FINRA attorney

FINRA Sanctions David Khezri Over Unauthorized Trading

December 4, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) brought an enforcement action (FINRA No. 2015044589701) against broker David Khezri (Khezri) resulting in a monetary sanction and suspension. In addition, according to the BrokerCheck records kept by FINRA, Khezri has been the subject of at least 1 customer complaint. The customer complaints against Khezri alleges excessive trading among other claims.

FINRA’s findings stated that Khezri consented to sanctions that he improperly exercised discretion by effecting around 100 trades for six customers without obtaining written authorization from the customers. The firm also did not accept the accounts as discretionary. FINRA alleged that Khezri exercised discretion by executing trades days after his customers provided him oral authority. However, FINRA found that Khezri’s firm did not permit discretionary trading except for registered investment advisors (RIA) trading in the accounts of their advisory clients and Khezri was not an RIA.

Advisors are not allowed to engage in unauthorized trading. Such trading occurs when a broker sells securities without the prior authority from the investor. All brokers are under an obligation to first discuss trades with the investor before executing them under NYSE Rule 408(a) and FINRA Rules 2510(b). These rules explicitly prohibit brokers from making discretionary trades in a customers’ non-discretionary accounts. The SEC has also found that unauthorized trading to be fraudulent nature because no disclosure could be more important to an investor than to be made aware that a trade will take place.

FINRA Bars Broker Jeffrey Snyder Over Failure to Respond to Regulator Requests

December 3, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) brought and enforcement action (FINRA No. 2015045289901) against broker Jeffrey Snyder (Snyder) resulting a permanent bar from the securities industry. In addition, according to the BrokerCheck records kept by FINRA, Snyder has been the subject of at least 6 customer complaints, and 1 regulatory event. The customer complaints against Snyder allege a number of securities law violations including that the broker made unsuitable investments, engaged in churning (excessive trading), misrepresentations, negligence, fraud, and unauthorized trading other claims.

FINRA’s findings stated that although Snyder appeared for an on-the-record interview, he refused to respond to certain questions concerning allegations that he paid a customer compensation for investment losses without the knowledge or authorization of his member firm. Snyder’s refusal resulted in an automatic bar.

An examination of Snyder’s employment history reveals that Snyder moves from troubled firm to troubled firm. The pattern of brokers moving in this way is sometimes called “cockroaching” within the industry. See More Than 5,000 Stockbrokers From Expelled Firms Still Selling Securities, The Wall Street Journal, (Oct. 4, 2013). In Snyder’s 12 year career he has worked at 6 different firms. Snyder entered the securities industry in 2003. From February 2006, through June 2008, Snyder was associated with New Castle Financial Services LLC. Thereafter from June 2008 until August 2008, Snyder was a registered representative of The Concord Equity Group, LLC. From August 2008, until April 2012, Snyder was registered with Spartan Capital Securities, LLC. From April 2012 until April 2015, Snyder was associated with Rockwell Global Capital LLC. Finally, in March 2015, Snyder was registered with Network 1 Financial Securities Inc. until September 2015 out of the firm’s Danbury, Connecticut office location.

Advisor John McKinstry Jr. Discharged After Customer Complaints

December 1, 2015 | by Staff Attorney

The securities and investment attorneys of Gana Weinstein LLP are interested in speaking with clients of John McKinstry Jr. (McKinstry). According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) McKinstry has been the subject of at least 5 customer complaints, 2 regulatory actions, and two employment terminations. The customer complaints against McKinstry allege securities law violations that claim unsuitable investments and churning among other claims.

The most recent complaint was filed in July 2015, and alleged $11,400 in damages due to claims that the broker made unsuitable investments and recommendations considering the age and risk tolerance of the client. Also in July 2015, another customer filed a complaint alleging that McKinstry made unsuitable investment recommendations causing alleged damages of $216,000.

In addition, in August 2015, McKinstry’s brokerage firm Moloney Securities Co., Inc. (Moloney Securities) terminated McKinstry concerning allegations that the firm had conducted an internal review concerning customer complaints and a FINRA exam.

Advisor Investigation: Morgan Stanley Broker Kirk Gill

December 1, 2015 | by Staff Attorney

The securities and investment attorneys of Gana Weinstein LLP are interested in speaking with clients of Kirk Gill (Gill). According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) Gill has been the subject of at least 7 customer complaints. The customer complaints against Gill allege securities law violations that claim unsuitable investments, misrepresentations, unauthorized investments, and breach of fiduciary duty among other claims.

The most recent complaint was filed in July 2015, and alleged $300,000 in damages due to claims that the broker, from 2007 to November 2014 made unsuitable investments and recommendations to the client. In April 2015, another customer filed a complaint alleging that Gill, from October 2011, until November 2014, made unsuitable investment recommendations causing alleged damages of $450,000. Gill denied the claims made by this investor and seeks an expungement of this case from his record. In December 2013, a customer filed a complaint against Gill alleging that the client was not properly advised concerning high risk and volatile stocks causing losses of $100,000.

Gill entered the securities industry in 1992. From July 2007 onward Gill has been associated with Morgan Stanley out of the firm’s Tucson, Arizona branch office location.

Julius Kenney Formerly of LPL Financial Barred Over Outside Business Activities Investigation

August 11, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently sanctioned and barred broker Julius Kenney (Kenney) concerning allegations Kenney refused cooperate with requests made by FINRA in connection with an investigation into possible outside business activities. Such activities may, under certain circumstances also involve investment transactions referred to as “selling away” in the industry. According to FINRA BrokerCheck records Kenney has disclosed that he operates as a LPL Financial LLC (LPL Financial) broker under the DBA Frank Kenney Wealth Management in Calhoun, Georgia. There is one customer complaint against Kenney alleging that the broker solicited an investment in a business referred to as Mellow Mushroom in or around October 2013.

Kenney entered the securities industry in 2008, when he became associated with Edward Jones. Thereafter, Kenney became associated with LPL Financial in 2011 before leaving for Dempsey Lord Smith, LLC in July 2012 through September 2013. Finally, in September 2013, Kenney came back to LPL Financial until his termination in June 2015. On May 22, 2015, LPL Financial filed a termination notice (known as a Form U5) with FINRA disclosing that Kenney was discharged from the firm for participating in an undisclosed outside business activity.

The conduct alleged against Kenney may lead to “selling away” securities violations. In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. However, even though the brokerage firm claim ignorance of their advisor’s activities, under the FINRA rules, a brokerage firm owes a duty to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away often occurs in brokerage firm that either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.

FINRA Alleges Numerous Supervisory Failures at Sammons Securities Part II

December 26, 2014 | by Staff Attorney

This post continues our exploration of the Financial Industry Regulatory Authority’s (FINRA) acceptance, waiver, and consent action (AWC) that sanctioned brokerage firm Sammons Securities Company, LLC (Sammons) over allegations that Sammons failed to establish and maintain a system of supervision to comply with the securities laws.

FINRA member firms were required to conduct reviews of all outside business activities disclosed before to ensure that the disclosures complied FINRA standards. During FINRA’s investigation the regulator found that Sammons was unable to demonstrate that it had conducted a review. In addition, FINRA alleged that Sammons used a form to collect information from its brokers concerning their outside business activities but the form failed to request information sufficient to detect the occurrence of private securities transactions away from the firm.

Moreover, FINRA found that two Sammons brokers were operating registered investment advisors that held customer accounts at broker-dealers other than Sammons. FIRNA found that the representatives disclosed their advisory business as outside business activities to Sammons and those activities were approved. However, FINRA found that Sammons did not record or maintain the advisories securities transactions on the firm’s books and records, or supervise the correspondence of the business. As a result, FINRA found that the representatives’ participation in private securities transactions was unsupervised by the firm.

FINRA Alleges SWS Financial Services Failed to Supervise Variable Annuity Transactions

December 19, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) filed a complaint against brokerage firm SWS Financial Services, Inc. (SWS Financial) over allegations that from September 2009, to May 2011, SWS Financial had inadequate supervisory systems procedures to supervise its variable annuity (VA) securities business. Specifically, FINRA alleged that SWS Financial: (1) failed to establish and maintain supervisory systems to supervise its VA securities business in violation of NASD and FINRA Rules; (2) failed to implement rules requiring a registered principal review and approval prior to transmission of a VA application to the issuing insurance company for processing and that a registered principal only approve VA transactions that he or she has determined that there is a reasonable basis to believe that the transaction is suitable for the customer; (3) failed to implement surveillance procedures to monitor a broker’s recommended exchanges of VAs to identify inappropriate exchanges; (4) failed to have policies and procedures to implement corrective measures to address inappropriate VA exchanges; and (5) failed to develop and document specific training policies or programs to ensure that principals supervisors who reviewed VA transactions had sufficient knowledge to monitor the transactions.

SWS Financial is a registered broker/dealer since 1986 and is headquartered in Dallas, Texas. The firm employs 313 registered personnel. From September 2009, to May 2011, SWS Financial derived the majority of its income from its business lines selling equities, mutual funds, variable life insurance or annuities, and municipal securities.

FINRA alleged that from September 2009, to May 2011, SWS Financial derived 16% to 20% of its total revenues from sales of VAs to customers. However, despite this fact, FINRA alleged that SWS Financial failed to establish and implement adequate supervisory systems for this aspect of its securities business. FINRA alleged that the firm’s brokers sold VAs both in branch offices where a registered branch manager was onsite as well as in offices where there was no onsite supervisor. FINRA alleged that the firms procedures required that VA transactions initiated by representatives in branch offices with a branch manager were reviewed and approved by the banch manager and then forwarded to SWS Financial’s home office for final review and approval employees at an affiliated insurance company, Southwest Insurance Agency (Insurance Agency).

Choosing the Right Securities Arbitration Attorney

September 29, 2014 | by Staff Attorney

When to Call a Securities Arbitration Attorney

Securities arbitration attorneys, sometimes referred to as investment attorneys, FINRA attorneys, or securities attorneys, should be contacted whenever an investor believes he or she has been a victim of broker misconduct. An investor may have cause to retain a securities fraud attorney to file a lawsuit or arbitration claim if his or her broker failed to create a suitable investment strategy. An investor may also want to contact an attorney case if a broker made false or misleading statements about a security or omitted negative information about the risk of a security in order to persuade the investor to invest.

An investor may also want to seek legal counsel the investor’s broker bought or sold securities without prior consent (unauthorized trading) or excessively traded securities for the purpose generating commissions (churning).

FINRA Suspends Financial Advisor Over Unsuitable Variable Universal Life (VUL) Sales Practices

September 25, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned broker James Moniz (Moniz) concerning allegations that while registered with Signator Investors, Inc. (Signator) Moniz made unsuitable recommendations to a married couple that they purchase a Variable Universal Life insurance policy (VUL) on the husband’s life and use the proceeds of a reverse mortgage to purchase a variable annuity and open a managed investment account. According to FINRA, after the insurance company questioned the VUL application, Moniz caused the application to be re-submitted with changed or added information without first informing the customers of his actions. FINRA found that Moniz also inaccurately represented the source of funds for the variable annuity and managed account.

VUL are complex dual part insurance and investment products that investors must fully understand the risks and benefits of prior to investing. One feature of a VUL policy is that the owner can allocate a portion of his premium payments to a separate sub-account that can be used to grow in value through investments. The other part of the investment is the life insurance policy where the policies monthly charges including a cost of insurance charge and administrative fees are deducted from the policy’s cash value. The cash value of the policy may increase or decrease based on the performance of the selected investments. However, customers must be careful in purchasing VULs because the policy terminates, or lapses, if at any time the net cash surrender value is insufficient to pay the monthly cost deductions. When the policy terminates the remaining cash value becomes worthless.

Given the costs involved in purchasing VULs, brokers must be careful to ensure that the recommendation to invest in VULs is suitable for the client. While an investor may be able to afford the initial purchase price of the policy it may be too expensive for the client to continue to make premium contributions over time causing the policy to lapse.

Blackbook Capital Sanctioned For Overcharging Clients

August 28, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned brokerage firm Blackbook Capital LLC (Blackbook) concerning allegations that: 1) between April 2010 and June 2011, Blackbook charged customers $60.50 on each purchase or sale transaction in addition to or in place of a designated commission; 2) between August 2010, and August 2011, Blackbook failed to search its records in response to requests by the Financial Crimes Enforcement Network of the Department of the U.S. Treasury (FinCEN) pursuant to the USA PATRIOT Act of 2001; 3) Blackbook failed to conduct an adequate independent Anti-Money Laundering (AML) test for calendar year 2010; and 4) between July 2009, and August 2011, Blackbook failed to preserve all of its business-related emails in a non-rewriteable, non-erasable format.

Blackbook has been a member of FINRA since March 2003. The firm has three offices with its main office located in New York City. Blackbook employs approximately 35 registered persons and engages in securities transactions for retail customers and investment banking transactions.

Under NASD Conduct Rule 2430 (Charges for Services Performed) charges for services performed, including miscellaneous services such as collection of moneys due for principal, dividends, or interest; exchange or transfer of securities; appraisals, safe-keeping or custody of securities, and other services, shall be reasonable and not unfairly discriminatory between customers. Under Exchange Act Rule 10b-10 (Confirmation of Transactions) broker-dealers are required to disclose specified information in writing to customers at or before the completion of a transaction. Finally, FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade) requires a member in the conduct of its business to observe high standards of commercial honor and just and equitable principles of trade.