NEW: FINRA disciplinary action list for JULY 2013 .(GlobaLink Securities, VSR Financial Services, Citigroup Global Markets Inc plus over 100 more))

p300016 – link to full report click here

 

Disciplinary and
Other FINRA Actions

Firms Fined, Individuals Sanctioned
GlobaLink Securities, Inc. (

CRD® #29721, Pasadena, California) and Junhua
Michael Liao (CRD #4278425, Registered Principal, San Gabriel, California)
submitted a Letter of Acceptance, Waiver and Consent in which the firm was
fined $20,000, jointly and severally with Liao. Liao was also suspended from
association with any FINRA member in any principal capacity for one month.
Without admitting or denying the findings, the firm and Liao consented to
the described sanctions and to the entry of findings that the firm, acting
through Liao, executed an agreement to market and sell a Regulation D
offering of promissory notes for a medical receivables financing company. The
findings stated that thereafter, the firm sold $1,260,049 of the notes to some
customers, and these sales generated approximately $56,700 in commissions
for the firm. The findings also stated that as the firm’s chief compliance officer
(CCO) and president throughout the relevant period, Liao was responsible for
ensuring that the firm established, maintained, and enforced a supervisory
system and written supervisory procedures (WSPs) reasonably designed to
achieve compliance with applicable laws rules, and regulations. The findings
also included that the firm maintained WSPs pertaining to the sales of private
placements, but the WSPs were inadequate in that they lacked specifics
concerning how the firm would conduct due diligence, process private
placement transactions, ensure that a Regulation D product was suitable for
investors, and document the firm’s decisions and actions regarding private
placement transactions. FINRA found that as a result of the firm’s deficient
supervisory system and WSPs, the firm, acting through Liao, failed to conduct
adequate due diligence on the offering. Such failure prevented the firm and
Liao from learning that the issuer had experienced payment problems on
earlier note offerings and thus, the private placement memorandum (PPM)
misrepresented the issuer’s past performance.
The suspension was in effect from June 3, 2013, through July 2, 2013. (FINRA
Case #2009018818901)

_______________________

VSR Financial Services, Inc.

(CRD #14503, Overland Park, Kansas) and Donald Joseph Beary
(CRD #15818, Registered Principal, Lenexa, Kansas) submitted a Letter of Acceptance,
Waiver and Consent in which the firm was censured and fined $550,000. Beary was
fined $10,000 and suspended from association with any FINRA member in any principal
capacity for 45 days. Without admitting or denying the findings, the firm and Beary
consented to the described sanctions and to the entry of findings that the firm failed to
establish, maintain and enforce a reasonable supervisory system regarding the sale of
non-conventional investments. The findings stated that the firm’s WSPs provided that
no more than 40 percent to 50 percent of a client’s exclusive net worth could be invested
cumulatively in alternative investments unless there was a substantial reason to exceed
the guidelines and that justification was well documented. Supplemental to these
procedures, the firm, through Beary, created additional procedures that applied a discount
to certain non-conventional instruments, reducing the percentage of a customer’s liquid
net worth invested. The findings also stated that as the direct participation principal, Beary
had responsibility for the implementation and supervision of the discount program. The
Securities and Exchange Commission (SEC) identified as a deficiency, in a letter to the firm,
that it did not have adequate written procedures relating to the discount program. The SEC
made the same finding two years later regarding the lack of WSPs relating to the discount
program. Despite these warnings from the SEC, Beary did not take reasonable steps to
implement WSPs or to otherwise discontinue the use of the discount program.
The findings also included that in addition to the 40 percent to 50 percent concentration
limit stated in the firm’s WSPs, the firm’s new account form asked each client to specify the
percentage of liquid net worth that the client would be comfortable investing in various
risk categories. Most alternative investment program sponsors identified their products
involving, at a minimum, a high degree of risk. The firm also assigned a risk category to
each alternative investment it sold. Rather than assign a risk category based upon the risk
level identified by the sponsor in the alternative investment offering documents, the firm
routinely assigned lower risk categories. In several instances, the firm lowered its internal
risk rating subsequent to the firm’s acceptance of the product. In spite of the firm’s efforts
to increase sales of alternative investments through the use of discounts and risk rating
reductions, customer investments still exceeded the 40 percent concentration guideline,
but the firm did not document the existence of a substantial reason to exceed the
concentration guidelines as required by its WSPs.
FINRA found that the firm failed to establish, maintain and enforce a reasonable
supervisory system regarding the use of consolidated reports. The firm’s WSPs regarding
consolidated statements were limited to a few memoranda issued to registered
representatives prior to the issuance of FINRA Regulatory Notice 10-19. In practice, for
six years, the firm’s registered representatives used a number of consolidated reporting
systems. The firm did not require pre-approval of the consolidated reports to determine
whether accurate pricing and disclosures were being used. The firm did not have a
system for prompt review of the consolidated reports after the reports were sent tocustomers. Given the fact that the firm allowed its registered representatives to enter
valuations manually, the firm’s lack of supervision of the consolidated reports was
unreasonable. FINRA also found that the firm, acting through a registered representative,
recommended and effected the sale of high-risk private placements to customers. While
these products may have been suitable for certain customers, they were not suitable
for these customers given their financial circumstances and condition. The firm earned
approximately $35,950 in commissions on the transactions. The firm, through another
registered representative, made recommendations to customers that were not suitable
given their moderate risk tolerance and specifications, and the firm earned commissions
on the transactions of approximately $483,077.38. In addition, FINRA determined that
the firm failed to reasonably supervise its representatives with respect to the unsuitable
transactions. One of several firm principals reviewed and approved the transactions of
one of these representatives, and each of the principals failed to detect or investigate “red
flags” regarding the transactions. This representative falsified the account documentation
for customers, but the firm did not detect or investigate any of the representatives’
falsification of documents or other red flags. Detection and investigation of any of these
red flags might have prevented the representative’s unsuitable recommendations and
the resulting loss of the customers’ funds. Moreover, FINRA found that the firm allowed
its registered representatives to send consolidated statements to their customers but
never reviewed the consolidated statements a representative sent to some customers to
determine whether he was following the firm’s procedures regarding pricing. Because of
the inaccurate pricing the representative used, and the firm’s lack of supervision, these
customers received statements with erroneous pricing information.
The suspension is in effect from June 3, 2013, through July 17, 2013. (FINRA Case
#2010022963602)

________________________________________________
Firms Fined

American Portfolios Financial Services, Inc.

(CRD #18487, Holbrook, New York) submitteda Letter of Acceptance, Waiver and Consent in which the firm was censured and fined
$25,000. Without admitting or denying the findings, the firm consented to the described
sanctions and to the entry of findings that it had inadequate written procedures
regarding the delivery of exchange-traded funds (ETFs) and/or unit investment trust (UIT)
prospectuses. The findings stated that the firm signed an agreement with another FINRA
member firm for delivery of ETF and UIT prospectuses. Although American Portfolios
retained the other firm to deliver its ETF and UIT prospectuses, it remained American
Portfolios’ responsibility to review transaction activity on a regular basis and verify that a
prospectus was properly delivered when required. To assist American Portfolios in fulfilling
its delivery obligations, the other firm made available online daily and monthly exception
reports. These exception reports listed all prospectuses that were not delivered on a trade
date, and the reason each prospectus was not delivered. American Portfolios failed toadequately review the exception reports, and failed to otherwise review or monitor the
functions it delegated to the other firm. As a result, American Portfolios failed to detect that
the other firm had failed to timely deliver prospectuses, thereby failing to timely deliver
the required prospectuses or written descriptions in connection with these ETF and UIT
purchases. (FINRA Case #2012033328301)

________________________________________
APB Financial Group, LLC

(CRD #38235, New York, New York) submitted a Letter ofAcceptance, Waiver and Consent in which the firm was censured and fined $30,000.
Without admitting or denying the findings, the firm consented to the described sanctions
and to the entry of findings that it failed to establish and maintain a supervisory system
and establish, maintain and enforce adequate WSPs reasonably designed to achieve
compliance with applicable securities laws and regulations concerning the supervision
of approved participation in private securities transactions, the review and inspection
of non-branch locations, and the retention of emails concerning firm business sent
from or received by personal email accounts. The findings stated that the firm failed to
enforce its WSPs addressing the review of outside brokerage account statements for the
approved outside accounts of associated persons. The firm failed to establish, maintain
and enforce adequate written supervisory control procedures reasonably and adequately
designed to review and supervise the customer account activity conducted by each of
the firm’s producing managers. The findings also stated that the firm submitted to
senior management annual reports for two years that failed to detail the firm’s system
of supervisory controls, the summary of the test results thereof, significant identified
exceptions and any supervisory procedures created in response to the test results. For
the two years, the firm prepared an annual certification from its chief executive officer
(CEO) stating that it had supervisory control and review processes in place, but failed to
adequately evidence such processes in a written report for review by the CEO and CCO.
(FINRA Case #2010021326901)

________________________________
Automated Trading Desk Financial Services, LLC

(CRD #103768, Mt. Pleasant, South
Carolina) submitted a Letter of Acceptance, Waiver and Consent in which the firm was
censured and fined $40,000. Without admitting or denying the findings, the firm consented
to the described sanctions and to the entry of findings that it reported last sale reports
of transactions in over-the-counter (OTC) equity securities to the OTC Reporting Facility
(OTCRF) that it was not required to report and incorrectly designated as “.W” last sale
reports of transactions in OTC equity securities to the OTCRF. The findings stated that the
firm transmitted last sale reports of transactions in designated securities to the FINRA/
NASDAQ Trade Reporting Facility® (FNTRF), and failed to include a “Y” to indicate that the
transactions qualified for an exemption from SEC Regulation NMS Rule 611. The reports
also failed to include the related “J” code indicating that the trades specifically qualified for
the sub-penny trade exemption from Rule 611. (FINRA Case #2011028302901

_____________________

Bishop, Rosen & Co., Inc.

(CRD #1248, New York, New York) submitted a Letter of
Acceptance, Waiver and Consent in which the firm was censured, fined $32,500, ordered
to pay $7,613.14, plus interest, in restitution to customers, and required to revise its
WSPs concerning fair pricing of municipal securities. Without admitting or denying the
findings, the firm consented to the described sanctions and to the entry of findings
that it purchased municipal securities for its own account from a customer and/or sold
municipal securities for its own account to a customer at an aggregate price (including
any markdown or markup) that was not fair and reasonable, taking into consideration all
relevant factors, including the best judgment of the broker, dealer or municipal securities
dealer as to the fair market value of the securities at the time of the transaction and of any
securities exchanged or traded in connection with the transaction; the expense involved
in effecting the transaction; the fact that the broker, dealer or municipal securities dealer
is entitled to a profit; and the total dollar amount of the transaction. The findings stated
that the firm’s supervisory system did not provide for supervision reasonably designed to
achieve compliance with applicable securities laws, regulations and Municipal Securities
Rulemaking Board (MSRB) rules concerning fair pricing of municipal securities. (FINRA Case
#2011028510401)
Citadel Securities LLC

(CRD #116797, Chicago, Illinois) submitted a Letter of Acceptance,
Waiver and Consent in which the firm was censured, fined $215,000, ordered to pay
$239,582.12, plus interest, in restitution to customers, and required to revise its WSPs
regarding the handling of customer orders during market-disrupting events. Without
admitting or denying the findings, the firm consented to the described sanctions and to
the entry of findings that on a certain date, the American Stock Exchange (AMEX) opened
for equity trading approximately 70 minutes later than its regular opening due to system
problems; its transmission lines were shut down and all orders transmitted to AMEX were
rejected. The findings stated that at the time, the firm did not have any WSPs to address
how it would handle customer orders in the event a primary market failed to open for
trading, or was unavailable for trading. With the exception of a few securities that the firm
decided to begin trading on a manual basis, it followed its regular practice and handled all
customer orders on a fully automated basis. Regular orders received prior to the opening
of the AMEX were routed, on a riskless principal basis, to the AMEX to participate in the
exchange’s opening process. The firm held the customer orders in-house on its book
and sent identical representative orders to the AMEX floor for execution. Relying on this
procedure, the firm continued to accept new customer orders and to send representative
orders to the AMEX, after receiving notice that it was rejecting all orders. The findings also
stated that the firm failed to establish, maintain and enforce a system of supervision and
WSPs reasonably designed to address the handling of customer orders during marketdisrupting
events. The firm’s supervisory system did not include WSPs concerning the
prompt and fair handling of customer orders in instances where a primary market fails
to open for trading, or the market is unavailable for trading. The findings also includedan accessible place, memoranda of the cancellation of numerous brokerage orders. FINRA
also found that in transactions for or with a customer, the firm failed to use reasonable
diligence to ascertain the best inter-dealer market, and failed to buy or sell in such market
so that the resultant price to its customer was as favorable as possible under prevailing
market conditions. (FINRA Case #2007010875201)
Citadel Securities LLC

(CRD #116797, Chicago, Illinois) submitted a Letter of Acceptance,
Waiver and Consent in which the firm was censured, fined $50,000 and required to revise
its WSPs regarding SEC Rules 203(a) (long sales), 203(b)(1) (locate requirement) and 203(b)
(3) (threshold closeout requirement). Without admitting or denying the findings, the firm
consented to the described sanctions and to the entry of findings that it had fail-to-deliver
positions in equity securities at a registered clearing agency that was attributable to
market-making activities, and did not close out the fail-to-deliver positions by purchasing
securities of like kind and quantity within the time frame prescribed. The findings stated
that the firm accepted short sale orders involving equity securities from another person,
or effected short sales for its own account, without first borrowing the security or entering
into a bona fide arrangement to borrow the security, and had a fail-to-deliver position at
a registered clearing agency in such security that had not been closed out in accordance
with the requirements of paragraphs (a) and (b) of SEC Rule 204T. The findings also stated
that the firm’s supervisory system did not provide for supervision reasonably designed to
achieve compliance with applicable securities laws, regulations and FINRA rules concerning
SEC Rules 203(a) (long sales), 203(b)(1) (locate requirement), and 203(b)(3) (threshold
closeout requirement). (FINRA Case #2009018256501)
Citigroup Global Markets Inc.

(CRD #7059, New York, New York) submitted a Letter of
Acceptance, Waiver and Consent in which the firm was censured, fined $800,000 and
ordered to pay $1,055.85, plus interest, in restitution to customers. The firm shall report
unreported transactions through the electronic Form T process and pay the fees assessed
for these previously unreported transactions. The firm shall provide reports, written and
oral, on dates no more than six months, 12 months, and 18 months after the date of
acceptance of this AWC regarding the implementation and effectiveness of the firm’s
equity trade reporting systems and supervision of equity trade reporting, and provide a
summary, written and oral, and any subsequent updates of the results of a review of the
new trade reporting system to be performed by the firm’s quality assurance team.
Without admitting or denying the findings, the firm consented to the described sanctions
and to the entry of findings that it failed to report last-sale reports of transactions in
designated securities to the FNTRF; and failed, within the required time period, to transmit
last-sale reports of transactions in designated securities to the FNTRF and failed to
designate some of them as late. The firm failed to report the correct execution time to the
FNTRF in last-sale reports of designated securities transactions and incorrectly designated
as “.PRP” to the FNTRF some last-sale reports of designated securities transactions. The firm
failed to mark transactions reported to the FNTRF as riskless principal transactions. The findings also stated that the firm incorrectly reported the second leg of riskless principal
transactions to the NASD®/NASDAQ Trade Reporting Facility (NNTRF) or the FNTRF. The
findings also stated that the firm failed to report last-sale reports of transactions in OTC
equity securities to the OTCRF. The firm failed to report trade reports to the OTCRF by
6:30 p.m. Eastern Time (or the end of the reporting session that was in effect at that
time) on the trade date. The firm failed to report the correct execution time for reportable
securities transactions to the OTCRF. The findings also included that the firm failed to
accept or decline trade reports in reportable securities in the FNTRF within 20 minutes after
execution, and failed to accept or decline in the OTCRF trade reports in reportable securities
within 20 minutes after execution.
FINRA found that the firm erroneously reported transactions in foreign equity securities
that were executed and reported in foreign countries to the OTCRF. The firm failed, within
90 seconds after execution, to transmit last-sale reports of transactions in OTC equity
securities to the OTCRF. The firm failed to designate to the OTCRF some last-sale reports as
late, and failed to report the correct execution time to the OTCRF for some last-sale reports
for transactions in OTC equity securities. FINRA also found that the firm failed, within 30
seconds after execution, to transmit to the OTCRF last-sale reports of transactions in OTC
equity securities, failed to designate to the OTCRF some last-sale reports as late, and failed
to report the correct execution time to the OTCRF for some last-sale reports for transactions
in OTC equity securities. Moreover, FINRA found that the firm’s supervisory system did
not provide for supervision reasonably designed to achieve compliance with applicable
securities laws, regulations and FINRA rules concerning equity trade reporting.
Furthermore, FINRA found that the firm transmitted Execution or Combined Order/
Execution Reports to the Order Audit Trail System (OATSTM) that contained inaccurate,
incomplete, or improperly formatted data, so OATS was unable to link the execution
reports to the related trade reports in a FINRA trade reporting system. The firm transmitted
reports to OATS that failed to include a desk receipt time and failed to show the order
receipt time on brokerage order memoranda. The findings also stated that the firm effected
transactions in securities while a trading halt was in effect for each of the securities and
effected transactions in one security after the securities registration was revoked pursuant
to Section 12(j) of the Exchange Act. The findings also included that the firm failed to fully
and promptly execute customer market orders, and for some of the orders, failed to use
reasonable diligence to ascertain the best inter-dealer market for the subject securities so
that the resultant prices to its customers would be as favorable as possible under prevailing
market conditions. (FINRA Case #2007010451301)
D.E. Shaw Securities, L.L.C

. (CRD #24332, New York, New York) submitted a Letter of
Acceptance, Waiver and Consent in which the firm was censured and fined $15,000.
Without admitting or denying the findings, the firm consented to the described sanctions
and to the entry of findings that it submitted inaccurate order cancellation information to
OATS. (FINRA Case #2010021247601)

Essex Radez LLC

(CRD #34649, Chicago, Illinois) submitted a Letter of Acceptance, Waiver
and Consent in which the firm was censured and fined $15,000. Without admitting or
denying the findings, the firm consented to the described sanctions and to the entry of
findings that it failed to transmit all of its Reportable Order Events (ROEs) it was required to
transmit to OATS on numerous business days. (FINRA Case #2010022104201)
Fifth Third Securities, Inc.

(CRD #628, Cincinnati, Ohio) submitted a Letter of Acceptance,
Waiver and Consent in which the firm was censured and fined $15,000. Without admitting
or denying the findings, the firm consented to the described sanctions and to the entry of
findings that its WSPs required the disclosure of material facts, including potential conflicts
of interest, to investors at or prior to the time of sale, which is typically accomplished by
the delivery of an offering statement. The findings stated that despite these procedures,
the firm failed to disclose the existence of a potential conflict of interest in the offering
statement for an issue of bonds for an entity. A firm Vice President of Public Finance served
as a director on the board of the entity at the same time the firm was underwriting the
issue of the bonds. This individual notified the firm of his position on the board on an
outside business activity disclosure form. This information, however, was not included
in the offering statement for the bonds for the entity. The findings also stated that the
vice president published Internet advertisements without prior approval, which the
firm failed to identify. The individual had previously published advertisements without
the firm’s prior approval. Despite these earlier incidents, the firm failed to establish and
enforce procedures to ensure the individual’s compliance with the applicable firm policy.
The findings also included that the firm failed to timely notify the MSRB of a political
contribution the individual made to his own campaign to become a member of the entity’s
board. The individual contributed $555.55 to his own campaign and later notified the firm
of the contribution. The firm notified the MSRB of the contribution in a Form G-37 filing
submitted 269 days late. (FINRA Case #2011025317201)\
First Asset Financial, Inc.

(CRD #139107, Salina, Kansas) submitted a Letter of Acceptance,
Waiver and Consent in which the firm was censured and fined $10,000. Without admitting
or denying the findings, the firm consented to the described sanctions and to the entry of
findings that it experienced problems that resulted in its failure to retain certain businessrelated
email. The findings stated that some of the failures were directly attributable to
the firm’s third-party email vendor. The vendor experienced a system failure during which
it did not archive any firm email, and some disks on which the vendor stored the firm’s
emails became corrupted, which resulted in the loss of 33 days’ worth of firm emails. The
findings also stated that the firm failed to retain emails sent by personnel to addresses
outside of the firm’s email domain. This failure resulted in a flaw in the firm’s testing of its
email-retention system. Although the system was not capturing outgoing messages, the
firm’s testing called for the recipient of the outgoing message to reply by email, which—
unbeknownst to the individual conducting the test—created the false appearance that
both the outgoing message and the resulting reply were retained. As a result, the firm did
not realize that the system was not capturing outgoing emails. This situation continued for
approximately two years. (FINRA Case #2012030785501)

HSBC Securities (USA) Inc. (CRD #19585, New York, New York) submitted a Letter of
Acceptance, Waiver and Consent in which the firm was censured and fined $10,000.
Without admitting or denying the findings, the firm consented to the described sanctions
and to the entry of findings that it failed to timely report ROEs to OATS; submitted New
Order Reports and related subsequent reports (i.e. Route Report, Cancel Report, Cancel/
Replace Report or Execution Report) with incorrect timestamps; submitted Execution or
Combined Order/Execution Reports that contained inaccurate, incomplete or improperly
formatted data; submitted Route or Combined Order/Route Reports that OATS was unable
to link to the related order in the NASDAQ Market Center due to inaccurate, incomplete or
improperly formatted data; submitted Route or Combined Order/Route Reports that OATS
was unable to match to the receiving firm’s related New Order Report; and submitted New
Order events it was not required to report. (FINRA Case #2010025141301)
HSBC Securities (USA) Inc

. (CRD #19585, New York, New York) submitted a Letter of
Acceptance, Waiver and Consent in which the firm was censured and fined $75,000.
Without admitting or denying the findings, the firm consented to the described sanctions
and to the entry of findings that it failed to report P1 transactions in TRACE-eligible
corporate securities to the Trade Reporting and Compliance Engine® (TRACE®); failed
to report the accurate volume and price for P1 transactions in TRACE-eligible corporate
securities to TRACE; failed to report the accurate execution date for P1 transactions in
TRACE-eligible corporate securities to TRACE; and failed to report the correct contra-party’s
identifier for P1 transactions in TRACE-eligible corporate securities to TRACE, and failed to
report the accurate market identifier for one P1 transaction in a TRACE-eligible corporate
security to TRACE. The findings stated that the firm failed to timely report P1 transactions
in TRACE-eligible corporate debt securities within the appropriate T+1 time frame. The
findings also stated that the firm failed to report new issue offerings to TRACE that it was
required to report within the time frames set forth in FINRA Rule 6760. The findings also
included that the firm failed to report S1 transactions in TRACE-eligible securities to TRACE
within 15 minutes of the execution time. (FINRA Case #2011027361201)\
Israel A. Englander & Co., LLC

(CRD #33725, New York, New York) submitted a Letter of
Acceptance, Waiver and Consent in which the firm was censured and fined $12,500.
Without admitting or denying the findings, the firm consented to the described sanctions
and to the entry of findings that it failed to transmit ROEs, all of which were Route Reports,
to OATS on numerous business days. (FINRA Case #2011027960101)
JHS Capital Advisors, LLC

(CRD #112097, Tampa, Florida) submitted a Letter of Acceptance,
Waiver and Consent in which the firm was censured and fined $75,000. Without admitting
or denying the findings, the firm consented to the described sanctions and to the entry
of findings that, in connection with terminating its relationship with one clearing firm, it
transferred accounts from the clearing firm to another clearing firm. The first clearing firm
charged a fee of $50 to transfer a non-qualified account and $90 to transfer a qualified
account to another clearing firm. The findings stated that in connection with this transfer
of accounts, the firm sent letter(s) to customers, advising them that it would liquidate the
securities in their accounts, send the account proceeds to them, and close their accounts,
if they did not transfer their accounts to another firm within a certain period, typically
30 days. In accounts from which the firm did not receive a response to the letter(s), it
liquidated the securities in the accounts, sent the account proceeds to the customers, and
closed the accounts. The firm did not have the requisite oral or written authority to execute
such sales in non-discretionary accounts. The sales totaled approximately $1.1 million.
(FINRA Case #2011026248501)

____________________
KBC Securities USA, Inc

. (CRD #46709, New York, New York) submitted a Letter of
Acceptance, Waiver and Consent in which the firm was censured, fined $11,500 and
required to revise its WSPs regarding OATS reporting. Without admitting or denying the
findings, the firm consented to the described sanctions and to the entry of findings that it
failed to transmit all of its ROEs it was required to transmit to OATS on numerous business
days. The findings stated that the firm’s supervisory system did not provide for supervision
reasonably designed to achieve compliance with applicable securities laws, regulations and
FINRA rules concerning OATS reporting. (FINRA Case #2011029694401)
Landolt Securities, Inc. (CRD #28352, Oshkosh, Wisconsin) submitted a Letter of
Acceptance, Waiver and Consent in which the firm was censured and fined $12,500.
Without admitting or denying the findings, the firm consented to the described sanctions
and to the entry of findings that it failed to prepare order memoranda and did not retain
any other documents showing the time that the firm received customer orders with
respect to municipal securities transactions that it conducted on behalf of customers. The
findings stated that the failure, which was limited to transactions placed by phone, rather
than through an electronic bond-order system, was corrected by implementing written
procedures requiring the creation of order tickets for all municipal-securities transactions.
The findings also stated that with respect to municipal securities transactions that the firm
conducted, for a little over a year, it reported inaccurate trade execution times to the MSRB.
Those transactions involved securities that the firm had first purchased from a dealer on a
riskless-principal basis and then sold to customers. Documents that the firm maintained,
such as emails, instant messages and contra-firm order tickets, reflected execution times
that were earlier than what the firm reported to the MSRB. The findings also included that
for almost 11 months, the firm did not have a supervisory system or procedures, written
or otherwise, designed to ensure that it obtained, investigated, and where appropriate,
disclosed to customers material information about issuers of municipal securities. There
is no evidence that, during this period, the firm or its representatives investigated or
disclosed information about municipal securities issuers that would or might have been
material to customers. Although the firm’s WSPs stated that the firm’s municipal securities
principal or a designee would review all municipal securities transactions on a daily basis,
the firm could not demonstrate that it had implemented that procedure. (FINRA Case
#2011025851901)

___________________
Disciplinary and Other FINRA Actions 11
July 2013
Leerink Swann LLC

(CRD #39011, Boston, Massachusetts) submitted a Letter of Acceptance,
Waiver and Consent in which the firm was censured, fined $37,500 and required to revise
its WSPs. Without admitting or denying the findings, the firm consented to the described
sanctions and to the entry of findings that it transmitted reports to OATS that contained
an inaccurate special handling code, inaccurate order type codes, inaccurate times-in-force
and inaccurate report types (the firm submitted execution reports when it should have
submitted route reports). The findings stated that the firm provided written notification to
customers that failed to disclose information or disclosed inaccurate information. The firm
incorrectly disclosed that transactions were executed at an average price, failed to disclose
that transactions were executed at an average price, failed to disclose its correct capacity in
transactions, and/or failed to disclose the correct trade price. The findings also stated that
the firm accepted short sale orders in an equity security from another person, or effected
short sales in an equity security for its own account, without borrowing the security,
or entering into a bona fide arrangement to borrow the security; or having reasonable
grounds to believe that the security could be borrowed so that it could be delivered on the
date delivery is due; and documenting compliance with SEC Rule 203(b)(1) of Regulation
SHO. The findings also included that during one month, the firm made available a report
on the covered orders in national market system securities it received for execution from
any person that included incorrect information as to the number of covered orders, the
cumulative number of shares of covered orders, and the cumulative number of shares of
covered orders executed at any other venue. FINRA found that the firm’s supervisory system
did not provide for supervision reasonably designed to achieve compliance with applicable
securities laws, regulations and/or FINRA rules addressing minimum requirements for
adequate WSPs regarding SEC Rule 606, market maker registration volume thresholds; SEC
Rule 605, accepting trades in a timely manner; affirmative determination; SEC Rule 204;
naked short selling antifraud (SEC Rule 10b-21); trading during a halt; and clearly erroneous
trade filings. FINRA also found that the firm failed to provide documentary evidence that
on the trade date(s) reviewed it performed the supervisory reviews set forth in its WSPs
concerning market order protection. (FINRA Case #2010021594401)
(Level ATS dba EBX LLC

CRD #138138, Boston, Massachusetts) submitted a Letter of
Acceptance, Waiver and Consent in which the firm was censured, fined $47,500, and
required to revise its WSPs regarding OATS and SEC Rule 605. Without admitting or
denying the findings, the firm consented to the described sanctions and to the entry of
findings that it failed to transmit ROEs to OATS; the firm failed to send Cancel Reports
to OATS. The findings stated that during one month, the firm made available a report on
the covered orders in national market system securities it received for execution from any
person. The report included incomplete and incorrect information as it failed to include
an order in some instances and the firm used an incorrect national best bid and offer
(NBBO) in another instance. The findings also stated that the firm’s supervisory system
did not provide for supervision reasonably designed to achieve compliance with applicable
securities laws, regulations, and FINRA rules addressing minimum requirements for
adequate WSPs in OATS and SEC Rule 605. (FINRA Case #2011026126201)

________________________-
LPL Financial LLC

(CRD #6413, Boston, Massachusetts) submitted a Letter of Acceptance,
Waiver and Consent in which the firm was censured and fined $60,000. Without admitting
or denying the findings, the firm consented to the described sanctions and to the entry
of findings that it purchased municipal securities for its own account from a customer
and/or sold municipal securities for its own account to a customer at an aggregate price
(including any commission or service charge) that was not fair and reasonable, taking into
consideration all relevant factors, including the best judgment of the broker, dealer or
municipal securities dealer as to the fair market value of the securities at the time of the
transaction and of any securities exchanged or traded in connection with the transaction;
the expense involved in effecting the transaction; the fact that the broker, dealer, or
municipal securities dealer is entitled to a profit; and the total dollar amount of the
transaction. The findings stated that in corporate bond transactions, the firm failed to use
reasonable diligence to ascertain the best inter-dealer market, and failed to buy or sell in
such market so that the resultant price to its customer was as favorable as possible under
prevailing market conditions. The findings also stated that the firm submitted evidence
that it made restitution to each of the affected customers. (FINRA Case #2009020204701)
Morgan Keegan & Company, Inc.

(CRD #4161, Memphis, Tennessee) submitted a Letter
of Acceptance, Waiver and Consent in which the firm was censured and fined $60,000.
Without admitting or denying the findings, the firm consented to the described sanctions
and to the entry of findings that its Small Business Administration (SBA) Desk purchased
U.S. government-guaranteed small business loans from small regional banks throughout
the United States. After purchasing the loans, the SBA Desk pooled together loans with
similar qualities, securitized them into SBA pools, and ultimately sold them to institutional
customers. The demand for SBA pools began to decline. As a result, the SBA Desk inventory
levels increased significantly and remained above the firm’s allowable levels. The
findings stated that the firm confronted the head trader about the excessive SBA Desk
inventory levels and instructed him to sell a number of positions. Instead, the head trader
manipulated SBA Desk inventory levels so that they appeared to be lower than they actually
were (and thus in compliance with the firm’s allowable inventory levels). Consequently,
the head trader entered fictitious SBA pool trades totaling approximately $82 million.
The findings also stated that as a result of the fictitious trades, the firm believed that the
SBA loan levels had decreased by a total of $75 million. In addition to effecting the false
trades, the head trader also repeatedly manipulated forward the settlement dates. As the
settlement date for each fictitious order approached, the head trader moved forward the
settlement date by 30 days to allow himself more time to sell the SBA pools, triggering
the creation of cancel and correct tickets for the trades for several consecutive months.
When confronted with the findings, the head trader admitted his misconduct and the
firm terminated the head trader immediately. The findings also included that the firm’s
supervisory systems and WSPs for government loans, including SBA pools, were inadequate
to prevent the head trader’s fictitious trading. Among other things, the firm did not have
a process to monitor SBA loans that were aged (more than 120 days old). While the firm’s WSPs outlined a process to review aged inventory related to all other securities, they did
not include a process to review aged and unsettled SBA pools. In addition, the firm did not
have a process to confirm and compare ex-clearing transactions, such as sales of SBA pools,
or controls in place to review cancelled or modified transactions for reasonableness. The
firm’s risk management structure did not adequately address the distinct duties of the
front and back offices, in that the back office personnel who handled the administration
of trades reported directly to the head trader. This structure caused the delay in the firm’s
detection of the head trader’s misconduct. FINRA found that the firm also inadequately
addressed the marking of the SBA Desk inventory positions because the WSPs required
that SBA pools be marked on a monthly basis, as opposed to a daily basis. The firm did not
have WSPs that adequately prevented the head trader from approving his own transactions
without additional supervisory oversight, and allowed the firm to detect and prevent the
head trader’s fictitious trading of SBA pools. (FINRA Case #2009018062602)
Murphy & Durieu

(CRD #6292, New York, New York) submitted a Letter of Acceptance,
Waiver and Consent in which the firm was censured, fined $130,000 and required to revise
its WSPs regarding TRACE reporting. Without admitting or denying the findings, the firm
consented to the described sanctions and to the entry of findings that it failed to report
the correct contra-party’s identifier for transactions in TRACE-eligible securities to TRACE,
and failed to report transactions in TRACE-eligible securities it was required to report. The
findings also stated that the firm failed to report transactions in TRACE-eligible securities to
TRACE within 15 minutes of the execution time; failed to report the correct trade execution
time for transactions in TRACE-eligible transactions to TRACE; and failed to report the
correct trade execution time in the correct format for some transactions to TRACE. The
firm failed to show the execution time, or the correct execution time, on brokerage order
memoranda. FINRA found that the firm failed to report the correct trade execution time for
transactions in TRACE-eligible agency debt securities to TRACE, and failed to report these
transactions to TRACE within 15 minutes of the execution time. FINRA also found that
the firm failed to enforce its WSPs, which specified that the CCO would review the details
of each trade report identified as a potential exception in the TRACE Quality of Markets
Report Card and evidence such reviews with dates and initials. Moreover, FINRA found
that the firm failed to establish, maintain and enforce a supervisory system reasonably
designed to achieve compliance with applicable rules concerning TRACE reporting, and the
firm’s supervisory system did not provide for supervision reasonably designed to achieve
compliance with applicable securities rules, regulations and/or FINRA rules concerning
TRACE reporting.
The findings stated that the firm failed to report to the FNTRF the correct symbol indicating
whether the transaction was a buy, sell or cross and/or the correct contra-side executing
broker in last sale reports of transactions in designated securities. The findings also
included that the firm improperly reported information to the Real-time Transaction
Reporting System (RTRS) that it should not have reported; the firm improperly reported
purchase and sale transactions effected in municipal securities to the RTRS when the inter dealer deliveries were step-outs and thus were not inter-dealer transactions reportable to
the RTRS. In addition, FINRA determined that the firm failed to report the correct trade time
to the RTRS in municipal securities transaction reports.(FINRA Case #2009020565001)
National Bank of Canada Financial, Inc. (CRD #22698, New York, New York) submitted
a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined
$75,000. Without admitting or denying the findings, the firm consented to the described
sanctions and to the entry of findings that it reported holding inventory positions, with
a market value of $10,258,027, at CDS Clearing and Depository Services, Inc. (CDS) in the
name of its Canadian affiliate. The firm, on a Financial and Operational Combined Uniform
Single (FOCUS) Report characterized these proprietary positions as allowable assets (i.e.
assets readily convertible to cash) in its net capital computation. The firm did not have
sufficient possession and/or control of the proprietary positions held at CDS because
they were not under the firm’s name. In the event that the firm had needed to convert
these inventory positions to cash, the proceeds would not have been readily available in
the firm’s name. Thus, the inventory positions should have been characterized as nonallowable
assets (i.e. assets not readily convertible to cash). The firm re-characterized the
$10,258,027 inventory holdings as non-allowable assets. This mischaracterization of assets
did not result in a net capital deficiency as there were sufficient net capital reserves to
buttress the loss of the inventory holdings from the net capital computation; therefore,
because the firm failed to properly characterize its inventory positions with its Canadian
affiliate as non-allowable assets in its net capital computation, it maintained inaccurate
net capital records and filed inaccurate FOCUS reports. The findings stated that the firm
outsourced certain proprietary trading functions relating to the majority of its inventory to
an unaffiliated third-party investment advisor (IA). The inventory positions under the thirdparty
investment advisor’s control had a market value of $219,293,716. The individuals
at the IA who performed the contracted trading functions on behalf of the firm were not
registered with the firm. The findings also stated that no more than two individuals at the
IA performed the contracted trading functions that were delineated in the agreement. The
firm terminated its investment advisory relationship with the IA and all trading authority
over the firm’s inventory positions by the IA ceased. Because the firm outsourced part of
its proprietary trading functions to the IA and provided it with broad discretionary trading
authority, it was required to register, with the firm, the IA employees who performed the
proprietary trading functions on the firm’s behalf. The findings also included that the firm’s
WSPs did not include any provisions regarding its supervisory controls over the proprietary
trading functions that were outsourced to the IA. Specifically, the firm’s WSPs failed to
detail the firm’s risk management practices for the trading of its inventory positions by the
IA (e.g., investment criteria, trading parameters, and product suitability guidelines).
FINRA found that the firm’s general ledger commingled securities and non-securities
related balances and transactions between the accounts of the firm, its parent, and
other intercompany affiliates. The firm’s financial systems permitted securities and nonsecurities
related transactions to be recorded within the same general ledger accounts.As a result, the firm improperly netted transactions and balances between intercompany
securities and non-securities-related accounts. The firm eliminated all customer-related
securities balances from its books and records, including intercompany securities
transactions and balances, by the assignment of all-customer accounts to a clearing firm.
In addition, a review of the firm’s receivables from affiliates disclosed that the firm netted
two separate bank loans. There was no netting agreement in place to reconcile these loans;
therefore, the firm improperly netted a bank loan payable from one affiliate to another
bank loan receivable from a different affiliate, resulting in it understating its non-allowable
assets and liabilities on its balance sheet by $60,317,046. (FINRA Case #2011027999001)
NEXT Financial Group, Inc.

(CRD #46214, Houston, Texas) submitted a Letter of Acceptance,
Waiver and Consent in which the firm was censured, fined $250,000 and agreed to
conduct an audit to identify all non-firm email accounts used for securities-related
communications by registered persons of the firm and identify whether such email
accounts are being captured by the firm’s servers, reviewed as a part of its normal email
surveillance, and retained as required by FINRA rules and the federal securities laws;
establish and implement a corrective procedure to ensure that such email accounts will
be captured, reviewed and retained by the firm in the future, and shall provide to FINRA
a written statement describing the steps taken in the audit, the results of the audit, and
the corrective steps taken to ensure the future capture, review and retention of the emails
identified. Without admitting or denying the findings, the firm consented to the described
sanctions and to the entry of findings that for over four years, two of the firm’s registered
representatives operated an approved outside business activity and would, at times,
use their outside business email accounts to send or receive securities-related electronic
correspondence with customers. The findings stated that the firm’s WSPs, allowed
registered persons to communicate with customers through non-firm email addresses, as
long as these outside email domain names were approved and hosted by the firm, such
that the emails sent or received from these email accounts would be captured on the firm’s
server and could be reviewed as part of the firm’s regular email surveillance. The findings
also stated that the firm discovered during the annual branch audit of the registered
representatives’ branch that their outside business emails were not being captured or
maintained on the firm’s server and, therefore, were not being reviewed. The findings
also included that despite this knowledge, the firm failed to take any corrective steps.
Consequently, the firm failed to review, maintain and preserve securities-related electronic
correspondence sent or received from the registered representatives’ outside business
email accounts. (FINRA Case #2011028898802)
PNC Investments LLC

(CRD #129052, Pittsburgh, Pennsylvania) submitted a Letter of
Acceptance, Waiver and Consent in which the firm was censured and fined $100,000.
Without admitting or denying the findings, the firm consented to the described sanctions
and to the entry of findings that it failed to establish and maintain a supervisory system
and WSPs reasonably designed to achieve compliance with Section 5 of the Securities Act of1933. The findings stated that the firm’s WSPs for compliance with Section 5 were limited
to a section on private placements and offerings which addressed Regulation D, Rule 144
and private investments in public equity (PIPEs). The procedures restated the requirements,
or exemptions, contained in the regulations, but provided for no supervisory structure
to ensure compliance with Section 5. The firm’s procedures did not address compliance
generally with Section 5 and they were inadequate in setting forth the circumstances under
which the firm should inquire into the registration or exemption status of securities in
customer accounts. The procedures then in place did not specifically list the factors that
the firm was required to evaluate or consider in order to determine whether it needed to
inquire further before allowing a customer to sell potentially unregistered securities. The
findings also stated that a firm customer engaged in an unregistered distribution of shares
of securities and the firm’s personnel incorrectly assumed that the shares were freely
tradable, without restriction, based on, among other things, representations made by the
customer in its account opening documentation and because the shares were received
into the customer account directly from a transfer agent. In allowing the customer to
sell its shares, the firm did not consider all of the factors relevant to a determination of
whether the shares were unrestricted and eligible for resale. The findings also included
that the customer and another individual sold a total of 1,099,900 shares of securities
into the market, mostly by way of on-line trades, for proceeds of $4,292,210 and the firm
earned commissions of $22,747 from the customer’s sales of securities. The one exception
from the customer’s account selling securities was a single day in which it bought 5,000
shares. The purchase triggered an exception report, which resulted in the firm prohibiting
purchases by the customer of more than 5,000 shares without a principal’s approval. The
customer’s selling activity generated no exception reports. (FINRA Case #2010025332301)
Regal Securities, Inc. (CRD #7297, Glenview, Illinois) submitted a Letter of Acceptance,
Waiver and Consent in which the firm was censured and fined $25,000. Without admitting
or denying the findings, the firm consented to the described sanctions and to the entry of
findings that it failed to deliver official statements by settlement date to customers who
purchased new issue municipal securities during a primary offering disclosure period.
The findings stated that in all of these transactions, even though the firm was neither an
underwriter nor part of the underwriting syndicate, it was required to deliver an official
statement to each customer by settlement date. The firm failed to establish an adequate
system, including adequate WSPs, with regard to the delivery of official statements in
connection with sales of new issue municipal securities in secondary market transactions.
The findings also stated that the firm failed to disclose to its customers certain information,
including negative rating changes and a call notice, in connection with some municipal
securities transactions. The findings also included that the firm failed to establish an
adequate system, including WSPs, with regard to the disclosure of material events in
connection with municipal securities transactions. (FINRA Case #2011025857201)

this is only at page 16 out of 57 for the month of JULY 2013. I don’t have time to put them all please see resource link for complete list….

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