FINRA Disciplinary Action Report January 2015

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.

Arque Capital, Ltd., based in Arizona, was censured and fined $50,000. The firm sold approximately $3.53 million in an alternative investment known as Renewable Secured Debentures, offered by a GWG Holdings Inc.,, to approximately 40 investors while providing investors with the company’s sales kit, which included a brochure with misleading statements. The firm distributed sales literature that contained misleading statements, omitted material facts and failed to provide a sound basis for evaluating the securities that were being offered. More here >>>

Essex Securities LLC of Massachusetts was censured, fined, ordered to pay restitution to customers for allegedly engaging in a pattern of unsuitable mutual fund switching in customer accounts, without having reasonable grounds for believing that such transactions were suitable for those customers, in view of the nature of the recommended transactions, the frequency of the transactions and the transaction costs incurred. More here >>>

LaSalle St Securities, L.L.C. of Illinois was censured and fined $175,000 with respect to private placement offerings. Allegedly, the firm failed to exercise adequate due diligence before allowing a registered representative to recommend the offering to four accredited investors and distributed a private-placement memorandum to potential investors that did not include certain material facts and relied on a flawed methodology for projecting return on investment. More here >>>

Michael Christopher Evangelista of ABC Corp of Pennsylvania was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Evangelista consented that he failed to disclose to his member firms that firm customers were purchasing securities away from the firms or that he was being compensated in connection with his referrals. The findings also stated that Evangelista lacked a reasonable basis to recommend to his customers that they purchase the securities the entity issued, given his failure to perform a reasonable investigation and appropriate due diligence on the investment. More here >>>

John Charles Hanson, most recently of Northwestern Mutual Investment Services was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Hanson consented to findings that he refused to respond to FINRA requests for information, documents and testimony in connection with an investigation involving allegations that he misappropriated more than $300,000 from at least two member firm customers. More here >>>

Joseph Scott Schaffer of MMM Partners of New York was barred from association with any FINRA member in any capacity. Without admitting or denying the allegations, Schaffer consented to the sanction that he and other individuals fraudulently sold a total of nearly $3 million worth of Senior Secured Zero Coupon Notes issued by a company in a private placement offering to customers. The findings stated that Schaffer recklessly misrepresented material facts about the offering, which promised to pay a return of 100 percent in one year by purportedly extracting precious metals from materials left over from mining operations. 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, including one such transaction Schaffer had effected. Schaffer recklessly failed to conduct a reasonable investigation of the viability and legitimacy of the notes in the face of numerous red flags that the offering was a fraud. More here >>>

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