF did not supervise private securities transactions of one representative and failed to keep up an adequate supervisory system to make sure that the customer transactions taking place were suitable. The broker-dealer also is accused of not properly supervising one representative’s alternative investment sales.

FINRA Orders Merrill Lynch to Pay $2.4M in Fine, Restitution for Hundreds of Securities Transactions That Violated Fair Price Guidelines

Published on: December 16, 2014 | by Shepherd Smith Edwards & Kantas, LLP

FINRA is ordering Bank of America’s (BAC) Merrill Lynch to pay a $1.9M fine for violating fair price guidelines over seven hundred times during a two-year period. The financial firm also must pay restitution of over $540K to customers that were affected.

According to the self-regulatory organization, Merrill’s credit trading desk purchased MLC notes from retail customers at up to 61.5% under the market price. General Motors had issued the notes prior to its bankruptcy. MLC Notes stands for Motors Liquidation Company Senior Notes.

Out of 716 transactions, 510 of them involved notes bought at markdowns that were greater than 10%. The desk would then sell the notes to brokers at market cost.