FINRA Regulation

Published on: January 11, 2018

FINRA Bars Former Ameriprise Advisor for Alleged Churning of Accounts

Piggy Bank in a Cage On January 5, 2018, FINRA Enforcement signed off on a Letter of Acceptance, Waiver and Consent (“AWC”) between FINRA and former financial advisor Larry Martin Boggs (“Boggs” or “Respondent”) (CRD# 1582741). Without admitting or denying FINRA’s findings, Mr. Boggs voluntarily consented to an industry bar from associating with any FINRA member firm in any capacity.

Mr. Boggs first became associated with a FINRA member firm in 1986 as a general securities representative. During the course of his career, he worked at a number of brokerage firms, including Ameriprise Financial Services, Inc. (“Ameriprise”) (CRD# 6363) from July 2009 to May 2015. Thereafter, he was associated with Wedbush Securities Inc. (“Wedbush”) (CRD# 877) for less than a year (2015-2016).

In May 2015, Mr. Boggs was discharged from his position by Ameriprise, based on allegations of “violations of company policy related to discretionary trading and suitability.” At around the same time frame, FINRA Enforcement conducted an investigation into Mr. Boggs and his sales practices and handling of customer accounts. FINRA’s findings include the following alleged activities and purported misconduct:

Published on: December 21, 2017

MML Financial Advisor Brian Travers Barred by FINRA

by InvestorLawyers

stock market chart On December 13, 2017, the Financial Industry Regulatory Authority (“FINRA”) disclosed that registered representative Brian Michael Travers has been barred from the securities industry. Specifically, pursuant to a Letter of Acceptance, Waiver, and Consent (“AWC”), pursuant to which Brian Travers neither admitted or denied FINRA’s findings, Mr. Travers acknowledged that on November 1, 2017, he received a written request from FINRA seeking his on-the-record testimony.

FINRA’s request concerned: “[a]n investigation into, among other things, potential undisclosed outside business activities and private securities transactions…” As set forth in the AWC, “By refusing to appear for on-the-record testimony as requested pursuant to FINRA Rule 8210, Travers violates FINRA Rules 8210 and 2010.”

Publicly available information through FINRA indicates that Brian Travers (CRD# 4767891) first entered the securities industry in 2004, and was most recently a registered representative of MML Investors Services, LLC (“MML”) (CRD# 10409) until his former employer terminated his registration in April 2017. Previous to working for MML (2013 – 2017), Mr. Travers was a financial advisor affiliated with Lincoln Financial Advisors Corporation (“Lincoln Financial”) (CRD# 3978). According to FINRA BrokerCheck, Mr. Travers was discharged from his employment with MML on April 4, 2017, in connection with an “[u]ndisclosed outside activity.”

Published on: December 13, 2017

FINRA Bars Broker for Failure to Produce Documentation Concerning Annuity Sales

by InvestorLawyers

stock market chart As part of its ongoing regulatory focus on variable annuity (“VA”) sales misconduct, the Financial Industry Regulatory Authority (“FINRA”) has recently barred a former Next Financial Group (“Next Financial”) (CRD# 46214) broker. Registered representative JoeAnn Walker (CRD# 2210194) was previously affiliated with Commonwealth Financial Network (1998-2006), LPL Financial LLC (2006-2015), and most recently, NEXT Financial – until her termination by her former employer in October. According to FINRA, it was conducting an inquiry into whether Ms. Walker was engaging in possible unsuitable VA sales practices.

As we have discussed in several recent blog posts, FINRA has ramped up its efforts in recent months to target VA sales practice misconduct. Since handing down a $20 million fine against MetLife Securities, Inc. (“MSI”) in May, 2016 (in addition, FINRA ordered MSI to pay $5 million to customers in connection with allegations of making negligent material misrepresentations and omissions on VA replacement applications), FINRA enforcement has continued to fine numerous member firms and investigate certain financial advisors concerning variable annuity sales practice issues.

In particular, FINRA has targeted brokers recommending unsuitable VAs, in the first instance, as well as recommending the sale of one VA for another in order to generate commissions (a practice akin to churning, and commonly referred to as “switching”). According to publicly available information through FINRA, Ms. Walker has three prior customer complaints, each of which resulted in a settlement. Most recently, in March 2016, a customer initiated a dispute against Ms. Walker, alleging “… unauthorized sales of various stocks, unauthorized and unsuitable purchases of variable annuities and unauthorized mutual fund switches between June 2014 and June 2015.” That FINRA proceeding alleged damages of $208,764 and ultimately settled for $175,000.

Published on: December 4, 2017

FINRA Sanctions Morgan Stanley for Failing to Supervise UIT Sales

by InvestorLawyers

Money Maze On September 25, 2017, the Financial Industry Regulatory Authority (“FINRA”) issued a fine of $3.25 million against Morgan Stanley Smith Barney LLC (“Morgan Stanley”) in connection with the brokerage firm’s alleged failure to supervise its brokers’ short-term trades of unit investment trusts. Unit investment trusts (“UITs”) are a specific type of Investment Company, as defined by the Investment Company Act of 1940 (the ’40 Act), and subject to regulation by the SEC. Unlike mutual funds, closed-end funds, or ETFs, UITs are unique in that they are created for a specific, limited time period (e.g., 24 months). Furthermore, UITs consist of a static investment portfolio as part of a pre-selected pooled investment vehicle.

Typically, UITs impose a number of charges. Some of these charges include a deferred sales charge, a creation and development fee, as well as annual operating expenses charged as an annual fee to account for portfolio administration and bookkeeping. In aggregates, these various fees might total approximately 4% for a typical 24-month UIT. Thus, any investor in a UIT will experience a “drag” on the performance of their UIT portfolio in the form of various fees.

Because UITs carry a substantial fee structure and are subject to termination after a given time period, there exists the potential for some financial advisors to recommend to their clients that they roll-over, or switch, from one UIT to another. In its worst form, this sales practice amounts to a stock broker seeking enhanced income through switching clients out of one product to another on a short-term basis in order to earn commissions and fees, at the expense of the client.

Published on: November 16, 2017

John P. Correnti of AXA Advisors Barred By FINRA

by InvestorLawyers

7-ways As recently reported, the Financial Industry Regulatory Authority (“FINRA”) barred broker John Phillip Correnti (CRD# 5319471) in light of his failure to provide testimony and documents in connection with an investigation into potential violations of applicable securities industry rules. Publicly available information through FINRA indicates that, in a career spanning 2007 – 2016, Mr. Correnti was previously affiliated with four different brokerage firms. Most recently, Mr. Correnti was associated with AXA Advisors, LLC (“AXA”) (CRD# 6627) (2015-2016).

FINRA records also indicate that Mr. Correnti was the subject of a customer dispute in 2011, which concerned allegations of mismanagement, misrepresentations, breach of fiduciary duty, as well as claims grounded in negligence / negligent misrepresentation. Furthermore, FINRA records indicate that Mr. Correnti was discharged from his employment with AXA in July 2016, following allegations concerning “[h]is apparent involvement in the possible manipulation of a low-price security.”

In August 2017, Mr. Correnti, who worked as a registered representative for AXA in Cleveland, Ohio, was barred from the securities industry by FINRA. Specifically, FINRA sanctioned Mr. Correnti with an industry bar following his failure to completely respond to FINRA’s request for documents, as well as his incomplete testimony. In addition, FINRA records suggest that the investigation was aimed, at least in part, on whether Mr. Correnti “[e]ngaged in undisclosed business activities….”

Published on: October 23, 2017

Williamsville, New York Financial Advisor Michael Giokas Arrested by FBI on Fraud Charges

by InvestorLawyers

House in Hands On October 11, 2017, Michael Giokas, the founder of Giokas Wealth Advisors, was reportedly arrested on fraud charges. Mr. Giokas’ arrest was the result of an investigation by the FBI Buffalo Office concerning allegations that the Williamsville broker misappropriated $200,000 from one of his clients. At Mr. Giokas’ arraignment before Magistrate Judge Michael J. Roemer, Assistant U.S. Attorney Paul E. Bonanno informed the Judge that the investigation suggests Giokas led his client to believe that the $200,000 would be placed in an investment that would yield 8-9% interest. Instead, according to Attorney Bonanno “… the money was not placed in any investment and was instead spent by the defendant on personal expenses.”

According to publicly-available information as disclosed by the Financial Industry Regulatory Authority (“FINRA”), Michael Giokas (CRD# 1398674) has worked in the securities industry for over three decades. Since 1986, he has been affiliated with the following brokerage firms: Cigna Securities, Inc. (CRD# 145) (1986-1987), FSC Securities Corporation (CRD# 7461) (1987-1991), Guardian Investor Services Corporation (CRD# 6635) (1991-1992), Linsco/Private Ledger Corp. (CRD# 6413) (1992-1999), Securities Service Network, Inc. (CRD# 13318) (1999-2001), Comprehensive Asset Management and Servicing, Inc. (CRD# 43814) (2002-2013), and Fortune Financial Services, Inc. (“Fortune Financial”) (CRD# 42150) (2013-2017).

FINRA BrokerCheck indicates that Mr. Giokas is no longer registered as a broker. Further, in May 1991 he was permitted to resign from his employment with FSC Securities following violation of firm policy concerning an insurance related bank account. Mr. Giokas has been the subject of several customer complaints, including two complaints in 2000 and 2001 that were settled.

Published on: October 13, 2016

FINRA Fines Investors Capital Over Unit Investment Trust Sales

by InvestorLawyers

The Financial Industry Regulatory Authority (FINRA) recently fined Investors Capital Corporation $250,000 over the sale of unit investment trusts (UITs). Investors Capital did not admit or deny the allegations leading to the fine, but also agreed to pay $841,500 in restitution to customers, bringing its total payment to over $1 million.

FINRA alleged that certain Investors Capital brokers recommended that customers engage in unsuitable short-term transactions in UITs, and also alleged that the firm failed to apply sales charge discounts that should have been available to some customers. FINRA further alleged that Investors Capital Corporation lacked adequate systems and procedures to supervise the sales of UITs, leading to the violations. Short-term trading in UITs may be uneconomical in many cases due to relatively high up-front sales charges, and UITs are typically recommended only as long-term investments.

Investors Capital’s alleged violations occurred between 2010 and 2015.

Published on: October 6, 2016

FINRA Fines Investors Capital for Alleged Unsuitable UIT Sales

by InvestorLawyers

Investors Capital will pay $1.1 million in fines and restitution over the sale of unit investment trusts (UITs) to resolve an investigation by the Financial Industry Regulatory Authority Inc. (FINRA). FINRA alleges that certain Investors Capital brokers recommended unsuitable short-term trading of UITs and other complex financial products known as steepener notes in accounts of 74 clients, according to the settlement.

old bird cage

Investors Capital also allegedly failed to apply sales charge discounts to certain customers’ purchases of UITs, and inadequately supervised its representatives, according to FINRA’s allegations. To resolve the FINRA case, Investors Capital agreed to pay $250,000 in fines and $842,000 in restitution. The firm has already reportedly paid close to $224,500 in restitution to clients.

Published on: June 10, 2015

LPL Financial Fined $10 Million For Failure To Supervise Brokers

by InvestorLawyers

The Financial Industry Regulatory Authority (FINRA) recently fined LPL Financial $10 million fine and ordered it to pay $1.7 million in restitution to investors who lost money with LPL brokers. The charges levied by FINRA alleged widespread supervisory failures involving securities such as nontraditional exchange-traded funds, variable annuities and non-traded real estate investment trusts (or REITs).

LPL’s failure to supervise sales of nontraditional ETFs continued into 2015, according to FINRA. FINRA also alleged that LPL failed to have adequate supervisory systems and guidelines for sales of nontraded REITs from January 2007 to August 2014. LPL consented to the fine without admitting or denying the charges.

This was not LPL’s first regulatory issue concerning lack of supervision concerning high-commission investments such as non-traded REITs. In March 2014, FINRA fined LPL $950,000 for supervisory deficiencies related to sales of a wide range of alternative investment products. These include nontraded REITs, oil and gas partnerships, business development companies, hedge funds, managed futures and other illiquid investments.

Published on: September 12, 2012

Victims of Clinton D. Fraley Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of former clients of Northwestern Mutual Investment Services LLC, MML Investors Services LLC, Wealth By Design Inc. and Clinton D. Fraley. In August, an emergency law enforcement action was filed by the Colorado Securities Commissioner to enjoin Wealth by Design and Clinton Fraley from violating the Colorado Securities Act. According to the allegations, Fraley violated the Colorado Securities Act by accessing investors’ mutual fund accounts without authorization, converting their securities into cash illegally and forging checks in order to access funds for personal use.

Victims of Clinton D. Fraley Could Recover Losses

“Fraley, who was a licensed securities professional employed with licensed broker-dealers until he was terminated in 2011, solicited hundreds of thousands of dollars from Colorado investors, promising the investors that their money would be invested in ‘a well-balanced portfolio of investments’ consisting of Roth IRAs, traditional investments such as stocks and bonds, mutual funds and non-qualified investments,” says the statement from Colorado enforcement officials. However, “Fraley gained unauthorized access to the investors’ accounts, forged the investors’ signatures on checks, deposited the money in a Wealth bank account and converted the money for his own personal benefit, including the purchase of a house.”

Stock fraud lawyers say Fraley was registered from March 2007 to May 2011 with Northwestern Mutual Investment Services, a FINRA-registered broker-dealer. Fraley was registered with another FINRA-registered broker-dealer, MML Investors Services, from May 2011 to October 2011. All FINRA-registered broker dealers are, according to securities fraud attorneys, required to properly supervise the activities of their brokers during the time in which they are registered with the firm. As a result, these firms may be held liable for failing to adequately supervise Fraley.