Articles Posted in Disciplinary Actions

In a FINRA Office of Hearing Officers’ decision reported in September, 2015 (which is presently on appeal) De Pere, Wisconsin broker dealer KCD Financial, Inc. was censured and fined $115,000. The sanctions were based on findings that the firm permitted registered representatives in two branch offices to use false and misleading advertisements as a marketing tool for their securities business.

The findings stated that these registered representatives separately ran what was sometimes referred to as a certificate of deposit finder or locator service. The KCD Financial representatives regularly advertised Federal Deposit Insurance Corporation (FDIC)-insured CDs at a rate of return that was far above the market rate. No FDIC-insured CDs existed at the advertised rate of return, but the advertisements made it seem that these CDs existed.

The representatives used the advertisements to entice potential customers into their offices in order to sell securities and other financial products to them. However, the advertisements did not mention securities. The CD advertisements were not separate and apart from the representatives’ securities business, but rather, were a marketing tool for their securities business. Further, from the customers’ perspective, the CDs and securities were offered and sold by the same person from the same office as part of the same business. The OHO decision found that KCD Financial was aware of, or at least turned a blind eye to, the nature and function of the advertising.

In September, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that registered representative John Waszolek of Scottsdale, AZ, and formerly associated with Raymond James submitted a letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member. Without admitting or denying the allegations, Waszolek consented to the sanction and to the entry of findings that he took unfair advantage of an elderly customer by having the customer give him successor trustee and residual beneficiary roles and responsibilities when he knew of her declining mental condition and lack of testamentary capacity.

The findings stated that John Waszolek knew that the customer had twice been diagnosed with Alzheimer’s disease and suffered from dementia and memory loss. Despite this knowledge, Waszolek procured the appointment as successor trustee and residual beneficiary of the customer’s trust, and following her death, attempted to inherit more than $1.8 million from her estate.

The findings also stated that John Waszolek concealed his roles as a fiduciary to the customer and a beneficiary of her trust from his broker dealer. Waszolek also failed to adhere to the firms’ written procedures when he failed to disclose or receive preapproval for his role as beneficiary or successor trustee of the customer’s trust, or that he had received a healthcare power of attorney over the customer. Waszolek neither sought nor obtained either firms’ approval to act in a fiduciary capacity as to the customer.

In September, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that registered representative Mike Talin of Seal Beach, CA, and formerly associated with Woodbury Financial Services 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, Mike Talin consented to the sanction and to the entry of findings that he failed to provide FINRA with documents and information, and appear for testimony during the course of its investigation into allegations that he converted funds from the nonsecurities account of his member firm’s customer.

Mike Talin’s registration and disciplinary history

In September, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that registered representative Joe Schroeder of Dallas, Texas and formerly associated with Wunderlich Securities out of Plano submitted a letter of Acceptance, Waiver and Consent in which he was assessed a deferred fine of $20,000 and suspended from association with any FINRA member in any capacity for 12 months.

Without admitting or denying the findings, Joe Schroeder consented to the sanctions and to the entry of findings that he participated in undisclosed private securities transactions without giving prior written notice to, or obtaining prior written approval from his member firm. The findings stated that Schroeder recommended and sold $300,000 worth of convertible promissory notes in Titan Energy to several investors, including 12 firm customers. Schroeder recommended these sales to the investors, wired the funds from their accounts at his firm to the entity, and received compensation from the entity for these sales.

The findings also stated that Joe Schroeder borrowed money from his firm’s customer in contravention of his firm’s policies and without prior written notice and the firm’s approval. The findings also included that Schroeder exercised discretion to purchase securities in the same customer’s account but did not receive the customer’s prior written discretionary authority to manage her account in this manner.

In September, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that registered representative Emily Pena of San Antonio, Texas and formerly associated with New York Life Securities in San Antonio 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, Emily Pena consented to the sanction and to the entry of findings that she converted funds from an affiliate of her member firm.

The findings stated that although firm policy prohibited payment of life-insurance premiums by its registered representatives for non-family members, Pena used approximately $7,868 in personal funds to pay premiums for customers unrelated to her. The policies had originally been sold to the customers by agents whom Emily Pena had recruited.

By paying the premiums for the customers, Pena kept the policies in place and artificially increased the recruiting overrides paid to her on policies she sold. Because none of the customers had authorized Pena to make premium payments, she created electronic fund transfer forms that falsely reflected customer authorization. As a result of these actions, Pena received approximately $4,734 in additional compensation to which she was not otherwise entitled.

In September, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that registered representative Matthew Levitt of Santa Monica, CA and formerly associated with Equinox Securities in Redlands, CA 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, Matthew Levitt consented to the sanction and to the entry of findings that he failed to appear and provide testimony before FINRA in connection with an investigation into whether there were violations of NASD and/or FINRA rules, and/or the federal securities laws, in connection with the offer and sale of certain securities between approximately April 2013 and August 2013.

Matthew Levitt’s registration and disciplinary history

In September, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that registered representative Kenneth Hornyak of Traverse City, MI and formerly associated with Stifel Nicholas 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, Ken Hornyak consented to the sanction and to the entry of findings that he refused to appear for an on-the-record interview in connection with FINRA’s investigation into Hornyak’s potential discretionary trading, unauthorized trading and unsuitable short-term trading in UITs.

Ken Hornyak’s registration and disciplinary history

In order to lawfully sell investments to the public, one must either be registered or exempt from registration.

In September, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that registered representative Dylan Grayson of Plano, Texas and formerly associated with Merrill Lynch 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, Dylan Grayson consented to the sanction and to the entry of findings that he failed to provide FINRA-requested testimony during the course of an investigation into allegations that he used a customer’s credit card to make purchases for his own personal benefit.

Dylan Grayson’s registration and disciplinary history

In September, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that registered representative Vikas Goel of Chino Hills, CA and associated with Newport Coast Securities submitted a letter of Acceptance, Waiver and Consent in which he was fined $10,000 and suspended from association with any FINRA member in any capacity for six months.

Without admitting or denying the allegations, Vikas Goel consented to the sanctions and to the entry of findings that he falsified customer documents by obtaining and maintaining pre-signed customer forms. The findings stated that Goel obtained customer signatures on one set of documents and then copied the signature pages and used them for multiple sets of documents for the same customer while transferring customer accounts to his broker dealer from his former firm. Goel maintained pre-signed account transfer documents, as well as other documents requiring a customer’s signature, in his files throughout his employment with the firm. His firm conducted an unannounced audit of Goel’s branch office files and discovered the documents that were either blank forms pre-signed by a customer or forms completed using an earlier obtained signature.

Goel’s suspension is in effect from August 17, 2015, through February 16, 2016.

In September, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that registered representative Jonah Engler of New York, NY and formerly associated with Global Arena Capital 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 allegations, Jonah Engler consented to the sanction and to the entry of findings that he recklessly misrepresented material facts to his customers regarding senior secured zero-coupon notes issued by a Metals, Milling and Mining, LLC in a private placement offering, in willful violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

Jonah Engler, along with other individuals, fraudulently sold a total of nearly $3 million worth of the notes to 59 customers. The findings stated that Engler recklessly misrepresented that the notes were collateralized when in fact, there was not any collateral for them. Engler failed to confirm that the collateral existed and that the supposed collateral had any value and recklessly misrepresented to prospective purchasers that their investments would be adequately secured by collateral.

The findings also stated that Engler recklessly failed to conduct a reasonable investigation of the viability and legitimacy of Metals, Milling and Mining LLC in the face of numerous red flags that the company was a fraud. Engler failed to obtain basic information about the company that was necessary to the due diligence process in order to understand an investment in it. Without such information, Engler lacked a reasonable basis to recommend the notes to investors. The investors lost all of the money that they invested in the notes, with the exception of three investors who were repaid with funds from new investors.