Articles Posted in FINRA

Shawn Edward Good, who was a registered broker with Morgan Stanley it its Wilmington, North Carolina office, was recently barred by FINRA by consent agreement.  Mr. Good also has a pending SEC Complaint against him alleging the following involvement in a ponzi scheme:

  • From 2012 until 2022 Mr. Good solicited customers to transfer funds to his personal bank account, allegedly for investments in real estate and government bonds.
  • In ponzi scheme fashion, the transferred monies were used to repay earlier customers who had also invested, in addition to payment of Mr. Good’s personal expenses.

The United States Securities and Exchange Commission (SEC) has filed a Complaint charging a Broker-Dealer for the first time with a violation of the recently enacted Regulation Best Interest (Reg BI).  The subject of the Complaint was Western International Securities, and five of its registered brokers, Nancy Cole, Patrick Egan, Andy Gitipityapon, Steven Graham, and Thomas Swan.

The Complaint alleges that Western and its brokers sold high risk and potentially illiquid L bonds issued by GWG Holdings, Inc., with many of the sales to customers on fixed incomes and with moderate risk tolerances.  The SEC’s press release alleged that the Defendants “failed to comply with Reg BI’s “Care Obligation” both because they did not exercise reasonable diligence, care, and skill to understand the risks, rewards, and costs associated with L Bonds, and also because they recommended L Bonds to at least seven particular customers without a reasonable basis to believe the bonds were in their customers’ best interests.”

The SEC also claimed that the activities and sales violated the compliance component of Reg BI which requires firms to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI.

Former Richmond, Virginia Oppenheimer & Co. Inc. financial advisor Warren E. Rowe Jr. was barred from the securities industry by FINRA recently after an investigation related to alleged loans taken from customers.

According the the FINRA Letter of Acceptance Waiver and Consent found here, Mr. Rowe refused to provide documents in response to a request of FINRA investigators.  The AWC, signed by Mr. Rowe, imposed a bar on Mr. Rowe’s association with any FINRA member in all capacities.

Mr. Rowe’s FINRA Brokercheck report reveals that he voluntarily resigned from Oppenheimer in May 2020 after an allegation that he took a loan from a client without disclosing it to the firm.  The report also references multiple customer complaints related to alleged loans, as well as complaints related to unauthorized trading, and inappropriate margin use.  Interestingly, a customer complaint regarding a loan made after his separation from Oppenheimer is still listed as “denied” by the firm.

In a recent disciplinary action against Cadaret, Grant & Co., Inc., FINRA discusses various red flags that should have been investigated by the firm to discover and prevent the sale of a ponzi scheme investment to its customers.

The Letter of Acceptance, Waiver and Consent (found here) states that the firm “failed to reasonably supervise the activities of a registered representative even after becoming aware of red flags of sales practice violations.”  According to the AWC, a securities salesperson at Cadaret, Grant created and controlled three ponzi scheme entities, promising annual returns as high as 8% despite the fact that the entities were shell companies with no revenues or business operations.  The broker never disclosed he was selling the investments to his customers at the firm, however, the AWC found the firm liable for failing to supervise his activities.

The AWC discusses various red flags that should have been discovered and investigated by the firm when complying with its duty to supervise under FINRA Rule 3110, including the following:

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