FINRA Regulation

Published on: June 27, 2018

Financial Advisor Matthew Eckstein Charged with Grand Larceny and Fraud by Nassau County District Attorney

broker misappropriating client money Syosset, NY-based stockbroker Matthew Eckstein was recently charged with three counts of second-degree grand larceny, third degree grand larceny, and two counts of first-degree scheme to defraud by the Nassau County District Attorney. These charges stem from Mr. Eckstein’s business as a financial advisor in Garden City, NY, and more specifically, allegations that he “betrayed his clients’ trust when he stole their money in a multi-million dollar Ponzi scheme and even pilfered hundred of thousands from the estates of deceased clients” according to Madeline Singas, the Nassau County District Attorney.

FINRA BrokerCheck indicates that Matthew Evan Eckstein’s (CRD# 2997245) career in the securities industry dates back to 1998, when he first began working as a registered representative for Gould, Ambroson & Associates Ltd. (“Gould”) (CRD# 17412) in Garden City, NY. Since September 16, 2015, Mr. Eckstein has been registered at his own broker-dealer, Sisk Investment Services, Inc. (“Sisk”) (CRD# 19406), where he is chief executive and chief compliance officer. On April 27, 2018, FINRA Enforcement filed a Complaint naming Mr. Eckstein as Respondent. As alleged by FINRA, from December 2014 until December 2015, Mr. Eckstein purportedly sold over $1.3 million in supposedly safe private investments akin to CDs to numerous clients.

Publicly available information suggests Mr. Eckstein’s alleged victims are from Massapequa, Seaford, Smithtown, Melville, Staten Island, Brooklyn, Manhattan, Norwalk, CT, Jupiter, FL, and Redlands, CA. In January 2015, Mr. Eckstein allegedly convinced one customer to invest approximately $385,000 into a company, Conmac Funding (“Conmac”), that was touted as a safe, no-risk investment. Further, Mr. Eckstein purportedly assured the client that the investment principal would be returned in two years, with an additional four-percent interest, much like a certificate of deposit. However, as recently reported, when the client requested his money back two years later, he only received $26,699.

Published on: June 20, 2018

Financial Advisor Peter D. Holler Suspended by FINRA in Connection with Recommendations to Invest in Woodbridge Unregistered Securities

by InvestorLawyers

woodbridge mortgage funds If you invested in a Woodbridge promissory note(s) upon the recommendation of broker Peter David Holler (CRD# 838897), you may be able to recover your losses through securities arbitration before FINRA. As disclosed by FINRA on May 21, 2018, registered representative Peter Holler has been suspended from the securities industry for a period of two years. From 2001 through August 2017, Mr. Holler was affiliated with Securities Service Network, LLC (BD No. 13318) (“SSN”) in their Bristol, TN office. FINRA BrokerCheck indicates that Mr. Holler was discharged from his employment with SSN on or about August 10, 2017 due to his alleged participation in “unapproved and undisclosed outside business activity…”

Pursuant to a Letter of Acceptance, Waiver, and Consent (“AWC”), through which Mr. Holler neither admitted or denied FINRA Enforcement’s findings, he accepted both the two-year suspension, as well as monetary penalties including a $10,000 fine and disgorgement of $49,790 in commissions received through the sale of unregistered Woodbridge securities to various investors. As encapsulated in the May 2018 AWC, Mr. Holler purportedly violated FINRA Rule 3280(b), an industry rule that prohibits brokers from participating in private securities transactions, without first providing written notice to their employer firm. Such written notice must set forth in detail the proposed transaction, as well as the financial advisor’s proposed role with regard to the contemplated transaction and whether he or she will receive any compensation in connection with the transaction.

According to FINRA Enforcement’s findings, from September 2016 – August 2017, Mr. Holler solicited various investors to purchase unregistered securities in certain Woodbridge Mortgage Investment Funds as offered through the Woodbridge Group of Companies (“Woodbridge”) of Sherman Oaks, CA. Further, FINRA Enforcement determined that Mr. Holler sold approximately $1.4 million in Woodbridge promissory notes to some 19 individuals, 9 of whom were SSN customers. In derogation of FINRA Rule 3280, Mr. Holler purportedly did not provide SSN with prior written notification of these private securities transactions.

Published on: May 8, 2018

Laidlaw & Company (U.K.) LTD. Consents to Sanctions Concerning Sales of Non-Traditional ETFs

by InvestorLawyers

financial charts and stockbroker On May 1, 2018, FINRA Department of Enforcement entered into a settlement via Acceptance, Waiver and Consent (“AWC”) with Respondent Laidlaw & Company (UK) LTD. (“Laidlaw”) (BD# 119037). Without admitting or denying any wrongdoing — Laidlaw consented to a public censure by FINRA, the imposition of a $25,000 fine, as well as agreeing to furnish FINRA with a written certification that Laidlaw’s “[s]ystems, policies and procedures with respect to each of the areas and activities cited in this AWC are reasonably designed to achieve compliance with applicable securities laws, regulations and rules.”

In connection with its investigation surrounding the matter, FINRA Enforcement alleged that “From April 2013 through December 2015… Laidlaw failed to establish and maintain a supervisory system and written supervisory procedures (“WSPs”) reasonably designed to ensure that” Laidlaw registered “representatives’ recommendations of leveraged and inverse exchange traded funds (“Non-Traditional ETFs”) complied with applicable securities laws and NASD and FINRA Rules.”

Non-Traditional ETFs are extremely complicated and risky financial products. Non-Traditional ETFs are designed to return a multiple of an underlying benchmark or index (or both) over the course of one trading session (typically, a single day). Therefore, because of their design, Non-Traditional ETFs are not intended to be held for more than a single trading session, as enunciated by FINRA through previous regulatory guidance:

Published on: March 30, 2018

Former Cambridge Investment Research Broker Ralph Savoie Pleads Guilty to Mail Fraud

by InvestorLawyers

Money Maze Investors who suffered losses due to misconduct by financial advisor Ralph Savoie (CRD# 411660) may be able to recover their losses in arbitration before the Financial Industry Regulatory Authority (“FINRA”). On March 26, 2018, Mr. Savoie plead guilty in Louisiana federal court to stealing up to $1.5 million from clients, using their monies for personal expenses including jewelry, hotels, and credit card bills, as well as to pay off previous clients in Ponzi-fashion in connection with prior purported investment opportunities. Mr. Savoie allegedly guaranteed his clients high rates of returns on various investments in securities and insurance products, describing the investments as a “sure thing.” In actuality, however, Mr. Savoie allegedly engaged in misconduct by using these funds on personal expenses, to pay prior clients and to funnel money into a “risky real estate venture.”

According to public records, Mr. Savoie of Mandeville, LA, was formerly associated with Cambridge Investment Research Advisors, Inc. (CRD# 134139) (“Cambridge”) in their Metairie, LA, branch office, until on or about August 11, 2015, at which time Mr. Savoie was discharged from his employment with Cambridge as a registered representative. Mr. Savoie’s career in the securities industry is lengthy and dates back to the early 1970’s, including his most recent stint at Cambridge from 2013 until August 2015.

According to publicly available information through FINRA, Mr. Savoie was discharged from his employment with Cambridge due to his alleged failure to “[d]isclose and receive approval for an outside business activity.” Further, FINRA reports that Mr. Savoie has been subject to six customer disputes, including three that remain pending and three that have resulted in settlement. A number of these disputes center on allegations concerning Mr. Savoie’s purported sales of “unsuitable, illiquid, expensive, private placements.”

Published on: March 13, 2018

FINRA Bars Former Gold Coast Securities Broker in Connection with Allegations of Excessive Trading

by InvestorLawyers

Piggy Bank in a Cage Financial advisor Joseph C. Farah (CRD# 2978633), who was most recently affiliated with Gold Coast Securities, Inc. (CRD# 110925) (hereinafter, Gold Coast), has voluntarily consented to a bar from the securities industry pursuant to an Order Accepting Offer of Settlement (hereinafter, the Settlement) entered into on or about January 25, 2018. Without admitting or denying any wrongdoing, Mr. Farah consented to the industry bar following FINRA Enforcement’s investigation into certain allegations including, inter alia, that Mr. Farah purportedly engaged in excessive trading in a customer’s account, and further, allegedly failed to inform his employer, Gold Coast, that the customer had opened a brokerage account at another broker-dealer at Mr. Farah’s behest.

Beginning in 1998, Mr. Farah began working as a registered representative for Financial Network Investment Corporation in El Segundo, CA. Subsequently, he worked at National Planning Corporation (CRD# 29604) from July 1998 – September 2002. From September 2002 until September 2015, Mr. Farah was affiliated with Gold Coast as a registered representative. In September 2015, Mr. Farah was discharged from his employment with Gold Coast. According to publicly available information, this termination was due, in part, to allegations raised by FINRA that “[t]he representative had discretionary authority over a customer’s account at another broker-dealer without notifying the firm of his affiliation….”

As alleged in the Settlement, in October 2012 Mr. Farah opened a Gold Coast brokerage account on behalf of a self-employed artist – identified by the initials ‘LN’. At around the same time, Mr. Farah allegedly suggested that LN also open a brokerage account with TD Ameritrade. According to FINRA, Mr. Farah allegedly “promised to reimburse LN for any losses in her TD Ameritrade account that exceeded five percent and, in exchange, would take 30 percent of the trading profits as compensation.”

Published on: March 9, 2018

FINRA Bars Former Vanderbilt Securities Broker in Connection with Allegations of Churning Elderly Investor’s Account

by InvestorLawyers

money whirlpool Financial advisor Mark Kaplan (CRD# 1978048), who was most recently affiliated with Vanderbilt Securities, LLC (CRD# 5953, hereinafter “Vanderbilt”), has voluntarily consented to a bar from the securities industry pursuant to a Letter of Acceptance, Waiver & Consent (“AWC”) signed off on by FINRA Enforcement on March 7, 2018. Without admitting or denying any wrongdoing, Mr. Kaplan consented to the industry bar following FINRA’s investigation and findings concerning allegations of unsuitable and excessive trading in an elderly retail investor’s brokerage account.

According to FINRA records, beginning in 1989, Mr. Kaplan began working as a registered representative for Lehman Brothers. Subsequently, he worked at CIBC Oppenheimer Corp., Morgan Stanley DW Inc., Citigroup, and Morgan Stanley. During the course of his nearly thirty-year career, he has been involved in seven customer disputes, each of which concluded with a settlement.

With regard to the AWC, FINRA Enforcement alleged that “Between March 2011 and March 2015 [Mr. Kaplan] engaged in churning and unsuitable excessive trading in the brokerage account of a senior investor” and thus “[v]iolated FINRA Rules 2020, and 2111, NASD Rule 2310… and FINRA Rule 2010.” FINRA’s findings centered on Mr. Kaplan’s customer, identified in the AWC by the initials ‘BP’, as “[a] 93-year-old retired clothing salesman” who opened several accounts at Vanderbilt with Mr. Kaplan during March 2011.

Published on: March 8, 2018

Former Morgan Stanley Broker Voluntarily Consents to Securities Industry Bar In Connection With Certain Outside Business Activity

by InvestorLawyers

stock market chart As recently disclosed by the Financial Industry Regulatory Authority (“FINRA”), former Morgan Stanley (CRD# 149777) financial advisor, Kevin Scott Woolf (CRD# 6145312), has voluntarily consented to an industry bar. Pursuant to a Letter of Acceptance, Waiver and Consent (“AWC”), accepted by FINRA on or about January 26, 2018, Mr. Woolf has consented to sanctions stemming from FINRA Enforcement’s allegations that “[h]e failed to provide documents and information and to appear and provide… on-the-record testimony during the course of an investigation that he engaged in multiple undisclosed outside business activities, including the development of a hotel, and participated in an undisclosed private securities offering for that development project that was marketed to customers of his member firm.”

According to BrokerCheck, Mr. Woolf was affiliated with Morgan Stanley as a registered representative from 2013 – 2016, during which time he worked out of the wirehouse’s Winter Haven, FL branch office. According to the allegations set forth in the AWC, it would appear that Mr. Woolf was permitted to voluntarily resign from Morgan Stanley on or about June 2016, based upon the brokerage firm’s internal review of Mr. Woolf’s “potential outside business activity related to a securities offering for a real estate investment.”

Based upon applicable securities laws and industry rules and regulations, a stockbroker or financial advisor is prohibited from engaging in conduct that amounts to “selling away,” or selling securities to his or her customers without prior notice to or approval from the broker’s firm. A registered representative who engages in such activity does so in violation of NASD Rule 3040, in addition to FINRA Rule 3280. As stated by the SEC, NASD Rule 3040 is designed to protect “investors from the hazards of unmonitored sales and protects the firm from loss and litigation.”

Published on: March 2, 2018

Western International Securities, Inc. Consents to a Fine of $521,098 in Connection With Sales of Non-Traditional ETFs

by InvestorLawyers

financial charts and stockbroker On February 28, 2018, FINRA Enforcement entered into a settlement via Acceptance, Waiver and Consent (“AWC”) with Respondent Western International Securities, Inc. (“WIS”) (CRD# 39262). Specifically, without admitting or denying any wrongdoing — WIS consented to paying a fine of $521,908, in addition to restitution to certain investors in the amount of $125,000 — in connection with FINRA’s findings of fact that from January 2011 – November 2015, WIS allegedly failed to supervise its registered representatives with regard to sales of certain leveraged, inverse, and inverse-leveraged Exchange-Traded Funds (“Non-Traditional ETFs”).

As our firm has highlighted in a number of recent blog posts, Non-Traditional ETFs are extremely complicated and risky financial products. Non-Traditional ETFs are designed to return a multiple of an underlying benchmark or index (or both) over the course of one trading session (typically, a single day). Therefore, because of their design, Non-Traditional ETFs are not intended to be held for more than a single trading session, as enunciated by FINRA Enforcement in its recent AWC as concerns Respondent WIS:

“[t]he performance of Non-Traditional ETFs over periods of time longer than a single trading session ‘can differ significantly from the performance… of their underlying index or benchmark during the same period of time.” FINRA Regulatory Notice 09-31.

Published on: February 23, 2018

Financial Advisor Melvin E. Case Suspended From the Securities Industry for Six Months

by InvestorLawyers

Money Maze Financial advisor Melvin Elwood Case (CRD# 2393464) has been suspended from the securities industry. According to publicly available information through FINRA, on January 19, 2018, Mr. Case, without admitting or denying FINRA Enforcement’s findings, consented to being barred from the securities industry in all capacities for a period of six months (the suspension is set to terminate on August 4, 2018).

Specifically, FINRA enforcement entered into a settlement via Acceptance, Waiver and Consent (“AWC”) with the Respondent, pursuant to which Mr. Case consented to a finding that he “willfully omitted to state a material fact on a Form U4, and that under Section 3(a)(39)(F) of the Securities Exchange Act of 1934… this omission makes him subject to a statutory disqualification with respect to association with a [FINRA] member.” As disclosed by FINRA, Mr. Case pled guilty to a felony charge of exploitation of an aged adult on or about August 2016. It appears that final adjudication of guilt was withheld, and Mr. Case was placed on probation for a period of 24 months.

Based on his purported failure to report his criminal infraction to his employer, LPL Financial LLC (“LPL”) (CRD# 6413), Mr. Case was terminated by LPL on or about May 2, 2017. As disclosed through FINRA, Mr. Case’s termination by LPL concerned allegations of “criminal charges involving exploitation of an aged adult after converting the victim’s money for his own benefit.”

Published on: January 18, 2018

FINRA Issues 2018 Regulatory Guidance on Securities Backed Lines of Credit

by InvestorLawyers

financial charts and stockbroker On January 8, 2018, the Financial Industry Regulatory Authority (“FINRA”) published its Annual Regulatory and Examination Priorities Letter (“2018 Letter”). The purpose of this letter is to highlight certain issues of importance to FINRA in the upcoming year, and serves as a useful guidepost for industry professionals and investors, alike. Included among the areas of concern addressed in the 2018 Letter is the increased prevalence of so-called securities backed lines of credit, or SBLOCs.

Given the current bull market that is currently approaching nine (9) years in age, it should come as no surprise that many brokerage firms and their registered representatives have heavily marketed SBLOCs to their clientele. The sales pitch in a rising market such as this is relatively simple: you may tap into the value of your investment portfolio in order to readily access cash in the form of an SBLOC, without the need to sell out of any investment holdings, thereby ensuring continued upside appreciation in the value of your investment portfolio. Such a marketing pitch, while logical, often downplays the risks associated with a SBLOC and its use of leverage against collateral that can rapidly deteriorate in value.

Put simply, SBLOCs are non-purpose in nature, meaning that such loans are not used to purchase more securities, and are thus distinguishable from traditional margin loans. Despite the fact that SBLOCs are non-purpose — and may be utilized for any number of ends, including for example creating liquidity for the purchase of a home, paying tuition, or financing the purchase of a car — FINRA has recently expressed concern over the risks associated with SBLOCs.