FINRA Cracksdown on Broker Migration

The Financial Industry Regulatory Authority (FINRA) announced that as a result of a 2014 onsite exam, it found securities violations including various misleading sales pitches, customer account churning and other business misconduct at Global Arena Capital Corp.  As a result, it has barred seven former registered representatives 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.

These actions are a result of FINRA’s continued focus on tracking groups of brokers that move from one risky firm to another. Seven of the 10 individuals had moved from HFP Capital Markets LLC, which was a problem firm that FINRA later expelled, to Global Arena Capital Corp. 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 noted that they 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 found that certain Global Arena representatives engaged in securities fraud by, among other things, using misleading sales pitches and high pressure sales tactics to make sales of junk bonds and other securities to customers. Brokers at the firm also churned existing customer accounts by recommending frequent trades and made unsuitable recommendations.

In the actions announced, FINRA barred the former President of Global Arena Capital Corp., Barbara Desiderio, and five former representatives (David Awad, a.k.a. “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 representatives (Niaz Elmazi, a.k.a. “Nick Morrisey” and Andrew Marzec) for failing to cooperate with FINRA’s investigation. One of these individuals was barred in August 2015 and the other individual’s bar becomes effective in October 2015. FINRA cancelled Global Arena’s membership in July 2015, 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.

This action by FINRA is another signal for member firms to know that there are ramifications to hiring brokers out of high risk firms, and it is critical to know who they are letting affiliate with them.

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