Library - Law Offices of Robert Wayne Pearce

Park Avenue Securities Censured for Engaging in Multiclass Mutual Fund Abuse

Park Avenue Securities in New York, New York, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which the firm was censured for allegedly engaging in multiclass mutual fund abuse and failed to establish and maintain a supervisory system and written supervisory procedures reasonably designed to ensure that customers who purchased mutual fund shares received the benefit of applicable sales charge waivers. As a result, Park Avenue violated NASD Conduct Rule 3010, FINRA Rule 3110, and FINRA Rule 2010. Since 1999, Park Avenue Securities (Park Avenue) has been a member firm of FINRA with 45 branch offices. According to the FINRA findings, Park Avenue had certain investors that were eligible for waiver of the initial sales charge associated with Class A shares. Instead, Park Avenue sold them Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses. The FINRA findings stated that 264 of Park Avenue’s customers who purchased mutual fund shares were overcharged by approximately $560,170. The findings also stated that Park Avenue allegedly failed to notify, train, and assist its financial advisors regarding the mutual fund sales charge waivers. In addition, Park Avenue determined that they had failed to provide these charge waivers after FINRA sent a targeted examination letter for them to review its applicable sales as part of a Mutual Fund Fee Waiver Sweep.

Aug 5, 2020

Former Berthel Fisher Stockbroker Mason Wayne Gann Suspended for Unsuitable Recommendations

Mason Wayne Gann of Dallas, Texas submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was fined and suspended for unsuitable recommendations in violation of FINRA Rule 2111 and 2010. From June 2012 until February 2018, Mason Wayne Gann was registered with Berthel Fisher as a General Securities Representative. According to the FINRA findings, Mr. Gann allegedly recommended and effected a risky options-trading strategy in the account of a senior customer. The FINRA findings stated that Mr. Gann knew the customer had limited income, modest retirement savings, and minimal investment knowledge and lacked a reasonable basis for believing that his recommendations were suitable. The findings also stated that Mr. Gann recommended the customer begin trading options to generate more income in his account which was valued at approximately $205,000. The customer began withdrawing $1500 each month and after two years, his account declined to approximately $120,000 with a loss of more than $12,500 as a direct result of the unsuitable options strategy because he did not produce enough income or gains to offset his withdrawals. In addition to these findings, the combined effect of investment losses and steady withdrawals reduced the customers account to below $20,000 over a 3-year period.

Aug 3, 2020

Former Century Securities Stockbroker Daniel R. Castoriano Suspended for Unauthorized Trading

Daniel R. Castoriano of New Orleans, Louisiana submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he has been fined and suspended for allegedly engaging in unauthorized trading in violation of NASD Rule 2510(b) and FINRA Rule 2010. From December 2003 until June 2019, Daniel R. Castoriano was registered with Century Securities Associates, Inc. (Century) until they filed a Form U5 reporting that Mr. Castoriano was permitted to resign in connection with exercising discretion in a customers account. According to the findings, FINRA began investigating Mr. Castoriano after the Form U5 was filed alleging that he used discretion to execute six trades pursuant to an investment strategy without written authorization from the customer or permission from the firm. The FINRA findings stated that Century payed the customer $1,844 to settle a complaint about the trades and associated losses in the account.

Jul 31, 2020

Dakota Securities International Expelled & Former Owner Bruce Martin Zipper Barred for Misconduct

Dakota Securities International (Dakota) and Bruce Martin Zipper (Mr. Zipper) appealed a National Adjudicatory Council (NAC) decision to the Securities and Exchange Commission (SEC). The Hearing Panel imposed three expulsions on Dakota for allegedly failing to maintain accurate books and records, failing to supervise, and allowing Mr. Zipper to associate with them and engage in activities requiring registration while suspended. The Hearing Panel also imposed two bars on Mr. Zipper for associating with Dakota and engaging in the particular activities while suspended and intentionally misidentifying the representative of record on customer transactions. In 2004, Mr. Zipper founded Dakota and was the majority owner until January 2018, when he sold his ownership. According to the NAC findings, Mr. Zipper executed then later tried to withdraw from an AWC that was final and non-appealable due to his failure to disclose three unsatisfied judgments on his Form U4. The findings stated that FINRA informed Mr. Zipper of his suspension, and during his absence he allegedly arranged for Dakota to continue operations without him for the three months. During the same period, Dakota did not restrict Mr. Zipper’s access to the firm’s email system or to the firm’s trading system in which he engaged and recommended transactions while suspended. In addition to the NAC findings, Mr. Zipper admitted that he intentionally misidentified the representative of record on hundreds of trades caused Dakota to maintain inaccurate books and records. Dakota Securities International was expelled from FINRA membership and Mr. Zipper was barred from association with any FINRA member in all capacities.

Jul 29, 2020

CV Brokerage Inc. Censured and Fined for Misconduct

CV Brokerage in Williamstown, New Jersey submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which the firm was censured and fined $100,000 for allegedly failing to establish and maintain a supervisory system, and written supervisory procedures (WSPs) reasonably designed to achieve compliance with applicable FINRA rules regarding the participation of Firm-registered representatives in private securities transactions in violation of FINRA Rules 3110(a) and (b), 3280, and 2010. According to the FINRA findings, a General Securities Principal with CV Brokerage, engaged in outside business activities and unapproved private securities transactions (PSTs). The FINRA findings stated that the representative formed an investment fund away from CV Brokerage and received substantial compensation from the transactions between multiple financial institutions and exchanges. During the same period, the WSPs permitted the representative to supervise her own compliance with the PSTs. CV Brokerage could have hired other principals to review or disapprove her participation in the PSTs but failed to do so. In addition, CV Brokerage allegedly failed to supervise the representatives participation in the PSTs, failed to supervise the securities trading conducted by the investment fund as if it was executed by the firm and failed to record the securities transactions for the fund on the Firm’s books and records.

Jul 27, 2020

Crown Capital Securities Fined for Failing to Establish and Maintain Supervisory Procedures

Crown Capital in Orange, California, submitted a Letter of Acceptance, Waiver, and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which the firm was censured and fined $75,000 for allegedly failing to establish and maintain a supervisory system, including written supervisory procedures, for reviewing and monitoring mutual fund switches conducted by representatives in violation of NASD Rule 3010(a), NASD Rule 3010(b), and FINRA Rule 2010. Crown Capital is a dually registered broker-dealer and investment advisor and has been a member of FINRA since July 5, 1999. According to the FINRA findings, Crown Capital had no supervisory mechanism in place and relied upon the registered representative to alert the firm of a mutual fund switch, which two representatives failed to do. The findings stated that one representative effected 61 short-term mutual fund switch transactions in a customer’s accounts which resulted in unnecessary front-end sales loads of between 3.75 and 5.75% with each new purchase and losses of approximately $5,000. During the same period, the other representative effected 49 Class A and two non-Class A short-term mutual fund switch transactions for four customers which also resulted in paid front-end sales loads of between 3.75 and 5.75% with each new purchase and losses of approximately $390,000. In addition to the findings, Crown Capital voluntarily compensated the customers who sustained losses due to the unsuitable recommendations, paying a total of approximately $395,000 in restitution.

Jul 24, 2020

Former Dakota Director Carlos Ricardo Fuenmayor Suspended for Misconduct

Carlos Ricardo Fuenmayor of Key Biscayne, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for allegedly acting as a General Securities Principal and a General Securities Representative without being registered in either capacity, in violation of NASD Rules 1021 and 1031, and FINRA Rule 2010. From September 2013 through October 2016, Carlos Ricardo Fuenmayor was associated with Dakota Securities International, Inc. (Dakota) as Director and 20% owner. According to FINRA, Fuenmayor securities licenses had lapsed in September 2013 when he purchased 20% ownership interest in Dakota. The findings stated that Fuenmayor did not become registered as a General Securities Principal or a General Securities Representative until 2015 but was actively engaged in Dakota’s securities business and in the management of its securities business. In addition to the FINRA findings, Fuenmayor was primarily responsible for the hiring and management of personnel at Dakota, advised registered representatives about different types of trading strategies and ordered the registered representatives to execute trades.

Jul 22, 2020

Former NYLife Securities Broker William Hite Suspended by FINRA for Forgery

William James Hite, a former registered representative of NY Life Securities LLC, submitted a Letter of Acceptance, Waiver, and Consent (AWC) in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) findings that he forged an elderly customer’s signature on four documents. According to FINRA, William Hite of Shelton Connecticut allegedly forged his elderly customer’s signature when he was not successful in reaching him to sign the document. Subsequently, Mr. Hite electronically forged the same customer’s signature on three more documents, including a fixed annuity application, client profile form, and replacement of life insurance or annuities form. What Mr. Hite was unaware of at the times of the forgeries, is that his elderly customer had passed away.

Jul 20, 2020

Former MML Investors Broker William McGowan Suspended for Private Securities Transactions

William Blake McGowan of Little Rock Arkansas submitted a Letter of Acceptance, Waiver, and Consent (AWC) in which he was fined and suspended by the Financial Industry Regulatory Authority (FINRA) for engaging in private securities transactions, a type of broker misconduct known as selling away. In July 2017, while employed by MML Investors Services, LLC, William McGowan purchased $55,000 of securities in a pooled real estate investment. More specifically, Mr. McGowan purchased shares in an Arkansas LLC formed to purchase and manage vacation property rentals in Florida. FINRA found that Mr. McGowan failed to provide the required prior written notice to his member firm of the transaction. Further, he falsely stated on a compliance attestation that he had not made any personal investments.

Jul 17, 2020

Former Cetera Advisors Broker Scott Kozak Suspended for Private Securities Transactions

Scott Patrick Kozak of Highlands Ranch, Colorado submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was suspended for two years for allegedly engaging in private securities transactions, known also as selling away. Between 2011 and 2014, while registered with Cetera Advisors LLC, Scott Kozak allegedly engaged in private securities transactions without written notice or approval from his member firm. According to FINRA, Mr. Kozak solicited Cetera customers and registered representatives to invest $1,166,000 in two companies’ securities. Mr. Kozak also invested his own money in the companies. Further, Mr. Kozak was found by FINRA to have solicited investments in promissory notes from seven Cetera customers, who collectively invested $380,000 in the promissory notes. NASD Rule 3040 prohibits associated persons from participating in any manner in a private securities transaction outside the regular course or scope of their employment without first providing written notice to the member firm. The written notice must describe in detail the proposed transaction and the person’s proposed role therein, and whether he has received or may receive selling compensation in connection with the transaction. A violation of NASD Rule 3040 is a violation of FINRA Rule 2010, which requires members and associated persons to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business.

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