What Went Wrong

TX RR Charged With Defrauding Municipalities

Houston broker, Harold Jaschke, while associated with First Allied Securities, Inc., allegedly conducted unauthorized and unsuitable trading on behalf of two Florida municipalities, putting them at risk of losing millions as he generated over $14mn in commissions for himself.   Jaschke engaged in high-risk, short term trading strategies that [in C-I's own words] "essentially defiled" the accounts of the City of Kissimmee, Fla. and the Tohopekaliga Water Authority.  

Jaschke would ... 

• buy and sell the same bond within a matter of days, and sometimes within the same day; 

And His Supervisor Failed to Adequately Supervise

Jeffrey Young, the supervisor for Harold Jaschke, the hot-blooded, hot-churning, risk-taking broker (and the subject of the above story), agreed to pay $25K and be suspended as supervisor for 9 months to settle SEC charges that he failed to supervise RR Jaschke, who executed unauthorized transactions, made unsuitable recommendations and churned customer accounts.  Let's first meet the players. 

• First Allied Securities, a San Diego-based B/D and, since 2004, an IA, with  over 900 independent contractor RR's and 600 branch offices nationwide. 
• Jeffrey C. Young, 45, joined First Allied  in 1997, from 2000 to mid-2009 was "vice president for supervision," and currently is "vice president of special projects." 
  
• Harold Jaschke, 48, was a Houston-based RR with First Allied from June 2005 to August 2008.

FINRA December Disciplinary Action: Individuals [Misappropriations from Firms]

Customers are not the only victims of misappropriations by associated persons.  In December, at least 3 firms were victimized.  These two (2) illustrated scenarios may enable you to prevent similar occurrences at your firm or client.

1.  RR Timothy Freeman, MD.   Misused funds that were not his by charging personal expenses on his corporate credit card, in violation of his member firm’s policies, and not making payment when it was due. The findings stated that Freeman’s member firm did not authorize the charges and paid the outstanding balance of approximately $2,000 on
Freeman’s corporate card after he failed to pay the bill for over 6 months.  Freeman was suspended 3 months, but not fines because of his personal financial position.

2.  RR Timothy Hackett, FL.   Placed day trades in his personal brokerage account at his firm, which resulted in a margin deficiency in that account.  Hackett had insufficient assets to satisfy the margin deficiency and, in an effort to satisfy the margin deficiency, accessed one of the firm’s back office systems and transferred approximately $6,129 from the firm’s general ledger account into his personal account. 

1.  RR Timothy Freeman, MD.   Misused funds that were not his by charging personal expenses on his corporate credit card, in violation of his member firm’s policies, and not making payment when it was due. The findings stated that Freeman’s member firm did not authorize the charges and paid the outstanding balance of approximately $2,000 on
Freeman’s corporate card after he failed to pay the bill for over 6 months.  Freeman was suspended 3 months, but not fines because of his personal financial position.

2.  RR Timothy Hackett, FL.   Placed day trades in his personal brokerage account at his firm, which resulted in a margin deficiency in that account.  Hackett had insufficient assets to satisfy the margin deficiency and, in an effort to satisfy the margin deficiency, accessed one of the firm’s back office systems and transferred approximately $6,129 from the firm’s general ledger account into his personal account. 

FINRA December Disciplinary Action: Individuals [Forgeries Loom Large]

In December, FINRA reported 8 cases in which an associated person committed forgeries and/or falsified firm records.  In this special report, we highlight various scenarios so firms might better protect themselves.  In all cases, the individual was barred from the industry - unless otherwise noted.

1.  RR Anthony Faithauer, TX.   Misappropriated approximately $853,795 from customers for his own personal benefit., by forging customers’ signatures on checks, distribution forms and withdrawal slips without their knowledge or authorization and by converting insurance premiums and funds surrendered from a customer’s fixed annuity.  Also borrowed $90K from a customer.

FINRA December Disciplinary Action: Individuals [Part 2]

In December, FINRA reported fines and sanctions against 50 individuals; 10 of whom were principals or supervisors (20%).  Here are today's stories: 

1. Bounced from Industry for False Expense Reports
   
2. Unusual Discretionary Authority - Or More Common Than We'd Like to Admit
3. Unregistered 'Principal' Operated Unregistered Branch
   

Continue below or Go directly to ...  [FINRA Disciplinary Actions - December] 

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1. Bounced from Industry for False Expense Reports
   
2. Unusual Discretionary Authority - Or More Common Than We'd Like to Admit
3. Unregistered 'Principal' Operated Unregistered Branch
   

Continue below or Go directly to ...  [FINRA Disciplinary Actions - December] 

1. Bounced from Industry for False Expense Reports
   
2. Unusual Discretionary Authority - Or More Common Than We'd Like to Admit
3. Unregistered 'Principal' Operated Unregistered Branch
   

Continue below or Go directly to ...  [FINRA Disciplinary Actions - December] 

1. Bounced from Industry for False Expense Reports
   
2. Unusual Discretionary Authority - Or More Common Than We'd Like to Admit
3. Unregistered 'Principal' Operated Unregistered Branch
   

Continue below or Go directly to ...  [FINRA Disciplinary Actions - December] 

Continue below or Go directly to ...  [FINRA Disciplinary Actions - December] 

Branch Compliance Officer Failed to Act on Variable Annuities Red Flags

the SEC's case against Gilman Ciocia and its broker-dealer unit, Prime Capital Services ("PCS"), a branch compliance supervisor, herself, was flagged for failing to respond reasonably to numerous red flags of wrongdoing in the variable annuity ("VA") sales practices of an RR. 

Christie Andersen, 39.  Joined the B/D's Boca Raton branch office in 2002 as a compliance officer and was promoted to office supervisor in 2004.  As a supervisor, she reviewed and approved variable annuity transactions for RR's in the Boca Raton office until she left PCS in late 2006.  While at PCS, Ms. Andersen was an employee of Gilman Ciocia and was licensed to sell securities and as a securities principal.  Since leaving PCS, Respondent has served as CCO of another broker-dealer.

WWW Briefs

1. SEC: Unregistered B/D Underwrites Unregistered Securities
2. SEC: Case Closed on N. American Clearing's Bruce Blatman
3. SEC: Sticks with Bear HF Case, Like "Gum on the Soles of Well-Worn Shoes"
4. Fed Prosecutors: Fund Manager Pleads to $133mn Ponzi
   

SEC Freezes French Citizens Within Nano-Second of Insider Trades

The SEC caught 2 French men trying to illegally profit on advanced knowledge that a French-based manufacturer planned to acquire a U.S.-based health care products company for $1.9bn.  And yes, we confess, the asset freeze really took place within days of the transactions.

Nicolas Patrick Benoit Condroyer and Gilles Robert Roger, who reside in Brussels, allegedly purchased hundreds of

SEC Takes Down Co-Sponsor of Heisman Trophy

Just 10 days after partaking in the presentation of the 2009 Heisman Trophy to Mark Ingram, Triton Financial was sued by the SEC on charges it defrauded investors in an insurance venture.  Triton, which co-sponsors the Heisman Trophy Trust, is an investment firm that is said to have leveraged its connections to former NFL players to recruit investors.  According to court records, the firm has agreed to an asset freeze, and  CEO Kurt Barton "intends to work with the receiver ... to ensure that the investors, many of whom are friends and relatives, do not lose their money."

FINRA December Disciplinary Action: Individuals

In December, FINRA reported fines and sanctions against 50 individuals; 10 of whom were principals or supervisors (20%). 

1. Top 5 Violations
   
2. Outside Business Activities for Compensation:  2 Scenarios and Punishments
3. Unauthorized Use of Internet Message Board
4. Failed Supervision:  Sale of Unregistered Securities
   

Continue below or Go directly to ...  [FINRA Disciplinary Actions - December] 

1. Top 5 Violations
   
2. Outside Business Activities for Compensation:  2 Scenarios and Punishments
3. Unauthorized Use of Internet Message Board
4. Failed Supervision:  Sale of Unregistered Securities
   

Continue below or Go directly to ...  [FINRA Disciplinary Actions - December] 

1. Top 5 Violations
   
2. Outside Business Activities for Compensation:  2 Scenarios and Punishments
3. Unauthorized Use of Internet Message Board
4. Failed Supervision:  Sale of Unregistered Securities
   

Continue below or Go directly to ...  [FINRA Disciplinary Actions - December] 

Continue below or Go directly to ...  [FINRA Disciplinary Actions - December]