Library - Law Offices of Robert Wayne Pearce

Former Morgan Stanley Broker Suspended for Unsuitable UIT Recommendations

Richard Shotz, a registered representative formerly employed with Morgan Stanley, submitted a Letter of Acceptance, Waiver and Consent (AWC) in which he was suspended for four months and fined $7,500 by the Financial Industry Regulatory Authority (FINRA) for engaging in unsuitable short-term trading of Unit Investment Trusts (UITs) in 486 customer accounts. According to FINRA, Richard Alan Shotz, of Port Orange, Florida, recommended and engaged in unsuitable short-term trading of UITs. The UITs recommended by Mr. Shotz had 24 month maturity dates and significant upfront charges. Notwithstanding, Mr. Shotz continually recommended his customers sell their UITs less than a year after purchase (FINRA found an average holding period of only 143 days). Furthermore, on approximately 1200 occasions, FINRA found that Mr. Shotz recommended that his customers use the proceeds from the short-term sale of one UIT to purchase another UIT with similar and/or identical investment objectives. These unsuitable recommendations and transactions caused his customers to incur unnecessary sales charges. Without admitting or denying FINRA’s findings, Mr. Shotz was fined $7,500 and suspended for four months. The suspension is in effect from February 20, 2018 through June 19, 2018.

Mar 13, 2018

Spencer Edwards Broker Suspended for Unsuitable Recommendations

Richard Seefried, of Spokane, Washington, 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 of convertible notes. FINRA found that while employed with Spencer Edwards, Inc., Richard Seefried failed to adequately investigate representations made by the issuer of convertible promissory notes. According to the FINRA AWC, Mr. Seefried failed to investigate discrepancies in materials provided by the issuer of the notes and failed to investigate the background of the officers of the issuer, who had prior litigation alleging securities fraud. Mr. Seefried made unsuitable recommendations to two of his customers, sold $200,000 of the notes and received commission of $13,600.

Mar 8, 2018

Accelerated Capital Group Named in FINRA Complaint for Failure to Supervise Violations

Costa Mesa, California-based Accelerated Capital Group (Accelerated Capital) was named in a Financial Industry Regulatory Authority (FINRA) complaint alleging that the firm failed to establish and maintain a proper supervisory system to detect unsuitable, excessive, or unauthorized trading in customers’ accounts. FINRA’s complaint goes on to make numerous allegations regarding failures in the firm’s supervisory system. According to the FINRA complaint, Accelerated Capital Group failed to properly monitor, through its supervisory system and written supervisory procedures (WSPs), mutual fund switches, exchanges, and sales for suitability, and failed to appropriately identify or respond to red flags of broker misconduct. The complaint also alleges that the firm’s supervisory procedures failed to ensure that customers understood the differences in fees among mutual fund products. Further, FINRA’s complaint alleges that due to the inadequate supervisory systems, a registered representative was able to churn his customers’ accounts, allegedly resulting in customers sustaining more than $900,000 in trading losses and improper sales loads.

Mar 6, 2018

Former Legend Securities Broker Suspended for Unsuitable Excessive Trading

Michael Guilfoyle, a stockbroker previously registered with Legend Securities, Inc., submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was suspended for 10 months and assessed a deferred fine of $10,000.00. Without admitting or denying FINRA’s allegations, Michael Nicholas Guilfoyle, of Old Bridge Township, New Jersey, consented to the entry of FINRA’s findings that he engaged in unsuitable excessive trading in customers’ accounts, resulting in cumulative losses to his customers of nearly $56,000.00. According to FINRA, Mr. Guilfoyle exercised control over the accounts of two customers, one of whom was a senior citizen, due to the customers’ limited investment experience. Mr. Guilfoyle’s trading strategy generated excessive commissions or markups/markdowns. For example, during the 18 month time period in which his 73 year old customer’s account was open, Mr. Guilfoyle executed 77 transactions; 90% were solicited. As a result of the excessive trading, the customer suffered losses of $27,821.22, while generating sales charges of over $35,000.00. The other customer, FINRA found, suffered losses of more than $28,000.00 and sales charges for Mr. Guilfoyle of $26,150.00. The suspension is in effect from December 18, 2017 through October 17, 2018.

Mar 1, 2018

Wells Fargo Representative Barred for Unsuitable Investment Strategy

Charles Frieda, a former registered representative with Wells Fargo Clearing Services, LLC (f/k/a Wells Fargo Advisors, LLC), submitted a Letter of Acceptance, Waiver and Consent (AWC) in which he was barred by the Financial Industry Regulatory Authority (FINRA) for recommending an investment strategy which was over-concentrated in energy-sector securities and unsuitable for his clients. FINRA found that Mr. Frieda’s unsuitable recommendations resulted in millions of dollars in losses to his clients. FINRA found that Charles Henry Frieda (along with another Wells Fargo representative) recommended an over-concentration of energy-sector securities, some of which were speculative, to more than 50 customers. Because of the speculative nature of the energy-sector securities, the volatility of the energy market, and the highly over-concentrated levels in the clients’ accounts, Mr. Frieda’s customers were exposed to significant losses. According to FINRA, Mr. Frieda failed to properly consider his customers’ investment profiles, including their investment experience, risk tolerance, investment time horizon, net worth, and liquidity needs. Even when the energy market began a downturn in 2015, Mr. Frieda continued to unsuitably recommend that his clients adhere to his investment strategy. Due to his highly unsuitable recommendations, Mr. Frieda’s customers suffered millions of dollars in aggregate losses. Without admitting FINRA’s findings, Charles H. Frieda, of Anaheim, California, was barred from association with any FINRA member in all capacities.

Nov 10, 2017

HSBC Securities Broker Permanently Barred by FINRA for Converting Blind Client’s Funds

Jaime Rodriguez, a former registered representative with HSBC Securities (USA) Inc., has been permanently barred by the Financial Industry Regulatory Authority (FINRA) amid findings that he converted funds of his elderly, legally blind customer. According to FINRA, Jaime R. Rodriguez, of Yonkers, New York, converted approximately $200,000 from his elderly, legally blind customer, using the money to purchase two apartments in his own name, unbeknownst to his customer. In the first apartment purchase, FINRA found that Mr. Rodriguez converted approximately $70,000 of his customer’s funds. In the second apartment purchase, Mr. Rodriguez allegedly converted $130,000 of his customer’s funds. In both purchases, the customer had no idea that Mr. Rodriguez was the sole owner of the apartments due to the fact that the elderly customer could not see or read the documents. In the case of the second apartment, FINRA found that Mr. Rodriguez was renting out the apartment and collecting and keeping the rent. Without admitting or denying FINRA’s findings, Mr. Rodriguez was permanently barred from association with any FINRA member in any capacity.

Nov 3, 2017

WFG Investments Representative Suspended for Unsuitable ETF Recommendations

Jay Dee Jordan, a former registered representative with WFG Investments, Inc. submitted a Letter of Acceptance, Waiver and Consent (AWC) in which he was barred by the Financial Industry Regulatory Authority (FINRA) for recommending and executing hundreds of unsuitable non-traditional exchange traded fund (ETF) purchases in his customers’ accounts. FINRA found that Mr. Jordan’s unsuitable recommendations and ETF purchases resulted in his clients’ accounts sustaining realized and unrealized losses of more than $8.4 million. FINRA found that Jay Dee Jordan, of Oklahoma City, Oklahoma, recommended that his clients purchase over $22 million in non-traditional ETFs. Of the 84 accounts in which Mr. Jordan recommended the non-traditional ETFs, 79 of these accounts held ETF positions for longer than thirty days, and on numerous occasions, the ETF positions were held for years. According to FINRA, Mr. Jordan routinely failed to sell these complex products on the same day he purchased them and did not have a reasonable basis to believe that his long-term buy-and-hold recommendations were suitable for his customers.

Nov 1, 2017

FSC Securities Fined $100,000 for Failure to Supervise ETF Sales

FSC Securities Corporation has been censured and fined $100,000 and ordered to pay restitution to affected customers of over $492,485.33 for failing to supervise the unsuitable sales of leveraged, inverse and inverse-leveraged exchange-traded funds (non-traditional ETFs). The Financial Industry Regulatory Authority (FINRA) found that FSC Securities, which is headquartered in Atlanta, Georgia, failed to establish and maintain an adequate supervisory system to ensure the suitability of its sales of non-traditional ETFs. According to FINRA, FSC Securities executed approximately 6,500 purchases of the non-traditional ETFs, which were worth approximately $92 million and generated roughly $603,000 in commissions.

Oct 30, 2017

Morgan Stanley Representative Fined and Suspended for Unauthorized Trades

Mathew M. Serth, of Stone Ridge, Virginia, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was fined and suspended for allegedly placing unauthorized trades in customers’ accounts without their knowledge or consent. FINRA investigators found that while registered with Morgan Stanley, Mr. Serth entered trade orders in four accounts. The net costs of the transactions ranged from $15,000 to $86,000. However, FINRA stated that none of these customers granted Mr. Serth discretionary trading authorization to trade in their accounts. Upon discovering the unauthorized trades, Mr. Serth’s member firm cancelled the trades and reimbursed a customer for margin interest incurred as a result of the unauthorized trades. Without admitting or denying FINRA’s findings, Mr. Serth was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in any capacity for three months. The suspension is in effect from August 7, 2017 through November 6, 2017.

Oct 27, 2017

FINRA Fines and Suspends Former Wells Fargo Broker for Discretionary Trade Violations

Frank Tegge, a registered representative formerly employed with Wells Fargo Advisors, 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 exercised discretion in customer accounts without the necessary prior written authorization. FINRA found that Frank Allen Tegge, of DeWitt, Michigan, failed to obtain the necessary written authorization from his customer or his member firm when he exercised his discretion and placed orders in customer’s accounts. According to FINRA, Mr. Tegge placed 64 discretionary transactions in two customer accounts without written authorization from the customer. Further, FINRA found that Mr. Tegge executed a discretionary transaction in another customer’s account without the customer’s prior authorization, placing the trade after speaking with the spouse, who had no authority to authorize any trading in the account.

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