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FINRA Sanctions 3 Reps Accused of Falsifying Documents

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The Financial Industry Regulatory Authority barred one representative and suspended two others who allegedly forged documents in separate cases, according to the regulator.

Without admitting or denying the findings, Wesley K. Omoto, Christopher R. Barone and Thomas J. Crossett each signed a FINRA letter of acceptance, waiver and consent in which they agreed to the sanctions imposed on them by FINRA.

Omoto signed his letter Jan. 16, agreeing to a two-month suspension from FINRA firms and a $5,000 fine. Barone signed his letter Dec. 30, agreeing to be barred from association with any FINRA firm in any capacity. Crossett signed his letter Jan. 7, agreeing to a three-month suspension and a $5,000 fine. FINRA accepted all three letters Thursday.

Over his more than 31 years in the industry, Omoto was associated with three firms before joining Ameritas Investment Corp. in August 1998, according to FINRA. On Feb. 26, 2018, Ameritas filed a Form U5 reporting that Omoto was permitted to resign three days earlier while under review for his failure to adhere to firm signature policies, specifically “repurposing of clients’ signatures,” the FINRA letter said.

Omoto, “while associated with Ameritas, falsified records by cutting and pasting signatures of two customers on forms as part of variable annuity transactions,” violating FINRA Rule 2010. In addition, through his conduct, Omoto caused Ameritas to make and preserve inaccurate books and records in violation of FINRA Rules 4511 and 2010, according to the FINRA letter.

Ameritas and Omoto’s lawyer, Jeremy L. Bartell of Bartell Law in Washington, D.C., declined to comment.

Meanwhile, Barone became associated as a general securities principal and general securities representative with FINRA member America Northcoast Securities in July 1999. Barone then became associated with America Northcoast as a municipal securities principal in February 2003, FINRA said. However, his association with America Northcoast was terminated in August 2017 when the firm terminated its membership with FINRA.

Between December 2016 and July 2017, Barone made misrepresentations to FINRA about the frequency of his supervision of his firm’s trade reporting responsibilities, and altered documents that he produced to FINRA, the regulator alleged. Through this conduct, Barone violated FINRA Rules 8210 and 2010, FINRA said.

Between Jan.1, 2016 and July 1, 2017, Barone was America Northcoast’s president and chief compliance officer. The firm’s written supervisory procedures required the CCO to conduct a monthly review of the firm’s trade reporting responsibilities to ensure compliance with applicable rules. “For various reasons, however, Barone was only completing this responsibility three or four times a year,” according to FINRA.

During the second half of 2016, FINRA conducted two inquiries pertaining to America Northcoast’s compliance with its trade reporting responsibilities. One of these inquiries pertained to the firm’s reporting of municipal securities transactions to the Municipal Securities Rulemaking Board. On Nov. 29, 2016, FINRA requested that America Northcoast produce documents and information regarding the firm’s failure to report 47 municipal transactions within 15 minutes of trade execution over a three-month period in 2016, FINRA said. The inquiry letter included a request that the firm produce “[c]opies of any and all documents evidencing that supervisory review of trade reporting compliance of municipal securities was conducted during the review period,” it said, noting Barone was “solely responsible for preparing the firm’s response.”

In a Dec. 20, 2016 letter, however, Barone “falsely represented” that he “reviewed these trades monthly to make sure we are not reporting late” to MSRB. “In fact, Barone was reviewing the firm’s municipal trade reporting only on, at most, a quarterly basis,” FINRA said.

Barone also produced three MSRB spreadsheets that “purportedly evidenced his supervisory reviews, but before doing so, he altered the documents in two important ways,” FINRA said, explaining: “First, he removed the ‘search date’ on the document, which was evidence of when Barone had actually conducted the review. Second, he added a different date and his initials.”

Based on concerns that Barone altered those documents, FINRA sent Barone a second inquiry letter on June 12, 2017. On July 6, 2017, Barone responded by producing MSRB spreadsheets for each month of the year. “Once again, however, Barone altered these documents before producing them,” FINRA alleged, adding: “For nine of the monthly spreadsheets, Barone concealed the search dates, which evidenced when he had actually reviewed them; and for seven of the months, he added a date and initials that falsely reported that he had performed the review on a date that was earlier than his actual review.”

In a separate inquiry, FINRA requested on Aug. 10, 2016 that America Northcoast produce evidence of supervisory reviews in connection with its reporting responsibilities through the Trade Reporting and Compliance Engine. “After several months of dialogue with FINRA about this request, Barone produced a document that he had created” and made a false representation, according to FINRA.

By altering documents in response to a request made pursuant to FINRA Rule 8210, Barone violated FINRA Rules 8210 and 2010, it said. “Moreover, by making a false representation in response to a FINRA request about the firm’s TRACE reporting compliance, Barone violated FINRA Rule 2010,” it said.

America Northcoast and Michael A. Gross, a lawyer at Ulmer & Berne in Boca Raton, Florida, who represented Barone in the FINRA case, didn’t immediately respond to requests for comment.

Last, Crossett was registered as a general securities representative through an association with Girard Investment Services from July 2014 to December 2018.

On Dec. 27, 2018, Girard Investment filed a Form U5 stating that Crossett’s registration was terminated because, among other reasons, he “signed his spouse’s signature to a loan document without her knowledge or consent.”

In the FINRA AWC letter, the regulator elaborated, saying Crossett “forged his estranged wife’s signature on a loan application.” As a result, Crossett violated FINRA Rule 2010, it said.

In November 2015, Crossett applied for a line of credit, the collateral for which was a brokerage account at his firm, for the purpose of obtaining additional funding for the company. However, “rather than opening an individual or business line of credit, Crossett applied for a joint line of credit in the name of Crossett and his estranged wife, who was a Firm customer.”

That same month, he forged her signature on the application paperwork for the LOC without her knowledge or consent, then presented the paperwork to a notary public, and “falsely represented that his wife had signed it,” according to the FINRA letter. The LOC was approved, and Crossett then withdrew $50,000 from the LOC and used the proceeds to fund the company’s business, FINRA said.

Crossett’s estranged wife learned of the LOC in December 2018, when she received paperwork about the LOC and she complained to the firm that she had not consented to, and had no prior knowledge of, the LOC, according to the FINRA letter. However, Crossett’s estranged wife didn’t lose any money as a result of the LOC and she subsequently ratified Crossett’s decision to open the LOC, FINRA said, noting Crossett violated FINRA Rule 2010.

Girard Investment and Jean H. Bickhart, a lawyer at McCausland Keen + M Buckman in Devon, Pennsylvania, who represented Crossett in the FINRA case, didn’t immediately respond to requests for comment.

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