Current FINRA Sanctions & Fines

FINRA Disciplinary Actions have been taken against the following individuals and brokerage firms for violating FINRA rules and federal securities laws


Failure of a member firm to comply with the sales practice rules and regulations for the standards of care may result in a legal cause of action which might result in the recovery of damages from member firms and their employees. Brokerage firm and stockbroker misconduct can be characterized by many different acts which can result in a legal cause of action. Such misconduct can result in the following claims for damages.

Unsuitable Investment Advice    Margin Abuse
Breach of Fiduciary Duty    Negligence
Material Misrepresentation/Omission    Unauthorized Trading
Churning/Excessive Trading    Securities Concentration
Mutual Fund Switching    Failure to Supervise
Variable Annuity Switching   


February 2013

Source: FINRA, Financial Industry Regulatory Authority, Inc. 2013
Full Disciplinary Reports Available to the public at: www.finra.org

Pruco Securities LLC, Newark, New Jersey
WR Rice Financial Services, Inc., Bay City, Michigan
Joel Irwin Wilson, Saginaw, Michigan
CM Securities LLC, Las Vegas, Nevada
Todd Burton Parriott, Henderson, Nevada
Citigroup Global Markets, Inc., New York, New York
LPL Financial LLC, Boston, Massachusetts
Santander Investment Securities, Inc., New York, New York
Gary Reed Feldman, North Caldwell, New Jersey
James Douglas Grimes, Lawrence, Pennsylvania
Neftali Mercedes, New York, New York
Charles Chul Nam, Tarzana, California
Janice Louise Hallett, Cibolo, Texas


FINRA Orders Pruco Securities to Pay $10.7 Million in Restitution for Improper Pricing of Mutual Fund Orders; Firm Fined $550,000
The Financial Industry Regulatory Authority (FINRA) announced that it has ordered Pruco Securities, LLC of Newark, New Jersey, to pay more than $10.7 million in restitution, plus interest, to customers who placed mutual fund orders with Pruco via facsimile or mail (paper orders) from late 2003 to June 2011 and received an inferior price for their shares. FINRA also fined Pruco $550,000 for its pricing errors and for failing to have an adequate supervisory system and written procedures in this area.

Brad Bennett, Executive Vice President and Chief of Enforcement, said, “Pruco’s inadequate supervision and pricing system resulted in thousands of customers receiving inferior prices for more than seven years. Broker-dealers must ensure that their systems provide customers with accurate pricing for all products that the firms offer.”

One of Pruco’s retail brokerage business units, COMMAND, instituted a practice for handling mutual fund paper orders that was inconsistent with the pricing requirements of the Investment Company Act of 1940, which requires that mutual fund orders are priced on the day the order is received prior to 4:00 p.m. Instead, from late 2003 to June 2011, COMMAND priced more than 850,000 paper orders, on average, one or two days after it received complete orders prior to 4 p.m. The employees mistakenly believed that they could use “best efforts,” (i.e. up to two business days) to process mutual fund paper orders and that paper orders could be priced on the date the order was processed, even if Pruco received a complete order prior to that date. As a result of these findings, approximately 37,000 accounts for 34,000 customers will receive more than $10.7 million in restitution, plus interest. The firm is in the process of calculating restitution for up to 3,240 additional customers who will receive restitution upon the firm’s completion of its review. The issue was discovered after an inquiry to COMMAND personnel regarding a fax order submitted had not been executed until the day after it was received as a complete order.

FINRA also found that Pruco failed to have an adequate supervisory system to detect and prevent the mispricing of paper mutual fund orders and to ensure that customers who submitted paper mutual fund orders received the correct price. Additionally, Pruco failed to have written procedures for the pricing of mutual fund orders, and did not provide its employees with any training or training materials regarding paper mutual fund pricing requirements.

When determining the sanctions imposed in this matter, FINRA took into consideration that the firm self-reported the pricing issue, undertook an internal review, implemented changes to its policies and procedures and commenced restitution to the affected customers.

In concluding the settlement, Pruco, neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.


Wilson and Kazee Diversified Financial Group, Inc. dba WR Rice Financial Services, Inc. (CRD® #36700, Bay City, Michigan) and Joel Irwin Wilson (CRD #5334955, Registered Principal, Saginaw, Michigan) submitted an Offer of Settlement in which the firm was expelled from FINRA membership and Wilson was barred from association with any FINRA member in any capacity. Without admitting or denying the allegations, the firm and Wilson consented to the described sanctions and to the entry of findings that the firm and Wilson perpetrated securities fraud in connection with customer investment of approximately $4.7 million in limited partnerships Wilson controlled. The findings stated that the firm, acting through Wilson and other registered representatives intentionally or recklessly made untrue statements of a material fact regarding the intended use of offering proceeds from the sales of limited partnership interests via private placement offerings by limited partnerships Wilson controlled. The findings also stated that the firm, acting through Wilson and other registered representatives, omitted the material facts that the due dates on promissory notes between the limited partnerships and the companies Wilson controlled had been extended, and that Wilson had unilaterally extended the due dates because the companies he owned did not have enough money to repay the notes. Based on the foregoing, the firm and Wilson willfully violated Section 10(b) of the Securities Exchange Act and Rule 10b-5. The findings also included that Wilson provided falsified limited partnership agreements to FINRA in response to its request for documents. FINRA found that Wilson failed to provide full and complete testimony during an on-the-record interview.
FINRA Case #2012030531101


CM Securities, LLC (CRD #127136, Las Vegas, Nevada) and Todd Burton Parriott (CRD #4663935, Registered Principal, Henderson, Nevada) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and ordered to pay $250,000 in restitution, jointly and severally, with Parriott, the firm’s former CEO, of which $26,180 is joint and several with another individual. Parriott was also barred from association with any FINRA member in any principal capacity, suspended from association with any FINRA member in any capacity for one year, and ordered to remain current with required payments to a customer consistent with the terms of a settlement agreement. In light of the firm’s and Parriott’s financial statuses, no monetary fine was imposed. Without admitting or denying the findings, the firm and Parriott consented to the described sanctions and to the entry of findings that the firm and Parriott, through its registered representatives, made unsuitable recommendations to customers to purchase a highly speculative non-traded real estate investment trust (REIT). The findings stated that the firm’s employees, most of whom did not have any experience in the securities industry, recommended and sold the highly speculative REIT to customers, who found themselves highly concentrated (for some, up to 95 percent) in the REIT, although the customers told the firm that they only sought a moderate amount of risk. Based on the representative’s unsuitable recommendations, the customers purchased $1,679,304 of the REIT; and since its shares were de-valued and the REIT filed for involuntary bankruptcy, the customers lost their entire principal investment in the REIT. The findings also stated that the firm and Parriott, acting through registered representatives, entered and maintained inaccurate information on subscription agreements and new account documents, including listing REIT purchases on subscription agreements as both solicited and unsolicited. The firm and Parriott also failed to supervise the firm’s registered representatives. Although sales of the REIT made up almost all of the firm’s business, the firm and Parriott failed to establish and maintain a supervisory system, including written procedures, that provided any process or guidance for monitoring customers’ REIT purchases, such as monitoring for unsuitable levels of concentration in REITs or determining whether a purchase was suitable for a customer based on the customer’s investment objectives and risk tolerance. In fact, the chief compliance officer (CCO), who did not have any experience in the securities industry, failed to conduct a thorough review of the customers’ subscription agreements for accuracy, and did not have sufficient information to determine whether a REIT transaction was solicited/unsolicited for a reasonable suitability assessment. Despite “red flags,” the firm and Parriott, acting through the CCO, failed to take reasonable steps to ensure the suitability of the registered representatives’ sales of the REIT to customers. The firm’s and Parriott’s complete delegation of compliance authority to the CCO was unreasonable given that the CCO and the retail registered representatives did not have any experience in the securities industry or experience with REITs, and the firm’s written supervisory procedures (WSPs) and system were inadequate.

FINRA found that the firm distributed institutional sales materials concerning the REIT that were misleading and were not fair and balanced because they failed to disclose that even if the REIT was a diversified investment, diversification did not guarantee a profit or protect investors against investment loss. FINRA also found that the firm and Parriott, participated in the secondary offering of the REIT, in which the total underwriting compensation exceeded the 10 percent limitation for a publicly offered non-traded REIT. As a result of the excessive underwriting compensation, the firm participated in a public offering of the REIT that had unreasonable and unfair underwriting compensation. In addition, FINRA determined that the firm and Parriott, failed to disclose all items of underwriting compensation in the REIT prospectus filed with the Securities Exchange Commission (SEC) in connection with the secondary offering of the REIT, and failed to maintain and enforce an adequate supervisory system and procedures to achieve compliance with applicable FINRA and NASD rules regarding underwriting compensation. The suspension is in effect from January 7, 2013, through January 6, 2014.
FINRA Case #2009017346702


Citigroup Global Markets, Inc. (CRD #7059, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $575,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that as part of its parent entity’s business strategy to reduce exposure to subprime assets, the firm incurred trading losses of $464 million when it purchased distressed assets during certain “blind auctions” held in connection with liquidation of collateralized debt obligations (CDOs). The long-term asset group (LTAG) placed reserve bids on all assets available in the blind auctions in which the firm’s banking affiliate was the super senior note holder. The reserve bids set a minimum price for the assets at the lower end of the fair market value range; and ensured a successful auction because the CDO could not be dissolved until all assets were distributed. Bids were submitted without pre-approval by the firm’s Capital Markets Approval Committee (CMAC). The findings stated that the firm did not adequately supervise the LTAG to ensure it bid fair market value on all assets, and, on occasion, the LTAG did not bid fair market value when it decided that fair market value could not be assessed in time for the auction, when it would bid par. The par bids submitted in auctions shifted significant losses from the banking affiliate to the firm when the purchased assets were marked to the cover price, which was often significantly lower than par. The LTAG did not seek permission from the CMAC, or notify any of the groups represented on the CMAC of the decision to bid par, and the CMAC representatives remained unaware of the losses caused until a later date. The findings also stated that the firm failed to address certain red flags that should have alerted it to the day-one losses caused by bidding par on the CDO assets, which should have been evident from a review of the LTAG’s liquidation summaries and profit and loss statements; losses increased when par bids were placed. The firm investigated, identified the par bids, and recorded a one-time capital contribution of $464 million to the banking affiliate and reversed a $184 million tax loss benefit resulting from its prior accounting treatment. The firm subsequently self-reported these issues to FINRA. The findings also included that the firm’s supervision of the LTAG was inadequate because it did not have an adequate system in place to address the potential conflict between the competing economic interests that arose when the LTAG bid for the firm on assets in which the banking affiliate had a beneficial interest; there wasn’t any system, procedure, person or entity assigned the responsibility of reviewing whether the firm’s bids were submitted at fair market value, as required; and the firm failed to adequately respond to red flags suggesting that the LTAG was not bidding fair market value on certain assets in the auction. FINRA found that the firm’s records, including Financial and Operational Combined Uniform Single (FOCUS) reports, inaccurately reflected $464 million in trading losses and $284 million in tax benefits when the day-one losses should have been accounted for as capital contributions from the firm to its banking affiliate.
FINRA Case #2010023574901


LPL Financial LLC (CRD #6413, Boston, Massachusetts) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $400,000. 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 an adequate supervisory system and written procedures reasonably designed to ensure timely delivery of mutual fund prospectuses consistent with Section 5(b)(2) of the Securities Act. The findings stated that the firm was required to provide each of its customers who purchased a mutual fund with a prospectus for that fund no later than three business days after the transaction. The firm executed approximately 16 million mutual fund purchase or exchange transactions, and several million of these transactions required the firm to deliver a mutual fund prospectus, or a summary prospectus, to the purchasing customer. As such, the firm was required to establish and maintain a supervisory system and WSPs reasonably designed to monitor and ensure the timely delivery of mutual fund prospectuses. The findings also stated that the firm relied on its registered representatives for the delivery of mutual fund prospectuses. Each registered representative was required to obtain the customer’s signature on a prospectus receipt form to document delivery of the prospectus. However, the firm did not have a supervisory system in place that was reasonably designed to ensure that prospectus receipts had been obtained in connection with mutual fund purchases or that a prospectus had actually been delivered timely. The firm’s WSPs did not require an adequate review of its registered representatives’ performance of their prospectus delivery obligations. Instead, the firm’s procedures consisted of inadequate measures. The findings also included that for some time, the firm was aware that its procedures were failing to ensure that its registered representatives consistently obtained prospectus receipts or other evidence of mutual fund prospectus delivery. On at least two occasions since that time, the firm considered proposals to modify its procedures for tracking prospectus delivery compliance, but the firm did not modify or enhance its procedures and continued to rely upon registered representatives without adequate controls or safeguards to ensure and monitor mutual fund prospectus delivery.
FINRA Case #2011029101501


Santander Investment Securities, Inc. (CRD #37216, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $350,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that a registered firm principal had been tasked with assessing interest within the U.S. institutional investor community for funds managed by a non-FINRA-regulated fund manager affiliated with the firm but located outside the United States. The principal, along with other registered representatives and several non-registered personnel, contacted investors concerning the future purchase of the non-U.S. funds but none of the institutional investors agreed to purchase the funds. The findings stated that the firm failed to have an appropriately registered person supervise the principal and other registered personnel in connection with contacting U.S. institutional investors. The firm did not have a system to adequately supervise communications between the principal, other registered representatives, non-registered firm employees and the investors concerning the purchase of the non-U.S. funds. The findings also stated that the communications occurred at presentations to potential investors where sales literature (fund materials) was provided to the investors. The firm did not designate an appropriate firm-registered individual to ensure its policies and procedures were enforced in this area. The firm did not apply its existing policies and procedures related to communications with the public and the review and approval of the fund materials and presentations. None of the materials were reviewed or approved by the firm’s compliance department to ensure the materials were fair and balanced, so it failed to maintain copies of the distributed material as required. The findings also included that the principal distributed communications to the investing public that contained the fund materials; the communications did not provide a sound basis for evaluating the facts and contained exaggerated and unwarranted claims.
FINRA Case #2009016628401


Gary Reed Feldman (CRD #1705897, Registered Representative, North Caldwell, New Jersey) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $25,000 and suspended from association with any FINRA member in any capacity for three months. The fine must be paid either immediately upon Feldman’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Feldman consented to the described sanctions and to the entry of findings that he sent emails to numerous individuals, many of whom he did not know, soliciting investment in an unregistered security contrary to Section 5 of the Securities Act of 1933, which prohibited Feldman from offering interests in the security to individuals through general solicitations. Two individuals eventually invested a total of $125,000 in the security. The findings stated that Feldman included numerous statements in his emails that failed to provide fair and balanced treatment of risks; failed to provide a sound basis for evaluation; and/or were false, exaggerated, unwarranted or misleading. Despite both purchases in the unregistered security occurring while Feldman was registered with a member firm, he did not provide prior written notice of the transactions, nor did the firm grant him approval to participate in the transactions. The suspension is in effect from December 17, 2012, through March 16, 2013.
FINRA Case #2011027874701


James Douglas Grimes (CRD #4106942, Registered Principal, Lawrence, Pennsylvania) submitted an Offer of Settlement in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the allegations, Grimes consented to the described sanction and to the entry of findings that he transferred $306,000 from customers’ accounts to a business account another customer owned, without any of the customers’ consent or knowledge. The findings stated that Grimes effected the unauthorized transfers by submitting written journal request forms to his firm that contained forged client signatures. Grimes wrote numerous checks, most made payable to cash, totaling $250,446, withdrawing funds from the business account and converted the proceeds for his personal use. Grimes forged the signature of the owner of the business account on those checks. The findings also stated that the firm maintained the journal request forms and the numerous checks as part of its books and records. Those documents appeared to contain genuine customer signatures, but the signatures were forged so the records were therefore inaccurate. By falsifying journal requests and checks, Grimes caused his firm’s books and records to be inaccurate.
FINRA Case #2011028219201


Neftali Mercedes (CRD #3201827, Registered Principal, New York, New York) was barred from association with any FINRA member in any capacity and ordered to pay a total of $97,500, plus interest, in restitution to customers. The sanctions were based on findings that Mercedes willfully made material misrepresentations and omissions in the sale of securities. The findings stated that Mercedes’ misleading statements and omissions concerned the risks associated with an investment in speculative securities and the financial condition of the issuer. Mercedes did not have any basis for making the statements to his customer and did not attempt to verify the information about the issuer that he conveyed to his customers. Mercedes failed to disclose the issuer’s negative financial condition and performance, which were facts material to the purchasers’ investment decisions. Mercedes’ conduct, which occurred over several months, enabled him to profit financially while his customers lost their investments and Mercedes did not make any attempt to pay restitution to the affected customers or otherwise remedy his misconduct.
FINRA Case #2008011743303


Charles Chul Nam (CRD #2565046, Registered Principal, Tarzana, California) was barred from association with any FINRA member in any capacity and required to pay $352,750 in restitution to investors. The sanctions were based on findings that Nam made fraudulent misrepresentations and omissions of material fact in connection with the offer or sale of securities of a REIT, and used telephone lines and the Internet to perpetuate his fraud. The findings stated that Nam falsely represented that he was affiliated with and accepting investor funds on behalf of the REIT. Through his wrongful conduct of material misrepresentations and omissions of facts, Nam fraudulently obtained $792,750 from the investors, $352,750 of which he has not repaid. The findings that Nam acted with scienter supports a finding that his violations were willful. The findings also stated that Nam wrongfully converted investors’ funds and used the funds for his own purposes. The findings also included that Nam failed to respond to FINRA requests for information and to appear for testimony.
FINRA Case #2011026514001


Janice Louise Hallett (CRD #4721899, Registered Representative, Cibolo, Texas) submitted a Letter of Acceptance, Waiver and Consent in which she was fined $10,000 and suspended from association with any FINRA member in any capacity for 20 business days. Without admitting or denying the findings, Hallett consented to the described sanctions and to the entry of findings that she offered and sold oil and gas interests to her member firm’s customers that were securities offerings issued by the firm’s affiliate; and while discussing the offerings, she negligently made inaccurate statements to several investors relating to the returns they could expect from the prospects and the affiliate’s track record. The findings stated that Hallett negligently advised some investors considering purchasing interests in an offering that they could expect a return of their principal investment in one to three years. Given the speculative nature of the oil and gas investments, such results could not be expected. The findings also stated that while selling interests in an oil and gas prospect, Hallett negligently advised a customer that the firm’s affiliate had drilled “24 straight successful wells” in a particular area. In fact, the affiliate had drilled at least one dry hole in the area and drilled other wells in the area that yielded very limited gas or oil production. The suspension was in effect from January 7, 2013, through February 4, 2013.
FINRA Case #2009020022402