FINRA Cases: Ex-LPL Broker is Barred for Not Disclosing Role in Private Securities Transactions, Merrill Lynch is Fined $1.4M For Extended Settlement Transactions, and Noble Capital Markets Agrees to Pay $225K for Failing to Disclose Conflicts to Investors

Former LPL Broker is Barred For Not Disclosing Private Securities Sales

The Financial Industry Regulatory Authority announced a bar against Leslie Koonce, an ex-LPL(LPLA) broker. According to the self-regulatory organization, Koonce lied when he failed to disclose that he had engaged in private securities sales. Koonce allegedly pitched a private company’s convertible promissory notes to at least 30 potential investors.

The FINRA case contends that not only did Koonce help facilitate the transfer of $175K to at least three LPL customers so they could invest in the private securities, but also, he invested $50K of his own funds. All the while, said the SRO, Koonce failed to notify LPL in writing of his involvement in these transactions. When he filed out compliance questionnaires twice in 2012, Koonce denied any involvement in these types of transactions.

LPL fired Koonce in 2015. He later went to work with Cetera and then EK Riley Investments. The ex-broker no longer works in the securities industry.

Inadequate Supervisory System Allegations Lead to $1.4M Fine for Merrill Lynch

In another FINRA case, the regulator has ordered Merrill Lynch (BAC) to pay a $1.4M fine for not putting into place a reasonable supervisory system and procedures to properly oversee extended settlement transactions. The brokerage firm settled without denying or admitting to the securities charges.

According to the regulator, because of the alleged supervisory issues, Merrill Lynch was unable to offset certain risks associated with these transactions. Extended settlement transactions come with a longer period between the trade and settlement, resulting in a credit extension that creates exposure to certain risks. As a result of the purported deficiencies, the firm is accused of not putting into place enough margin to counter the risks, improperly issuing extended credit to cash-account customers, and making calculation errors regarding outstanding margin and net capital.

FINRA also said that supervisory system deficiencies made it impossible for Merrill Lynch to identify and assess whether extended settlement transactions were in compliance with margin and net capital rules. The regulator said that from at least 4/2013 through 6/2015, quite a number of the firm’s customers took part in such transactions involving different Merrill Lynch product lines. The transactions’ notional values were hundreds of millions of dollars. Net capital and margin rule violations resulted, in addition to other alleged violations involving records and books.

Noble Capital Markets is Accused of Recommending Almost a Million Shares in a Company Without Disclosing Conflicts

Noble Capital Markets Inc. has agreed to pay a $225K fine over allegations that the firm and financial adviser Nicholas Petrus Pronk recommended and sold close to a million shares of one company’s stock to customers without notifying them that the firm had conflicts of interest. According to the FINRA case, Noble Capital Markets and Pronk marketed the stock so they would make money from the firm’s undisclosed investment banking ties with the company, as well as their “undisclosed arbitrage” of the latter’s securities.

Among the actions that the firm and Pronk are accused of taking to sell the stock: producing research, going on no-deal road shows, getting in touch with potential investors (mostly institutions), and giving representatives a sales script that was “misleading” for when they solicited investors.

Without denying or admitting to the allegations, Noble settled the case, as did Pronk, who was ordered to pay a $25K fine. He also is suspended from associating with all FINRA members for several months.

The SSEK Partners Group is a securities fraud law firm. We work with investors throughout the US in helping them to recoup their losses.

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Texas Securities Fraud: Houston Investment Advisor Gets Five Years for Defrauding Investors and Prison Sentences are Rendered in $6.4M Diamond Investor Fraud Case, SSEK Blog, November 10, 2017