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FINRA August 2015 Disciplinary Actions: Part I

Dempsey Lord Smith, LLC and Jerry Eskel Dempsey, Jr. of Rome, Georgia submitted a letter of acceptance, waiver and consent ("AWC") in which the firm was censured and fined $10,000. Dempsey is joint and severally liable for half of that with the firm. Similarly, Dempsey was fined $10,000, half of which the firm is joint and severally liable for with Dempsey. According to FINRA, the firm through Dempsey, its CEO and Financial and Operations Principal, failed to establish a proper escrow account for the maintenance of investor funds relating to numerous securities offerings, despite the fact the firm participated in all of the offerings and received customer funds. Rather, the firm let investor funds become commingled in lawyer escrow accounts the issuers had set up. Dempsey allegedly sent emails to potential investors in relation to solicitations to sell bonds issued by an affiliate of the firm that had promissory statements that were not fair and balanced. The firm also failed [...]

By |September 15th, 2015|FINRA, Press Releases & News, SEC|
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FINRA Warns Investors About Messaging Apps

FINRA issued an investor alert yesterday, titled Messaging Apps Are Latest Platform for Delivering Pump-and-Dump Schemes. In the alert, FINRA cautions investors against stock promotions sent through increasingly popular messaging apps, including WhatsApp. Lately, users of WhatsApp were inundated with test messages promoting the stock of Avra, Inc. These text messages seemed to be sent from people at large brokerage firms and stated that Avra was "going to double in the next few days." "Scammers keep up with the times. If you are using a messaging app and receive a tout claiming that a stock is poised for explosive growth, don't respond—just delete," said Gerri Walsh, FINRA's Senior Vice President for Investor Education. Scams such as these are simply variations on the classic pump-and-dump scheme, where people spam potential investors to tout a particular stock. In this particular case, they use the mass message feature of messaging apps. The subsequent purchases of the stock will pump up the price, until the [...]

By |September 3rd, 2015|FINRA, Press Releases & News|
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FINRA Fines Charles Schwab $2M

FINRA has fined Charles Schwab & Co., Inc. $2 million for net capital deficiencies and for failing to supervise. The net capital deficiencies happened on three different dates in 2014 and spanned from $287 million to $775 million. FINRA's findings indicated that in three instances between May 15, 2014 and July 1, 2014, Schwab was net capital deficient up to $775 million. The deficiencies occurred because on each of those dates, Schwab had cash coming in that exceeded the amounts it could invest with existing facilities. So Schwab gave $1 billion to its parent company for overnight investment. Schwab's Treasury group approved the transfer as an unsecured loan under a revolving loan agreement without consulting its Regulatory Reporting group as to how these transfers would affect the firm's net capital position. Schwab had no procedures implemented mandating its Treasury group to consult with its Regulatory Reporting group about the impact of its actions on net capital. The firm's supervisory systems [...]

By |August 25th, 2015|FINRA, Press Releases & News|
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FINRA Investigates Conflicts In Broker Pay

FINRA is examining potential conflicts in interest regarding how firms compensate their brokers. In a targeted exam letter, FINRA asks firms about a number of compensation policies and practices, ranging from payout grids to recruiting incentives and mutual fund fees. Firms were also asked about compensation they get from product sponsors and how they promote particular products or groups of products. “The intent of this review is to continue our assessment of the efforts employed by firms to identify, mitigate and manage conflicts of interest, specifically with respect to compensation practices,” FINRA explained. FINRA is trying to gather information, rather than looking for violations. The regulator uses these kinds of sweeps to figure out if firms are adequately managing conflicts of interest or if FINRA needs to issue additional guidance. “It is really designed to determine whether practices around compensation or certain products that are sold are being sold for the right reason and there are not compensation incentives that could [...]

By |August 21st, 2015|FINRA, Press Releases & News|
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