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Regulation and Compliance > Federal Regulation > FINRA

FINRA Nabs 10 Reps in Risky Broker Op

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The Financial Industry Regulatory Authority said Tuesday that it has suspended or barred 10 registered reps and branch managers for numerous securities violations following several of the reps’ moves from the now-defunct HFP Capital Markets LLC to another problem broker-dealer, Global Arena Capital Corp.

FINRA said that a 2014 onsite exam performed by the self-regulatory organization found securities violations including various misleading sales pitches, customer account churning and other business misconduct at Global Arena Capital Corp.

As a result of the Global Arena exam findings, FINRA has barred seven former registered reps from the securities industry, suspended an eighth person whose bar will become effective in October, and barred two former branch managers from serving in a principal capacity.

FINRA tracks groups of brokers that move from one risky firm to another as part of its high-risk broker initiative.

“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,” said Susan Axelrod, FINRA’s executive vice president of regulatory operations. “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.”

Seven of the 10 individuals had moved from HFP — a troubled firm that FINRA later expelled — to Global Arena.

In the actions announced Tuesday, FINRA barred the former president of Global Arena Capital Corp., Barbara Desiderio, and five former reps (David Awad, aka “David Bennett,” James Torres, Peter Snetzko, Alex Wildermuth and Michael Tannen) in all capacities; barred two former principals of the firm (Kevin Hagan and Richard Bohack) in a principal capacity for supervisory failures; and sanctioned two former reps (Niaz Elmazi, a.k.a. “Nick Morrisey” and Andrew Marzec) for failing to cooperate with FINRA’s investigation.

According to FINRA BrokerCheck records, the organization suspended former Global Arena advisor Elmazi, aka Morrisey, in May of this year over his failure to respond to its information requests.

In 2014, FINRA denied a client of Elmazi/Morrisey $29,000 in requested relief for “unsuitable recommendations.”

However, Elmazi/Morrisey was required to pay $45,000 and was barred from the securities business in 2013, after the state of Arkansas brought action against him.

While cold calling potential clients about corporate bonds issued by Verso Paper, the advisor called an Arkansas resident employed as a securities examiner by the state on the examiner’s office phone during business hours.

The state alleged that the then-advisor made “unjustifiable and untruthful statements,” the FINRA records state. In addition, Arkansas claimed he “had no reasonable grounds” for believing that the recommendation was suitable for the investor.

Elmazi/Morrisey was with Global Arena from October 2013 to May 2015. From February 2009 to October 2013, he worked with HFP Capital Markets, which FINRA expelled from the industry in June 2014.

The advisor was with First Republic from 2001-2002. FINRA barred this firm from the securities business in 2009.

According to FINRA, Global Arena opened a branch office in October 2013 to register a number of brokers who had been discharged by HFP. Like HFP, the branch office’s business model involved cold-calling customers, including seniors, to make solicited recommendations of securities. FINRA employed a risk-based approach to identify certain brokers who had moved from HFP to Global Arena and were then subject to heightened regulatory scrutiny during a 2014 exam.

During the onsite audit and subsequent investigation, FINRA says that it found that certain Global Arena reps engaged in securities fraud by, among other things, using misleading sales pitches and high-pressure tactics to sell junk bonds and other securities. Brokers at the firm also churned existing customer accounts by recommending frequent trades and made unsuitable recommendations.

FINRA canceled Global Arena’s membership in July, and the firm’s de facto owner and three other former Global Arena brokers had been barred for fraud in a separate FINRA action related to HFP in July 2015.

In settling the actions, the respondents neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

The two individuals sanctioned for non-cooperation were sanctioned pursuant to a summary proceeding and not pursuant to settlement, and thus they did not consent to entry of any FINRA findings.

(Janet Levaux contributed reporting.)

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