FINRA November 2014 Disciplinary Report


Each month and again on a quarterly basis, the agency that regulates the financial industry, FINRA (Financial Industry Regulatory Authority), produces a detailed report that runs down all disciplinary actions recently taken against brokerage firms and brokers. This long list of alleged wrongdoing and misconduct reads a lot like a police blotter. We strongly encourage any investor who suspects their broker and/or broker-dealer of having lost them money on dubious terms to at least skim this report to see if you recognize any names, schemes, products, or securities.

For our part, in addition to circulating the entire report to help get the word out about these alleged misdeeds, we like to pick out some of the highlights from each report. Specifically, we’re looking for schemes or abuses that might be more far-reaching than the individual cases brought through the FINRA arbitration process. In other words, we name names here because we hope to raise awareness out there about certain brokers and products that might otherwise go unnoticed except for the case appearing in the report.

Penny Stock Related Violations/Actions

Feltl & Company (Minneapolis, Minnesota)

This firm was censured and fined $1,000,000. The firm consented to the sanctions and to the entry of findings that it failed to comply with penny stock rules as they relate to suitability, disclosure and record-keeping requirements for broker-dealers. The findings stated that the firm engaged in thousands of penny stock transactions on behalf of its customers and received significant revenue from its penny stock business. The firm solicited its customers to make penny stock purchases and received over $2.1 million from these transactions through markups, markdowns or commissions.

Stifel, Nicolaus & Company, Incorporated (St. Louis, Missouri)

This firm was censured and fined $300,000. It consented to the sanctions and to the entry of findings that it failed to establish and implement an adequate anti-money laundering (AML) program to detect and cause the reporting of certain potentially suspicious activity. The findings stated that the firm executed, for its customers, unsolicited purchases and sales of at least 2.5 billion shares of low-priced securities (penny stocks), which generated at least $320 million in proceeds. Despite the amount of unsolicited penny-stock trading activity conducted through the firm and the awareness of risks associated with such activity, the firm failed to have an adequate surveillance system to review unsolicited penny-stock transactions.

Thomas Neil Charbonneau (Minnesota) was barred from association with any FINRA member in any capacity. Charbonneau consented to the sanction and to the entry of findings that he sold approximately 1.7 million shares of a speculative penny stock (X Corp.) from his own accounts, generating proceeds of approximately $400,000, while he solicited and recommended the purchase of the speculative penny stock to his customers without disclosing that he was selling the stock from his personal accounts. The findings also stated that Charbonneau caused a customer to sign and initial in blank investment-related member firm documents pertaining to a potential investment in a REIT in contravention of his firm’s prohibition against such conduct.

Non-traditional ETF Violations

Huntleigh Securities Corporation (St. Louis, Missouri)

The firm consented to the sanctions and to the entry of findings that it failed to establish and maintain a supervisory system, including written policies and procedures, regarding the sale of leveraged, inverse and inverse-leveraged exchange-traded funds (non-traditional ETFs) that was reasonably designed to achieve compliance with applicable securities laws and regulations. The findings stated that the firm allowed its representatives to recommend and sell non-traditional ETFs to customers when its WSPs did not address the sale or supervision of non-traditional ETFs. The firm did not conduct due diligence of non-traditional ETFs before allowing its representatives to recommend and sell them to customers. The findings also stated that despite the unique features and notable risk factors of non-traditional ETFs, the firm did not provide its representatives or supervisors with any training or other guidance specific to whether and when non-traditional ETFs might be appropriate for their customers.

Misappropriation Related Violations/Actions

Mark Foster (California) of Stern Fisher Edwards Inc. was barred from association with any FINRA member in any capacity. The sanction was based on findings that Foster failed to respond to requests from FINRA for information and documents and to appear and provide on-the-record testimony regarding allegations that he misappropriated more than $2 million in customer funds.

Clark Smith Gardner (Utah) of Cetera was barred from association with any FINRA member in any capacity. Gardner consented to the sanction and to the entry of findings that he converted customer funds for his own use and benefit.

Jason Mitchell Meyers (New York) of ICM Capital Markets was barred from association with any FINRA member in any capacity. Meyers consented to the sanction and to the entry of findings that he misappropriated at least $700,000 of funds raised from investors in a series of private offerings of securities.

James Marc Unger (Ohio) was barred from association with any FINRA member in any capacity. Unger consented to the sanction and to the entry of findings that he borrowed at least $219,000 from a customer without his member firms’ approval.

Warren Carl Buterbaugh (Pennsylvania) was named a respondent in a FINRA complaint alleging that he forged an elderly customer’s signature on an annuity withdrawal request form to effectuate the unauthorized withdrawal of the customer’s variable annuity.

Unsuitable Investments Violations/Actions

Aon Douglas Miller (Tennessee) was named a respondent in a FINRA complaint alleging that he participated in private securities transactions with various entities in which four of his member firm’s customers invested a total of $1,550,000. The complaint alleges that at no time were any of the entities in which the customers invested on the list of approved investment products at Miller’s firm.

Experienced FINRA Securities Litigation Attorneys

If you or anyone you know has been the victim of broker misconduct or investment fraud, please contact our experienced securities attorneys immediately for a free consultation at 1-855-462-3330 or via email by clicking here.