FINRA Issues July 2012 Disciplinary Actions

The Financial Industry Regulatory Authority (FINRA) issues a report on disciplinary and other actions involving registered brokers, investment advisers and brokerage firms every month.

Here are significant Florida related actions for July 2012. Follow this link to the FINRA website for the entire report for the month of July 2012 as well as to access  earlier time periods.

Andrew James Aragona , Deerfield Beach, Florida was fined $138,500 and suspended from association with any FINRA member in any capacity for one year. The fine is due and payable when and if Aragona seeks to re-enter the securities industry. The sanctions were based on findings that Aragona recommended unsuitable variable annuity switches to an elderly customer. The findings stated that Aragona failed to conduct an objective, quantitative analysis of the benefits of the recommended switches, so the customer incurred $130,000 in surrender fees, which was more than 10 percent of the value of her investment, but Aragona earned $123,500 from the switches. Aragona formerly worked for Newbridge Securities.

David Louis Bocchino of Bradenton, Florida submitted a Letter of Acceptance, Waiver and Consent in which he was fined $7,500, which includes disgorgement of $2,850 in commissions, and suspended from association with any
FINRA member in any capacity for three months. The fine must be paid either immediately upon Bocchino’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. Bocchino consented to the described sanctions and to the entry of findings that he became licensed with a company that underwrites life settlement contracts and, while registered with his firm, sold a $30,000 unregistered security to an individual. The findings stated that the customer
was to use the funds to purchase issued life insurance policies, and upon the death of the insureds, receive a portion of the death benefit from each policy. The individual used funds from his individual retirement account (IRA) at another firm to make the investment. Bocchino received $2,850 in commissions in connection with the transaction. The findings
also stated that Bocchino failed to provide his firm with prior written notice and failed to obtain his firm’s written approval concerning the transaction although the firm’s WSPs explicitly prohibited the sale of life settlements. The suspension is in effect from May 21, 2012, through August 20, 2012.

Stanley Neil Crooms of St. Petersburg, Florida
submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Crooms consented to the described sanction and to the entry of findings that he failed to provide all of the information FINRA requested as part of aninvestigation into allegations that he had misappropriated customer funds.

Harrison A. Hatzis of  Hallandale, Florida was fined
$30,000 and suspended from association with any FINRA member in any capacity for two years.  The sanctions were based on findings that Hatzis provided incomplete and
inaccurate information concerning his member firm’s application for FINRA membership and misled FINRA staff. The findings stated that the firm failed to accurately, completely  and timely disclose the source and nature of its initial funding and ownership. When the firm applied for FINRA membership, the firm incorrectly stated that Hatzis, the firm’s president, funded the firm, and it failed to disclose an individual’s monetary contribution. The firm’s membership application and Application for Broker-Dealer Registration
(Form BD) also inaccurately indicated that Hatzis solely owned the firm, when in fact an entity was the firm’s sole, direct owner. The findings also stated that the firm ultimately
disclosed the individual’s financing of the firm and clarified the entity’s ownership role, but did so only after providing a series of confusing and misleading responses to several
FINRA requests for information. The findings also included that the firm misled FINRA concerning a $250,000 payment under an Investment Agreement and sought to shield
the investment agreement from regulatory review. The firm never disclosed to, or discussed with, FINRA the terms of these final or proposed contracts. FINRA found that the firm’s obligation to forego $285,000 in net commissions otherwise
due from another firm alone affected a significant aspect of the firm’s financing and revenues, and raised considerable questions concerning the firm’s ability to maintain adequate net capital.  FINRA specifically requested that the firm provide a detailed description of the $250,000 payment
to the other firm, and rather than divulge the investment agreement to FINRA, the firm falsely stated that the $250,000 represented service fees pursuant to a service agreement
and, to support this claim, provided a back-dated service agreement, which deceptively omitted any reference to a loan and otherwise whitewashed the firm’s obligation to repay
it by foregoing commissions. FINRA also found that Hatzis should have, but did not, amend the firm’s membership application to ensure it was complete and contained accurate
information.

The suspension is in effect from June 4, 2012, through June 3, 2014.

Charles Edward Krsek of Ocala, Florida submitted a
Letter of Acceptance, Waiver and Consent in which he was fined $7,500 and suspended from association with any FINRA member in any capacity for 10 business days.  Krsek consented to the described sanctions and to the entry of findings that he opened a trust brokerage account for an elderly customer at the request of a firm registered representative who did not have a Series 7 license and
was not permitted to handle securities accounts other than variable annuities accounts.

The findings stated that Krsek submitted the application for approval and became the assigned registered representative, but never monitored the account activity. The findings
also stated that the registered representative asked Krsek to open another account for the customer; the account application included the representative as a joint account holder.

Krsek did not prepare the account application and did not recall if he reviewed it or any documentation prior to opening the account. Krsek mistakenly believed that the customer was related to the representative and failed to notice that the section of the application that questioned whether any relatives of the customer worked at the firm was marked “no”
despite the representative being a joint account holder with the customer. The findings also included that the opening of the account and permitting it to remain open for more
than four years caused a violation of firm policies and procedures as well as NASD Rule 2330(f) and FINRA Rule 2150(c) because the registered representative at the firm was not permitted to share directly or indirectly in profits or losses in a customer’s account. The firm had written policies and procedures regarding sharing of joint brokerage accounts by firm customers and its financial representatives that specifically prohibited sharing directly or indirectly in profits or losses in an individual’s account.

The suspension was in effect from June 18, 2012, through June 29, 2012.

Myrron Marcos Martinez of Sarasota, Florida
submitted an Letter of Acceptance, Waiver and Consent in which he was fined $5,000and suspended from association  with any FINRA member in any capacity for four months.
The fine must be paid either immediately upon Martinez’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.
Martinez consented to the described sanctions and to the entry
of findings that he participated in an outside business activity without providing his member firm with prior written notice. The findings stated that Martinez recommended that a firm customer invest in a company and a business venture that Martinez’s friends owned, hoping to become their financial adviser and earn commissions in the future in the event their businesses became successful. The findings also stated that the customer invested $240,000 total in promissory notes Martinez’s friends issued. To facilitate the transactions, Martinez delivered the $240,000 to his friends and witnessed their signatures on the promissory notes. Martinez’s friends did not repay the customer any portion of the $240,000 investment in the promissory notes. The findings also included that Martinez used his personal email account to send emails to the customer to promote one of the above-mentioned investments, knowing that the firm’s procedures required him to use his firm email account for all business communications with clients, circumventing his firm’s
supervisory procedures.

The suspension is in effect from June 4, 2012, through October 3, 2012.

Robert Neri of New Port Richey, Florida) submitted an
Offer of Settlement in which he was suspended from association with any FINRA member in any capacity for six months. In light of Neri’s financial status, no monetary sanctions have been imposed. Without admitting or denying the allegations, Neri consented to the described sanction and to the entry of findings that he failed to timely cooperate with a FINRA investigation.

The suspension is in effect from June 18, 2012, through December 17, 2012.

Alfred Pierrepont Reeves III of Hallandale, Florida was
named as a respondent in a FINRA complaint alleging that he served as the FINOP for his member firm and was listed as an authorized billing contact for the firm with its clearing
firm. The firm did not immediately remove Reeves as an authorized billing contact after it terminated his association. The complaint alleges that the clearing firm sent Reeves, as
his firm’s supposed authorized billing contact, an email regarding an invoice stating that the clearing firm owed money to the firm and requested payment instructions. Reeves
responded to the email by attaching a completed accounting questionnaire containing routing information and account numbers to have the funds wired to a bank account maintained by a company he owned, in part, and that he controlled. The complaint also alleges that the clearing firm wired $59,704.93 to the account. Reeves did not inquire as
to the source of the funds, wrote checks totaling $55,182.36 from the account and made electronic payments from the account totaling $3,389.69, knowing the funds did not belong to him, but used the funds for personal expenses, thereby converting funds that did not belong to him for personal expenses. The complaint further alleges that after the firm
demanded Reeves return the funds, he repaid only $31,000 as of the date of the complaint.

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