Friday, November 16

Stockbrokers Caught Abusing Client's Money - Oct 2007

Here are some excerpts from the FINRA (formerly known as NASD) October, 2007 Disciplinary Actions Report where stockbrokers were caught either taking liberties with their client's accounts without permission or borrowing/stealing their client's money.

The total amount of money misused/stolen from investors listed below is $242,000. (Some entries do not list the amount taken.)

Individuals Barred or Suspended

Ramona Marie Bianchi (CRD #3126133, Registered Representative, Harrisburg, Pennsylvania) submitted a Letter of Acceptance, Waiver and Consent in which she was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Bianchi consented to the described sanction and to the entry of findings that she obtained possession of an automatic teller machine (ATM) card for a public customer’s account and, without the customer’s knowledge or authorization, used the ATM card to make unauthorized cash withdrawals from the customer’s bank account, and unauthorized purchases totaling $68,000 for her own benefit. (FINRA Case #2007008767001)

Brandon W. Cade (CRD #5062931, Registered Representative, Chicago, Illinois) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Cade withdrew $1,300 from his teller cash drawer at a bank affiliate of his member firm without permission and used the funds for his own purposes. The findings stated that Cade failed to respond to FINRA requests for information. (FINRA Case #2006006367801)

Wayne Kenneth Campbell Jr. (CRD #4676905, Registered Representative, Dover, New Hampshire) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for 90 days. The fine must be paid before Campbell re associates with a FINRA member following the suspension, or prior to any application or request for relief from statutory disqualification is filed. Without admitting or denying the findings, Campbell consented to the described sanctions and to the entry of findings that he signed public customers’ names to account transfer forms and to documents used in connection with the purchase of variable annuities without the customers’ knowledge, authorization or consent. The suspension in any capacity is in effect from September 17, 2007, through December 15, 2007. (FINRA Case #2006006481301)

Dale Lewis Cash (CRD #4909387, Registered Representative, Oxford, Alabama) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Cash consented to the described sanction and to the entry of findings that he affixed a bank financial specialist’s signature to an instrument without the specialist’s authorization, knowledge or consent in order to withdraw $5,100 from the bank for a public customer’s benefit, but failed to assign the funds to any customer account. The findings stated that Cash’s failure to assign the funds to a customer account prevented the bank from identifying the customer, thereby incurring a loss for the bank. (FINRA Case #2006006319201)

James Richard Clayborn (CRD #4844986, Registered Representative, Bristol, Indiana) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member firm in any capacity and required to pay $118,287.39, plus interest, in restitution to public customers. The restitution must be paid before Clayborn re associates with a FINRA member following the suspension, or prior to the filing of any application or request for relief from statutory disqualification.

Without admitting or denying the findings, Clayborn consented to the described sanctions and to the entry of findings that he misused approximately $150,000 from public customers, for his personal expenses. The findings stated that Clayborn, in an effort to conceal his misappropriation of funds from the customers, created and distributed a false account statement that purportedly verified that $80,000 was invested with his member firm for the customers. (FINRA Case #2006005927801)

Thomas Anthony DeMarco (CRD #4608717, Registered Representative, Springfield, Illinois) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member firm in any capacity. Without admitting or denying the findings, DeMarco consented to the described sanction and to the entry of findings that he directed that $5,000 were withdrawn from a public customer’s savings account to purchase additional shares in mutual funds, but the funds were not used as directed. The findings stated that DeMarco discovered the funds in his desk drawer six weeks later, at which time he forwarded the funds to his member firm. The findings also stated that DeMarco failed to timely respond to FINRA requests for information. (FINRA Case #2006004803301)

Carolyn Sue Everhard (CRD #2344119, Registered Representative, Cincinnati, Ohio) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Everhard received $6,400 from a public customer for investment purposes and converted the funds to her own use and benefit without the customer’s knowledge, authorization or consent. The findings stated that Everhard failed to fully respond in a timely manner to FINRA requests for information. (FINRA Case #20050025930)

Norman R. Flemens (CRD #3212865, Registered Representative, Las Vegas, Nevada) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for 18 months. The fine must be paid immediately upon re association with a FINRA member firm following the suspension, or prior to the filing of any application or request for relief from statutory disqualification. Without admitting or denying the findings, Flemens consented to the described sanctions and to the entry of findings that he received checks and/or letters of application from public customers to transfer funds to effect the purchase of mutual fund company shares, and delayed entering the checks on his member firm’s checks-received blotter and delayed forwarding the checks and processing applications to effect the purchases, thereby failing to execute customer orders.

The suspension in any capacity is in effect from September 4, 2007, through March 3, 2009. (FINRA Case #2006005294301)

Daniel Stephan Flitt (CRD #2965169, Registered Representative, Buffalo, NewYork) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Flitt consented to the described sanction and to the entry of findings that he borrowed $2,660 from a public customer without his member firm’s approval and contrary to his firm’s written procedures prohibiting representatives from borrowing money from customers. The findings stated that Flitt failed to respond to FINRA requests for information. (FINRA Case #2006005734401)

Michael J. Menendez (CRD #4895632, Registered Representative, Chandler, Arizona) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Menendez misappropriated approximately $3,000 that belonged to his member firm’s affiliated bank and failed to respond to FINRA requests for information. (FINRA Case #2006005688201)

David Anthony Nagler (CRD #1190128, Registered Supervisor, Santa Fe, New Mexico) submitted an Offer of Settlement in which he was fined $10,000 and suspended from association with any FINRA member in any capacity for 20 business days. The fine is due and payable either immediately upon re association with any FINRA member firm following the suspension, or prior to the filing of any application or request for relief from statutory disqualification. Without admitting or denying the allegations, Nagler consented to the described sanctions and to the entry of findings that he borrowed $3,000 from a public customer contrary to his member firm’s written procedures prohibiting its registered representatives from borrowing or lending money from or to a client under any circumstances. The findings stated that Nagler failed to request or obtain his firm’s permission to borrow money from a public customer. The findings also stated that Nagler misled another member firm during the hiring process when he failed to advise the firm that he had been permitted to resign from a previous firm for violating its policy prohibiting borrowing funds from customers.

The suspension in any capacity was in effect from September 4, 2007, through October 1, 2007. (FINRA Case 2005003406001)

Claudia Reyes (CRD #4815334, Registered Representative, Los Lunas, New Mexico) submitted a Letter of Acceptance, Waiver and Consent in which she was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Reyes consented to the described sanction and to the entry of findings that she received more than $3,000 from customers of an insurance company affiliate of her member firm. Reyes either failed to forward the full amount of the customers’ payments or did not forward any of the payments to the insurance company affiliated with her member firm. The findings stated that Reyes acted without the customers’ knowledge and consent, thereby improperly using customer funds. (FINRA Case #2006006912001)

Decisions Issued

Their Note: "The Office of Hearing Officers (OHO) issued the following decision, which has been appealed to or called for review by the NAC as of August 31, 2007. The NAC may increase, decrease, modify or reverse the findings and sanctions imposed in the decision. Initial decisions which time for appeal has not yet expired will be reported in subsequent FINRA Notices."

Brian James Kelly (CRD #2270427, Registered Representative, Severna Park, Maryland) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Kelly churned a public customer’s account and engaged in trading in the account that was unsuitable due to the quantity of trades and excessive use of margin. The findings stated that Kelly exercised discretion in the customer’s account without his member firm’s prior written approval.

This decision has been appealed to the NAC and the sanction is not in effect pending consideration of the appeal. (FINRA Case #E9A2004048801)

Joseph Andrew Zaragoza Jr. (CRD #2417735, Registered Representative, Chicago, Illinois) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Zaragoza effected discretionary transactions in a public customer’s account without the customer’s prior written authorization and his firm’s prior written acceptance of the account as discretionary. The findings stated that Zaragoza recommended and effected excessive trading in the customer’s account despite the customer’s investment objectives and financial situation. The findings also stated that Zaragoza failed to submit email correspondence to his firm for review and approval before sending it to the customer. The findings also included that Zaragoza engaged in outside business activity for compensation and failed to give his member firm prompt written notice.

This decision has been appealed to the NAC and the sanction is not in effect pending consideration of the appeal. (FINRA Case #E8A2002109804)

Source: October FINRA Report (PDF Format)

Of course, you have to wonder about how much of this activity is going on without being noticed.


NASD Monthly Disciplinary Actions 2007


Previous:
Stockbrokers Caught Abusing Client's Money - Jan 2007
Stockbrokers Caught Abusing Their Client's Money - Dec 2006

Are Brokers 'Screwing' Stockholders through Short Selling? - 6 Apr 06

You should not be trading on Margin - 9 Jan 06
Do You Know If You Have A Margin Account? - 2 May 07

"the biggest global margin call in history" - 20 Aug 07

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