Broker Misconduct - Law Offices of Robert Wayne Pearce

Jul 13, 2016

New York Princor Investment Representative Fined and Suspended for Unsuitable Annuity Recommendations

Michael Taylor of Buffalo, New York was registered with FINRA as an Investment Company Products and Variable Contracts Limited Representative through Princor Financial Services Corporation (Princor) from 2010 until March 16, 2016. Mr. Taylor submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly failing to identify and submit seven variable annuity purchases as annuity replacements even though each was funded by the sale of another annuity. According to FINRA, from December 2010 through May 2011, Mr. Taylor “circumvented Princor’s compliance procedures by failing to identify and submit seven variable annuity purchases as annuity replacements even though each was funded by the sale of another annuity. In addition, Taylor provided inaccurate information on the annuity transaction documents further concealing that they were replacements.” This alleged conduct would be in violation of NASD Conduct Rule 3110 and FINRA Rule 2010.

Jul 11, 2016

Florida Wells Fargo Representative under Investigation for Converting Client Funds

Jeffrey Krupnick of Sarasota, Florida was named as a respondent in a Financial Industry Regulatory Authority (FINRA) complaint for allegedly converting a client’s funds for his own personal use. FINRA alleged that Mr. Krupnick, between January 2012 and November 2014, while registered with FINRA member firm Wells Fargo Advisors, LLC (Wells Fargo) converted approximately$143,000 from his half-brother, a Wells Fargo customer. FINRA alleged that due to over $50,000 in accumulated credit-card debt, Mr. Krupnick attempted to take advantage of his half-brother in a scheme to cover his losses. The FINRA investigators found that Mr. Krupnick opened several brokerage accounts for his half-brother for which he took control over and took funds from. FINRA alleged that Mr. Krupnick removed over $170,000 from 4 brokerage accounts he had created for his half-brother in October 2013. Furthermore, FINRA found that Mr. Krupnick named himself as the primary account holder on the joint accounts and assumed primary control over them even though he never contributed funds to the accounts and instead used the ill-gained funds to pay credit card bills, home payments, and other luxuries including a wedding in Hawaii.

Jul 4, 2016

World Equity Group Fined for Alleged Churning

World Equity Group, Inc. (WEG) of Arlington Heights, Illinois submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for alleged supervisory failures in connection with excessive equity securities trading. WEG, a FINRA member since 1992, has been the subject of similar FINRA disciplinary actions. According to FINRA, between 2009 and 2012, WEG failed to detect and prevent excessive trading, also known in the securities industry as “churning.” Churning is excessive trading in client accounts by a stockbroker to generate commissions. Churning is an illegal activity that violates SEC and FINRA rules. During the relevant time period (2009 through 2012), FINRA alleged that WEG’s supervisory failures led to an ongoing practice of churning. FINRA found a pattern of excessive unsuitable trades in WEG customer accounts, therein violating NASD Rules 3010, 3310, 2310, 2110, and FINRA Rule 2010. It is the responsibility of the investment advisor and his/her associated member firm to ensure clients are treated fairly and not taken advantage of. Firm representatives are required to recommend investment strategies that comply with multiple criteria regarding an individual including investment objectives, financial status and age. Excessive trading is a violation of FINRA Rules as it generally disadvantages the customer in order for the broker to generate additional commissions.

Jul 1, 2016

J.P. Morgan Branch Fines Exceed $1 Million for Unsuitable Activity

J.P. Morgan Clearing Corp. (JPMCC) of Brooklyn, New York and J.P. Morgan Securities LLC (JPMS) of New York, New York submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for alleged unsuitable broker activity. The Suitability Rule (FINRA Rule 2011) is the most fundamental rule brokerage firms and associates must abide by in recommending investments to customers. Brokers must recommend appropriate investments given the customer’s objectives, financial condition, tax status, etc. This rule lays out the three main suitability obligations requiring brokers to (i) perform due diligence to understand the risks of an investment or investment strategy, and determine whether it is suitable for anyone, (ii) have a reasonable basis for believing the investment strategy is suitable for the particular customer based on that customer’s investment profile; and (iii) have a reasonable basis for believing that a series of securities transactions are not excessive (if the broker has control over the account). In the case of JPMCC and JPMS, FINRA found that JPMS failed to send letters to customer accounts confirming changes in their investment objectives.

Jun 29, 2016

Tampa Firm Fined $175,000 and Ordered to Pay Over $400,000 in Restitution for Supervisory Failures

INVEST Financial Corporation (IFC) of Tampa, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement for the Financial Industry Regulatory Authority (FINRA) for alleged supervisory failures in connection with Unit Investment Trust (UIT) transactions with its customers. A UIT is generally a portfolio of redeemable securities (units) that can contain several different types of securities with a specified lifetime. The most common of these securities are stock and bond trusts. UITs are created with a definite life and are a fixed portfolio of securities. This makes UITs different from a mutual fund that allows its securities to be bought and sold in perpetuity. Sales charge discounts are often offered to customers who periodically reinvest in a UIT which is also known as a rollover. The UIT sponsor can also offer “breakpoints” which distribute sales charge discounts depending on the amount invested.

Jun 27, 2016

Miami Brokerage Firm CP Capital Securities Fined for Illegitimate Private Placement Offering

CP Capital Securities, Inc. (CP) of Miami, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly failing to maintain proper supervisory procedures in connection with private placement offerings. FINRA noted that CP had participated in several minimum contingency private placement offerings without “adequate supervisory procedures.” A private placement is generally an offering between only a select few investors in order to raise capital without registration. Private placement offerings must satisfy certain conditions to avoid registration with the Securities and Exchange Commission (SEC). CP’s failure to supervise those offerings put the exemptions in jeopardy.

Jun 8, 2016

Former Wells Fargo Broker Named in FINRA Complaint Alleging Unsuitable Private Securities Recommendations

Dennis Mark Adam Merritt, a registered representative formerly employed with the Palm Harbor, Florida branch of Wells Fargo Advisors, LLC was named a respondent in a Financial Industry Regulatory Authority (FINRA) complaint alleging that he failed to perform adequate due diligence in connection with unsuitable private securities recommendations he made to several of his customers. The complaint alleges that Dennis Merritt, of Palm Harbor, Florida, recommended that four of his customers invest in a speculative investment, namely, a company called SavvyPhone, LLC, without having conducted proper due diligence to have made such recommendations. According to FINRA’s complaint, Mr. Merritt participated in three private securities transactions in which his customers invested a total of $115,000 in SavvyPhone based upon his unsuitable recommendations.

May 11, 2016

FINRA Slams MetLife with $25 Million Fine for Misrepresenting Variable Annuities

The Financial Industry Regulatory Authority (FINRA) slammed MetLife Securities, Inc. (MetLife) with a $25 million fine for negligent misrepresentations and omissions to customers regarding the costs and guarantees relating to variable annuities. MetLife agreed to the fine, which includes a $20 million fine and $5 million to be paid to customers, without admitting or denying FINRA’s findings. From approximately 2009 to 2014, FINRA found that MetLife falsely told customers that new variable annuities were less costly than the annuities they were replacing. Further, MetLife made the replacement annuities appear more beneficial to the customer when they were typically more expensive. According to FINRA, MetLife sold at least 43 billion in variable annuities which generated $152 million in gross dealer commissions for the firm. Nonetheless, MetLife failed to supervise its registered representatives to ensure they were property trained and informed of the comparative analysis between the variable annuities and the recommended replacement annuities. In fact, FINRA found that MetLife principals approved 99.79% of the variable annuity replacements, even though three-quarters (3/4) of the replacement applications contained at least one misrepresentation or omission.

May 6, 2016

Wunderlich Securities Broker Fined and Suspended for Unauthorized Discretionary Trades

Merid Amde, a former registered representative with the Birmingham, Michigan office of Wunderlich Securities, Inc. (Wunderlich), submitted an Offer of Settlement in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) findings that he entered discretionary trades in a customer’s account without the necessary prior written customer authorization and made false and exaggerated account valuations. According to FINRA, Merid Amde, of Bloomfield, Michigan, executed approximately 55 discretionary transactions in a customer’s accounts without the customer’s written authorization and without the accounts designated as discretionary by his member firm. Further, FINRA found that Mr. Amde mismarked 36 order tickets as unsolicited when they were actually solicited in order to purchase low-priced equities and various unit investment trusts (UITs).

May 4, 2016

Capitol Securities Management Broker Suspended for Unsuitable Reverse Convertible Note Recommendations

Robert Stein, a registered representative with the Boston, MA branch of Capitol Securities Management, Inc. (Capitol Securities), submitted a letter of Acceptance, Waiver, and Consent in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) sanction and findings that he made unsuitable reverse convertible note (RCN) recommendations and purchases in the accounts of eight customers. FINRA found that Robert Gerald Stein, of Sudbury, MA, recommended and effected 24 purchases of RCNs in 8 customer accounts. The customers were primarily over 60 years old and had conservative investment objectives. According to FINRA, Mr. Stein’s recommendations and purchases totaled approximately $4 million in the 8 customers’ accounts. Moreover, all of the accounts were heavily concentrated in RCNs, constituting a substantial portion of their net worth.