During a 2014 onsite exam, FINRA found numerous securities violations at Global Arena Capital Corp., including misleading sales pitches, customer account churning, as well as other business misconduct. The regulatory authority has banned seven former registered representatives from the industry, suspended an eighth, and barred two former branch managers from serving in a principal capacity.
FINRA’s sanctions are part of the agency’s continuing effort to track groups of brokers that move from one risky firm to another. Seven of the ten people sanctioned had switched from HFP Capital Markets LLC, a firm which FINRA later expelled, to Global Arena Capital Corp., which opened a branch in October 2013 to register a number of brokers who had been discharged by HFP. As HFP did, Global Arena’s new branch’s business model included cold-calling customers, including the elderly, to make solicited recommendations of securities.
“FINRA carefully monitors broker migration particularly with respect to brokers that move in groups from an expelled or high-risk firm to other securities firms, based on a variety of risk factors,” stated Susan Axelrod, FINRA’s Executive Vice President. “FINRA will continue to leverage this data to expedite sales practice examinations and enforcement investigations to rid the industry of individuals who prey on vulnerable investors.”
FINRA used a risk-based approach to identify particular brokers who had moved from HFP to Global Arena and were then subject to heightened regulatory scrutiny during a 2014 exam. During the investigation, FINRA found that particular Global Arena representatives were involved in securities fraud by using misleading sales pitches and high pressure sales tactics to make sales of junk bonds and other securities to clients. Brokers at the firm additionally churned existing accounts by soliciting frequent trades and made unsuitable recommendations.
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