February FINRA Cases of Note on RRBDLaw.com by Bill Singer

February 20, 2009

By Bill Singer

http://RRBDLaw.com

http://BrokeAndBroker.com

The FINRA February disciplinary cases are hot off the press --- or at least just started to flicker their pixels online --- and inveterate regulatory pundit Bill Singer has read each and every one, and culled the more interesting for your consideration.  For the full 2009 survey to date, visit http://www.rrbdlaw.com/RegulatoryLinks/CASESOFNOTE/NASD/2009.htm 

Among the Cases of Note that Bill posted for this month are these:

An Initial Reaction

Diane Jo Savage altered a subscription agreement by signing a customer's initials on the agreement after the customer had failed to initial one section of the agreement. It's a common industry short-cut, but it still got her a $5,000 fine and a three day suspension.

Borrowed Time

Yvonne Yuliene Russell loaned $150,830 to a firm customer and was fined $10,000 and suspended for 30 days (including an outside business activity violation). No...that's not a typo--the broker loaned money to a client.  It can still be a violation.d 30 business days in all capacities

profit???(LOSS!!!)

Clifford Michael Jensen made excessive and unsuitable securities transactions in a client account resulting in losses of $32,000 to the customer and generating gross commissions of $49,000. That must have been one hell of a trading strategy. The additional cost to Jensen was a $10,000 fine and a three-month suspension

Checking Out

Randle Wayne Farrar Jr. forged his supervisor's signature on checks made payable to Farrar or to his creditors, and misappropriated $14,739.03 from his supervisor's business checking account. Not surprisingly, he was barred. 

pass/FAIL

Troy Eric Brown, Larry Michael Cole, and Jeffrey David Swanson allowed a subordinate to complete the Firm Element training programs for them by completing the modules and taking the applicable proficiency tests using their user IDs and passwords. Not to be outdone, Michael Alvin Callaway allowed a subordinate to complete firm training programs, including Firm Element training, for him by completing the modules and taking the applicable proficiency tests using his User ID and password. Also, Callaway condoned allowing associates to complete firm training, including Firm Element training, for members of his business unit. Brown and Cole were each fined $5,000 and suspended for 10 business days; Swanson was fined $5,000 and suspended for 30 business days; and Callaway was fined $5,000 and suspended for three months.

Crapping Out

Ching Yang Aul created and submitted falsified Letters of Authorization (LOAs) to his member firm that bore forged customer signatures requesting that the firm transfer $1.5 million from the customers' accounts to acquaintances of Aul, who then transferred the funds to Aul (who used the funds for personal expenses including paying off large gambling debts). FINRA barred Aul.

PAUSE

AXA Advisors, LLC was censured and fined $350,000

  • did not adequately retain and archive back-up tapes, 
  • permitted representatives to change their desktop computer settings to stop outgoing emails from being retained automatically, and 
  • did not prevent representatives from deleting emails or moving incoming emails to their desktops prior to daily backups so that emails would not be retained automatically. 
  • utilized an email system that overwrote email back-up tapes that contained emails employees sent or received every three or four weeks. 
  • permitted representatives to use, or failed to prevent them from being able to use, public instant messaging and other means of electronic communications without retaining the communications. 
  • implemented a new email retention system, but the system malfunctioned and the firm did not have adequate systems and procedures in place to detect and prevent the malfunctions. 

"FINRA found that the deficiencies did not result in the firm's failure to produce emails that were material to any regulatory investigation or legal proceeding."

READ ALL OF BILL SINGER'S CASES OF NOTE AT http://www.rrbdlaw.com/RegulatoryLinks/CASESOFNOTE/NASD/2009.htm