Securities Arbitration Lawyers Blog

Silver Law Group is investigating Burnham Securities, Inc. (CRD# 22549) and related entities for allegations of its role as placement agent for fraudulent tribal bonds.

In May 2016, the Securities and Exchange Commission (“SEC”) filed a complaint against a host of individuals, including notorious securities fraudsters Jason W. Galanis and his father John P. Galanis for defrauding investors in sham Native American tribal bonds.

The Galanises main objective was to steal money for their own extravagant expenses and criminal defense costs.

On December 5, 2016, FINRA reported that it fined Credit Suisse Securities (USA) LLC (CRD# 816) $16.5 million for anti-money laundering (“AML”), supervision and other violations.

According to the Acceptance, Waiver & Consent (“AWC”) entered into between Credit Suisse and FINRA, Credit Suisse neither admitted or denied the allegations but consented to the findings.

FINRA found that Credit Suisses’s suspicious activity monitoring program was deficient in that it relied on its registered representatives to identify and report potentially suspicious trading, including microcap transactions.  This self-regulation did not always work in practice, and high-risk activity was not always reported and investigated.

FINRA reported in a news release that it fined Merrill Lynch, Pierce, Fenner & Smith Inc. (CRD# 7691) $6.25 million and the firm will pay approximately $780,000 in restitution for inadequately supervising its customers’ use of leverage and  overconcentrating some of its customers in Puerto Rican bonds.

According to the Acceptance, Waiver & Consent (“AWC”) entered into between Merrill Lynch and FINRA, FINRA found that from January 2010 through July 2013, Merrill Lynch did not establish and maintain adequate supervisory systems and did not establish, maintain, and enforce adequate written procedures reasonable designed to ensure the suitability of transactions in certain Puerto Rico securities, namely, municipal bonds and closed-end funds.  Certain customers’ holdings were highly concentrated in Puerto Rican bonds and highly leveraged through margin.

This is not the first time a firm has been sanctioned for supervisory, concentration and margin issues related to Puerto Rican securities, municipal bonds and/or closed-end funds.  In September 2015, FINRA fined UBS Financial Services Inc. (CRD# 8174) of Puerto Rico a total of $18.5 million in fines and restitution for similar allegations.

FINRA fined Oppenheimer & Co. Inc. (CRD# 249) and ordered the firm to pay retribution in an amount totaling $3.4 million for failing to produce documents in discovery to customers who filed FINRA arbitrations and for not applying applicable sales charge waivers to customers.

According to the news release, FINRA found that over a span of several years, Oppenheimer failed to timely report to FINRA more than 350 required filings including securities-related regulatory findings, disciplinary actions taken by Oppenheimer against its employees, and settlements of securities-related arbitration and litigation claims.  On average, according to FINRA, Oppenheimer made these filings more than four years late.

In addition to those allegations, FINRA found that between 2010 and 2013, Oppenheimer failed to produce relevant documents during discovery to seven FINRA arbitration claimants alleging Oppenheimer failed to supervise former Oppenheimer broker Mark C. Hotton (CRD# 2346843). Oppenheimer failed to provide spreadsheets showing that Hotton had excessively traded multiple customer accounts.