NEWPORT COAST SECURITIES, INC. · 2015. 9. 2. · NEWPORT COAST SECURITIES, INC. CRD# 16944 SEC#...

BrokerCheck Report

NEWPORT COAST SECURITIES, INC.

Report #20916-34106, data current as of Wednesday, September 02, 2015.

Section Title

Report Summary

Firm History

CRD# 16944

1

6

Firm Profile 2 - 5

Page(s)

Firm Operations 7 - 13

Disclosure Events 14

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CRD# 16944

SEC# 8-34790

Main Office Location

180 MAIDEN LANE17TH FLOORNEW YORK, NY 10038Regulated by FINRA New York Office

Mailing Address

180 MAIDEN LANE17TH FLOORNEW YORK, NY 10038

This firm is a brokerage firm and an investmentadviser firm. For more information aboutinvestment adviser firms, visit the SEC'sInvestment Adviser Public Disclosure website at:

Business Telephone Number

646-259-4700

http://www.adviserinfo.sec.gov

Report Summary for this Firm

This report summary provides an overview of the brokerage firm. Additional information for this firm can be foundin the detailed report.

Disclosure Events

Brokerage firms are required to disclose certaincriminal matters, regulatory actions, civil judicialproceedings and financial matters in which the firm orone of its control affiliates has been involved.

Are there events disclosed about this firm? Yes

The following types of disclosures have beenreported:

Type Count

Regulatory Event 10

Arbitration 1

Firm Profile

This firm is classified as a corporation.

This firm was formed in California on 03/06/1985.

Its fiscal year ends in December.

Firm History

Information relating to the brokerage firm's historysuch as other business names and successions(e.g., mergers, acquisitions) can be found in thedetailed report.

Firm Operations

Is this brokerage firm currently suspended with anyregulator? No

This firm conducts 13 types of businesses.

This firm is not affiliated with any financial orinvestment institutions.

This firm has referral or financial arrangements withother brokers or dealers.

This firm is registered with:

• the SEC• 2 Self-Regulatory Organizations• 50 U.S. states and territories

www.finra.org/brokercheck User Guidance

1©2015 FINRA. All rights reserved. Report# 20916-34106 about NEWPORT COAST SECURITIES, INC. Data current as of Wednesday, September 02, 2015.

http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_Search.aspx?CrdNumber=16944


http://www.finra.org/brokercheck

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This firm is classified as a corporation.

This firm was formed in California on 03/06/1985.

CRD#

This section provides the brokerage firm's full legal name, "Doing Business As" name, business and mailingaddresses, telephone number, and any alternate name by which the firm conducts business and where such name isused.

Firm Profile

Firm Names and Locations

Its fiscal year ends in December.


SEC#

16944

8-34790

Main Office Location

Mailing Address

Business Telephone Number

Doing business as NEWPORT COAST SECURITIES, INC.

646-259-4700

Regulated by FINRA New York Office








This section provides information relating to all direct owners and executive officers of the brokerage firm.

Direct Owners and Executive Officers

Firm Profile

Position

Percentage of Ownership

Is this a public reportingcompany?

Position Start Date

Does this owner direct themanagement or policies ofthe firm?

RUBICON FINANCIAL INCORPORATED

OWNER

75% or more

Yes

Domestic Entity

09/2007

Yes

Is this a domestic or foreignentity or an individual?

Legal Name & CRD# (if any):

Position



Position Start Date


KESSLER, KRISTOPHER CHARLES

COO

Less than 5%

No

Individual

09/2010

Yes

4543640



Position


Position Start Date

LEE, KEVIN CHONG

CHIEF COMPLIANCE OFFICER

Less than 5%

Individual

08/2013

3143283








Direct Owners and Executive Officers (continued)

Firm Profile




Less than 5%

No

Yes

Position



Position Start Date


ONESTO, RICHARD ERNEST

CEO

Less than 5%

No

Individual

01/2015

Yes

2453096



Position



Position Start Date


ONESTO, RICHARD ERNEST

FINOP/CFO

Less than 5%

No

Individual

03/2013

Yes

2453096








This section provides information relating to any indirect owners of the brokerage firm.

Indirect Owners

Firm Profile

No information reported.






Firm History

This section provides information relating to any successions (e.g., mergers, acquisitions) involving the firm.

No information reported.






Firm Operations

RegistrationsThis section provides information about the regulators (Securities and Exchange Commission (SEC), self-regulatoryorganizations (SROs), and U.S. states and territories) with which the brokerage firm is currently registered andlicensed, the date the license became effective, and certain information about the firm's SEC registration.

This firm is currently registered with the SEC, 2 SROs and 50 U.S. states and territories.

SEC Registration Questions

This firm is registered with the SEC as:

A broker-dealer:

A broker-dealer and government securities broker or dealer:

A government securities broker or dealer only:

This firm has ceased activity as a government securities broker or dealer:

Yes

Yes

No

No

Federal Regulator Status Date Effective

SEC Approved 11/21/1985

Self-Regulatory Organization Status Date Effective

FINRA Approved 03/24/1986

NASDAQ Stock Market Approved 08/14/2008






Firm Operations

Registrations (continued)

U.S. States &Territories

Status Date Effective

Alabama Approved 08/20/1996

Alaska Approved 06/20/2000

Arizona Approved 05/21/1990

Arkansas Approved 11/06/1996

California Approved 04/15/1986

Colorado Approved 06/27/1988

Connecticut Approved 11/01/1995

Delaware Approved 02/04/2009

District of Columbia Approved 06/09/1991

Florida Approved 05/16/1991

Georgia Approved 09/25/1995

Hawaii Approved 04/18/1995

Idaho Approved 03/06/1990

Illinois Approved 03/27/1989

Indiana Approved 03/02/1995

Iowa Approved 04/10/2007

Kansas Approved 10/25/1995

Kentucky Approved 07/08/1996

Louisiana Approved 09/25/1995

Maryland Approved 07/01/1996

Massachusetts Approved 05/28/1992

Michigan Approved 07/19/1996

Minnesota Approved 10/24/1996

Mississippi Approved 07/30/2004

Missouri Approved 09/19/2002

Montana Approved 02/10/1988

Nebraska Approved 09/19/2006

Nevada Approved 02/23/1989

New Hampshire Approved 09/24/1996

New Jersey Approved 08/14/1995

New Mexico Approved 09/08/1992

New York Approved 03/11/1992

North Carolina Approved 07/10/1996

U.S. States &Territories

Status Date Effective

North Dakota Approved 02/05/2009

Ohio Approved 05/30/2006

Oklahoma Approved 05/23/2006

Oregon Approved 09/30/1996

Pennsylvania Approved 10/17/1995

Rhode Island Approved 07/31/1996

South Carolina Approved 07/03/1996

South Dakota Approved 09/05/2008

Tennessee Approved 07/16/2008

Texas Approved 08/13/1991

Utah Approved 09/22/1995

Vermont Approved 08/11/1997

Virginia Approved 08/06/1996

Washington Approved 01/29/1990

West Virginia Approved 11/18/1994

Wisconsin Approved 10/15/2007

Wyoming Approved 09/30/1996






Firm Operations

Types of BusinessThis section provides the types of business, including non-securities business, the brokerage firm is engaged in orexpects to be engaged in.

This firm currently conducts 13 types of businesses.

Types of Business

Broker or dealer making inter-dealer markets in corporation securities over-the-counter

Broker or dealer retailing corporate equity securities over-the-counter

Broker or dealer selling corporate debt securities

Underwriter or selling group participant (corporate securities other than mutual funds)

Mutual fund retailer

U S. government securities broker

Municipal securities broker

Broker or dealer selling variable life insurance or annuities

Broker or dealer selling oil and gas interests

Put and call broker or dealer or option writer

Investment advisory services

Broker or dealer selling tax shelters or limited partnerships in primary distributions

Private placements of securities






Firm Operations

Clearing Arrangements

This firm does not hold or maintain funds or securities or provide clearing services for other broker-dealer(s).

Introducing Arrangements

This firm does refer or introduce customers to other brokers and dealers.

Name: COR CLEARING LLC

Business Address: 9300 UNDERWOOD AVE.SUITE 400OMAHA, NE 68114

CRD #: 117176

Effective Date: 12/05/2012

Description: FULLY DISCLOSED CLEARING THROUGH COR CLEARING LLC.

Name: APEX CLEARING CORPORATION

Business Address: 1700 PACIFIC AVENUESUITE 1400DALLAS, TX 75201

CRD #: 13071


Description: FULLY DISCOSED CLEARING THROUGH APEX CLEARINGCORPORATION

Name: WEDBUSH SECURITIES INC.

Business Address: 1000 WILSHIRE BLVD10TH FLOORLOS ANGELES, CA 90017

CRD #: 877


Description: CLEARING ON A FULLY DISCLOSED BASIS






Firm Operations

Industry Arrangements

This firm does not have books or records maintained by a third party.

This firm does have accounts, funds, or securities maintained by a third party.

This firm does have customer accounts, funds, or securities maintained by a third party.



CRD #: 117176





CRD #: 13071





CRD #: 877





CRD #: 117176

Effective Date: 12/05/201211©2015 FINRA. All rights reserved. Report# 20916-34106 about NEWPORT COAST SECURITIES, INC. Data current as of Wednesday, September 02, 2015.





Firm Operations

Industry Arrangements (continued)

This firm does not have individuals who control its management or policies through agreement.

This firm does not have individuals who wholly or partly finance the firm's business.

Control Persons/Financing





CRD #: 13071





CRD #: 877








Firm Operations

Organization AffiliatesThis section provides information on control relationships the firm has with other firms in the securities, investmentadvisory, or banking business.

This firm is not, directly or indirectly:

· in control of· controlled by· or under common control withthe following partnerships, corporations, or other organizations engaged in the securities or investmentadvisory business.

This firm is not directly or indirectly, controlled by the following:

· bank holding company· national bank· state member bank of the Federal Reserve System· state non-member bank· savings bank or association· credit union· or foreign bank






Disclosure Events

All firms registered to sell securities or provide investment advice are required to disclose regulatory actions, criminal orcivil judicial proceedings, and certain financial matters in which the firm or one of its control affiliates has been involved.For your convenience, below is a matrix of the number and status of disclosure events involving this brokerage firm orone of its control affiliates. Further information regarding these events can be found in the subsequent pages of thisreport.

Final On AppealPending

Regulatory Event 2 8 0

Arbitration N/A 1 N/A






Disclosure Event Details

What you should know about reported disclosure events:

1. BrokerCheck provides details for any disclosure event that was reported in CRD. It also includessummary information regarding FINRA arbitration awards in cases where the brokerage firm wasnamed as a respondent.

2. Certain thresholds must be met before an event is reported to CRD, for example: o A law enforcement agency must file formal charges before a brokerage firm is required to disclose a

particular criminal event.3. Disclosure events in BrokerCheck reports come from different sources:

o Disclosure events for this brokerage firm were reported by the firm and/or regulators. When the firmand a regulator report information for the same event, both versions of the event will appear in theBrokerCheck report. The different versions will be separated by a solid line with the reporting sourcelabeled.

4. There are different statuses and dispositions for disclosure events: o A disclosure event may have a status of pending, on appeal, or final.

§ A "pending" event involves allegations that have not been proven or formally adjudicated.§ An event that is "on appeal" involves allegations that have been adjudicated but are currently

being appealed.§ A "final" event has been concluded and its resolution is not subject to change.

o A final event generally has a disposition of adjudicated, settled or otherwise resolved.§ An "adjudicated" matter includes a disposition by (1) a court of law in a criminal or civil matter,

or (2) an administrative panel in an action brought by a regulator that is contested by the partycharged with some alleged wrongdoing.

§ A "settled" matter generally involves an agreement by the parties to resolve the matter.Please note that firms may choose to settle customer disputes or regulatory matters forbusiness or other reasons.

§ A "resolved" matter usually involves no payment to the customer and no finding ofwrongdoing on the part of the individual broker. Such matters generally involve customerdisputes.

5. You may wish to contact the brokerage firm to obtain further information regarding any of thedisclosure events contained in this BrokerCheck report.

Regulatory - Final

This type of disclosure event involves (1) a final, formal proceeding initiated by a regulatory authority (e.g., a statesecurities agency, self-regulatory organization, federal regulator such as the U.S. Securities and Exchange Commission,foreign financial regulatory body) for a violation of investment-related rules or regulations; or (2) a revocation orsuspension of the authority of a brokerage firm or its control affiliate to act as an attorney, accountant or federalcontractor.

Disclosure 1 of 8

Reporting Source: Regulator

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT SUBMITTEDEXECUTION OR COMBINED ORDER/EXECUTION REPORTS WHICHCONTAINED INACCURATE, INCOMPLETE OR IMPROPERLY FORMATTEDDATA. THE FINDINGS STATED THAT THE FIRM REPORTED EXECUTION ORCOMBINED ORDER/EXECUTION REPORTS WITH REPORTING EXCEPTIONCODES THAT WERE REQUIRED TO MATCH TO A RELATED TRADE REPORTIN A FINRA TRADE REPORTING FACILITY. IN EXECUTION OR COMBINEDORDER/EXECUTION REPORTS, THE FIRM SUBMITTED RELATEDPROPRIETARY ORDERS IN WHICH THE FIRM POPULATED AN INCORRECTACCOUNT TYPE CODE.

Current Status: Final






Initiated By: FINRA

Principal Sanction(s)/ReliefSought:

Other Sanction(s)/ReliefSought:

Date Initiated: 04/09/2015

Docket/Case Number: 2013037817001

Principal Product Type: No Product

Other Product Type(s):

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT SUBMITTEDEXECUTION OR COMBINED ORDER/EXECUTION REPORTS WHICHCONTAINED INACCURATE, INCOMPLETE OR IMPROPERLY FORMATTEDDATA. THE FINDINGS STATED THAT THE FIRM REPORTED EXECUTION ORCOMBINED ORDER/EXECUTION REPORTS WITH REPORTING EXCEPTIONCODES THAT WERE REQUIRED TO MATCH TO A RELATED TRADE REPORTIN A FINRA TRADE REPORTING FACILITY. IN EXECUTION OR COMBINEDORDER/EXECUTION REPORTS, THE FIRM SUBMITTED RELATEDPROPRIETARY ORDERS IN WHICH THE FIRM POPULATED AN INCORRECTACCOUNT TYPE CODE.

Resolution Date: 04/09/2015

Resolution:

Other Sanctions Ordered:

Sanction Details: THE FIRM WAS CENSURED AND FINED $7,500. 4/27/2015 FINE PAID IN FULL.

Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?

No

Sanctions Ordered: CensureMonetary/Fine $7,500.00

Acceptance, Waiver & Consent(AWC)

iReporting Source: Firm

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT SUBMITTEDEXECUTION OR COMBINED ORDER/EXECUTION REPORTS WHICHCONTAINED INACCURATE, INCOMPLETE OR IMPROPERTY FORMATTEDDATA.






http://disciplinaryactions.finra.org/Search.aspx?CaseNB=2013037817001


Initiated By: FINRA


Censure






Allegations:TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT SUBMITTEDEXECUTION OR COMBINED ORDER/EXECUTION REPORTS WHICHCONTAINED INACCURATE, INCOMPLETE OR IMPROPERTY FORMATTEDDATA.


Resolution:


Sanction Details: THE FIRM WAS CENSURED AND FINED $7,500.

Firm Statement THE FIRM MAINTAINS THAT IT WAS NOT AWARE OF THE ERRORS AS THEYWERE HIDDEN FROM THE FIRM'S VIEW. THE CLEARING FIRM HASADMITTED, IN WRITING, TO CAUSING THE FORMATTING ERROR.



Disclosure 2 of 8

i


Allegations: FINRA RULE 2010, NASD RULE 3010(B): THE FIRM FAILED TO ENFORCE ITSWRITTEN SUPERVISORY PROCEDURES. THE FIRM'S WRITTENSUPERVISORY PROCEDURES (WSPS) PROVIDED THAT THE FIRM WOULDMAINTAIN A RESTRICTED LIST OF SECURITIES. THE FIRM PROHIBITEDTRADING OF ANY STOCK ON THE RESTRICTED LIST ABSENT WRITTENPERMISSION FROM ITS COMPLIANCE DEPARTMENT. THE FIRM'SPROCEDURES FURTHER PROVIDED THAT IT WOULD MONITOR DAILYTRADING TO IDENTIFY TRANSACTION IN SECURITIES OF ISSUERS ON THERESTRICTED LIST AND TAKE ACTION AS NECESSARY WHICH MAYINCLUDE INQUIRING REGARDING THE SOLICITED OR UNSOLICITEDNATURE OF TRANSACTIONS, CANCELING TRANSACTIONS, OR TAKINGOTHER APPROPRIATE ACTION. FOR A PERIOD, SECURITIES FROMAPPROXIMATELY 20 ISSUERS WERE ON THE FIRM'S RESTRICTED LIST.THE FIRM FAILED TO MONITOR TRADING ADEQUATELY TO ENSURE THATTRANSACTIONS DID NOT OCCUR IN RESTRICTED LIST SECURITIESABSENT THE REQUISITE WRITTEN PERMISSION. DURING THE PERIOD,THE FIRM FAILED TO IDENTIFY AND TAKE ACTION IN 165 TRANSACTIONSINVOLVING SIX RESTRICTED LIST SECURITIES, WHICH WERE COMPLETEDWITHOUT WRITTEN PERMISSION.








Initiated By: FINRA


Other


N/A



Principal Product Type: Other

Other Product Type(s): RESTRICTED LIST SECURITIES

NATURE OF TRANSACTIONS, CANCELING TRANSACTIONS, OR TAKINGOTHER APPROPRIATE ACTION. FOR A PERIOD, SECURITIES FROMAPPROXIMATELY 20 ISSUERS WERE ON THE FIRM'S RESTRICTED LIST.THE FIRM FAILED TO MONITOR TRADING ADEQUATELY TO ENSURE THATTRANSACTIONS DID NOT OCCUR IN RESTRICTED LIST SECURITIESABSENT THE REQUISITE WRITTEN PERMISSION. DURING THE PERIOD,THE FIRM FAILED TO IDENTIFY AND TAKE ACTION IN 165 TRANSACTIONSINVOLVING SIX RESTRICTED LIST SECURITIES, WHICH WERE COMPLETEDWITHOUT WRITTEN PERMISSION.


Resolution:


Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS,THEREFORE THE FIRM IS CENSURED AND FINED $10,000. FINE PAID INFULL JULY 17, 2014.


No




Allegations: ALLEGED VIOLATION OF FINRA RULE 2010, NASD RULE 3010(B): THE FIRMFAILED TO ENFORCE ITS WRITTEN SUPERVISORY PROCEDURES.








Initiated By: FINRA


Other


N/A




Other Product Type(s): RESTRICTED LIST SECURITIES

Allegations: ALLEGED VIOLATION OF FINRA RULE 2010, NASD RULE 3010(B): THE FIRMFAILED TO ENFORCE ITS WRITTEN SUPERVISORY PROCEDURES.


Resolution:


Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS,THEREFORE THE FIRM IS CENSURED AND FINED $10,000.



Disclosure 3 of 8

i


Allegations: FINRA RULES 2010, 3310(A) AND (B), NASD RULES 2110, 3011(A) AND (B):BETWEEN JANUARY 1, 2008 AND DECEMBER 31, 2010, THE FIRM FAILEDTO ESTABLISH AND IMPLEMENT POLICIES AND PROCEDURES THATCOULD BE REASONABLY EXPECTED TO DETECT AND CAUSE THEREPORTING OF SUSPICIOUS TRANSACTIONS AND, AS A RESULT, FAILEDTO FILE SUSPICIOUS ACTIVITY REPORTS, AS APPROPRIATE. THE FIRM'SANTI-MONEY LAUNDERING (AML) SYSTEMS, PROCEDURES AND INTERNALCONTROLS FOR MONITORING SUSPICIOUS ACTIVITY WERE INADEQUATEAND NOT REASONABLY DESIGNED TO MONITOR AND ACHIEVECOMPLIANCE WITH THE REQUIREMENTS OF THE BANK SECRECY ACT,THE IMPLEMENTING REGULATIONS, OR FINRA'S RULES. ACCORDING TOTHE AML PROCEDURES, THE FIRM WOULD MONITOR ACCOUNT ACTIVITYFOR PATTERNS OF UNUSUAL SIZE, VOLUME, PATTERN OR TYPE OFTRANSACTIONS, OR OTHER RED FLAG ACTIVITY. THE AML CHIEFCOMPLIANCE OFFICER (AMLCO), OR HIS DESIGNEE, WAS RESPONSIBLEFOR THE MONITORING, AND THE AMLCO WAS ALSO RESPONSIBLE FORREVIEWING EXCEPTION REPORTS PROVIDED BY THE FIRM'S TWOCLEARING FIRMS TO DETECT PATTERNS OF SUSPICIOUS ACTIVITY.THESE REPORTS WERE DESIGNED ONLY TO CAPTURE ACCOUNTS WITH ACERTAIN NUMBER OF TRANSACTIONS. THE REPORTS WERE NOTDESIGNED TO CAPTURE PATTERNS OF SUSPICIOUS TRADING ACROSSACCOUNTS OR BY SECURITY AND WERE INCAPABLE OF CAPTURINGSUCH ACTIVITY. THE REPORTS RELIED UPON BY THE FIRM TO CAPTURESUSPICIOUS ACTIVITY WERE INCAPABLE OF DETECTING SUSPICIOUSTRADING ACTIVITY. THE ONLY REPORT AVAILABLE TO FIRM PERSONNELFOR DETECTING SUSPICIOUS TRADING ACTIVITY WAS THE FREQUENCYREPORT WHICH WAS INCAPABLE OF CAPTURING PATTERNS OFSUSPICIOUS TRADING ACTIVITY. THAT LEFT THE FIRM'S MANUAL REVIEWOF ITS DAILY TRADE BLOTTERS AS THE ONLY OTHER TOOL FORATTEMPTING TO IDENTIFY POTENTIALLY SUSPICIOUS TRADING ACTIVITY.ACCORDING TO THE FIRM, THE HEAD TRADER WAS RESPONSIBLE FORUSING THE DAILY TRADE BLOTTERS TO IDENTIFY ANY IRREGULARTRADING ACTIVITY AT THE FIRM. YET, THERE WAS NO FORMALDESIGNATION OF THIS RESPONSIBILITY BY THE AMLCO TO THE HEADTRADER, AND THERE WAS ALSO NO EVIDENCE THAT THE HEAD TRADERUTILIZED THE TRADE BLOTTERS TO MONITOR FOR SUSPICIOUS ACTIVITY.ALSO, ACCORDING TO THE FIRM, AT THE BRANCH LEVEL, THE BRANCHOFFICE MANAGERS WERE TO REVIEW DAILY TRADE BLOTTERS FORACCOUNT ACTIVITY AND UNUSUAL TRADING ACTIVITY. AGAIN, THEREWAS NO FORMAL DESIGNATION OF THIS RESPONSIBILITY BY THE AMLCOTO THE BRANCH MANAGERS, AND THERE WAS ALSO NO PROCESS FORDETERMINING UNDER WHAT CIRCUMSTANCES THE FIRM SHOULDCONSIDER FILING A SUSPICIOUS ACTIVITY REPORT (SAR). SIMILAR TOTHE HEAD TRADER, THE BRANCH OFFICE MANAGERS ALSO FAILED TOUSE THE DAILY TRADE BLOTTERS TO MONITOR FOR SUSPICIOUSACTIVITY. THE FIRM'S AMLCO ACKNOWLEDGED THAT THE TRADEBLOTTERS ALONE COULD NOT BE USED TO CAPTURE UNUSUALPATTERNS OR TYPES OF SUSPICIOUS TRANSACTIONS. THIS, COUPLEDWITH THE FIRM'S FAILURE TO PROVIDE MEANINGFUL GUIDANCE TO ITSPERSONNEL TO MONITOR FOR, DETECT AND INVESTIGATE SUSPICIOUSTRADING ACTIVITY, RENDERED ITS AML SYSTEMS, PROCEDURES, ANDINTERNAL CONTROLS UNREASONABLE. SOME OF THE FIRM'SCUSTOMERS' ACCOUNTS TRADED AN ENTITY'S, NO INFORMATION PINKSHEET STOCK, AND SEVERAL OF THESE ACCOUNTS WERE ASSIGNED TOONE OF THE FIRM'S BRANCH OFFICE MANAGERS OR TO ONE OF THEREGISTERED REPRESENTATIVES THAT THE BRANCH OFFICE MANAGERSUPERVISED. THE BRANCH OFFICE MANAGER WAS ON THE BOARD OFDIRECTORS FOR THE ENTITY AND THE REGISTERED REPRESENTATIVEHELD FOUR SEPARATE (FAMILY OR PERSONAL) ACCOUNTS THAT TRADEDTHE ENTITY. THE FIRM SHOULD HAVE IDENTIFIED THESE AS RED FLAGS,BUT DID NOT. THE FIRM FAILED TO DETECT AND INVESTIGATE RED FLAGSINDICATIVE OF SUSPICIOUS ACTIVITY DUE TO THE FIRM'S DEFICIENT AMLPROGRAM. HAD THE FIRM CONDUCTED A MORE EXTENSIVE REVIEW OFTHESE ACCOUNTS OR CONDUCTED PROPER DUE DILIGENCE ON THEENTITY IT MAY HAVE DETECTED THE RED FLAGS AND POSSIBLY OTHERSSUCH AS THOSE ASSOCIATED WITH MANIPULATIVE ACTIVITY. (CONT. INCOMMENTS)








TRANSACTIONS, OR OTHER RED FLAG ACTIVITY. THE AML CHIEFCOMPLIANCE OFFICER (AMLCO), OR HIS DESIGNEE, WAS RESPONSIBLEFOR THE MONITORING, AND THE AMLCO WAS ALSO RESPONSIBLE FORREVIEWING EXCEPTION REPORTS PROVIDED BY THE FIRM'S TWOCLEARING FIRMS TO DETECT PATTERNS OF SUSPICIOUS ACTIVITY.THESE REPORTS WERE DESIGNED ONLY TO CAPTURE ACCOUNTS WITH ACERTAIN NUMBER OF TRANSACTIONS. THE REPORTS WERE NOTDESIGNED TO CAPTURE PATTERNS OF SUSPICIOUS TRADING ACROSSACCOUNTS OR BY SECURITY AND WERE INCAPABLE OF CAPTURINGSUCH ACTIVITY. THE REPORTS RELIED UPON BY THE FIRM TO CAPTURESUSPICIOUS ACTIVITY WERE INCAPABLE OF DETECTING SUSPICIOUSTRADING ACTIVITY. THE ONLY REPORT AVAILABLE TO FIRM PERSONNELFOR DETECTING SUSPICIOUS TRADING ACTIVITY WAS THE FREQUENCYREPORT WHICH WAS INCAPABLE OF CAPTURING PATTERNS OFSUSPICIOUS TRADING ACTIVITY. THAT LEFT THE FIRM'S MANUAL REVIEWOF ITS DAILY TRADE BLOTTERS AS THE ONLY OTHER TOOL FORATTEMPTING TO IDENTIFY POTENTIALLY SUSPICIOUS TRADING ACTIVITY.ACCORDING TO THE FIRM, THE HEAD TRADER WAS RESPONSIBLE FORUSING THE DAILY TRADE BLOTTERS TO IDENTIFY ANY IRREGULARTRADING ACTIVITY AT THE FIRM. YET, THERE WAS NO FORMALDESIGNATION OF THIS RESPONSIBILITY BY THE AMLCO TO THE HEADTRADER, AND THERE WAS ALSO NO EVIDENCE THAT THE HEAD TRADERUTILIZED THE TRADE BLOTTERS TO MONITOR FOR SUSPICIOUS ACTIVITY.ALSO, ACCORDING TO THE FIRM, AT THE BRANCH LEVEL, THE BRANCHOFFICE MANAGERS WERE TO REVIEW DAILY TRADE BLOTTERS FORACCOUNT ACTIVITY AND UNUSUAL TRADING ACTIVITY. AGAIN, THEREWAS NO FORMAL DESIGNATION OF THIS RESPONSIBILITY BY THE AMLCOTO THE BRANCH MANAGERS, AND THERE WAS ALSO NO PROCESS FORDETERMINING UNDER WHAT CIRCUMSTANCES THE FIRM SHOULDCONSIDER FILING A SUSPICIOUS ACTIVITY REPORT (SAR). SIMILAR TOTHE HEAD TRADER, THE BRANCH OFFICE MANAGERS ALSO FAILED TOUSE THE DAILY TRADE BLOTTERS TO MONITOR FOR SUSPICIOUSACTIVITY. THE FIRM'S AMLCO ACKNOWLEDGED THAT THE TRADEBLOTTERS ALONE COULD NOT BE USED TO CAPTURE UNUSUALPATTERNS OR TYPES OF SUSPICIOUS TRANSACTIONS. THIS, COUPLEDWITH THE FIRM'S FAILURE TO PROVIDE MEANINGFUL GUIDANCE TO ITSPERSONNEL TO MONITOR FOR, DETECT AND INVESTIGATE SUSPICIOUSTRADING ACTIVITY, RENDERED ITS AML SYSTEMS, PROCEDURES, ANDINTERNAL CONTROLS UNREASONABLE. SOME OF THE FIRM'SCUSTOMERS' ACCOUNTS TRADED AN ENTITY'S, NO INFORMATION PINKSHEET STOCK, AND SEVERAL OF THESE ACCOUNTS WERE ASSIGNED TOONE OF THE FIRM'S BRANCH OFFICE MANAGERS OR TO ONE OF THEREGISTERED REPRESENTATIVES THAT THE BRANCH OFFICE MANAGERSUPERVISED. THE BRANCH OFFICE MANAGER WAS ON THE BOARD OFDIRECTORS FOR THE ENTITY AND THE REGISTERED REPRESENTATIVEHELD FOUR SEPARATE (FAMILY OR PERSONAL) ACCOUNTS THAT TRADEDTHE ENTITY. THE FIRM SHOULD HAVE IDENTIFIED THESE AS RED FLAGS,BUT DID NOT. THE FIRM FAILED TO DETECT AND INVESTIGATE RED FLAGSINDICATIVE OF SUSPICIOUS ACTIVITY DUE TO THE FIRM'S DEFICIENT AMLPROGRAM. HAD THE FIRM CONDUCTED A MORE EXTENSIVE REVIEW OFTHESE ACCOUNTS OR CONDUCTED PROPER DUE DILIGENCE ON THEENTITY IT MAY HAVE DETECTED THE RED FLAGS AND POSSIBLY OTHERSSUCH AS THOSE ASSOCIATED WITH MANIPULATIVE ACTIVITY. (CONT. INCOMMENTS)






Initiated By: FINRA


Other


N/A




Other Product Type(s): PINK SHEET STOCK

HELD FOUR SEPARATE (FAMILY OR PERSONAL) ACCOUNTS THAT TRADEDTHE ENTITY. THE FIRM SHOULD HAVE IDENTIFIED THESE AS RED FLAGS,BUT DID NOT. THE FIRM FAILED TO DETECT AND INVESTIGATE RED FLAGSINDICATIVE OF SUSPICIOUS ACTIVITY DUE TO THE FIRM'S DEFICIENT AMLPROGRAM. HAD THE FIRM CONDUCTED A MORE EXTENSIVE REVIEW OFTHESE ACCOUNTS OR CONDUCTED PROPER DUE DILIGENCE ON THEENTITY IT MAY HAVE DETECTED THE RED FLAGS AND POSSIBLY OTHERSSUCH AS THOSE ASSOCIATED WITH MANIPULATIVE ACTIVITY. (CONT. INCOMMENTS)


Resolution:

Other Sanctions Ordered: AN UNDERTAKING

Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS,THEREFORE THE FIRM IS CENSURED AND FINED $100,000. ALSO, WITH ANUNDERTAKING THAT THE FIRM'S PRESIDENT SHALL CERTIFY WITHIN 60DAYS OF THE EFFECTIVE DATE OF THIS AWC, THAT THE FIRM IS INCOMPLIANCE WITH FINRA RULE 3310 BY ESTABLISHING ANDIMPLEMENTING AML POLICIES, PROCEDURES, AND INTERNAL CONTROLSWITH RESPECT TO ITS MONITORING FOR SUSPICIOUS TRANSACTIONSTHAT ARE REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH THEREQUIREMENTS OF THE BANK SECRECY ACT AND THE TREASURY'SIMPLEMENTING REGULATIONS.FINE PAID IN FULL ON JUNE 1, 2015.


No









REQUIREMENTS OF THE BANK SECRECY ACT AND THE TREASURY'SIMPLEMENTING REGULATIONS.FINE PAID IN FULL ON JUNE 1, 2015.

Regulator Statement THE REGISTERED REPRESENTATIVE, WHO HELD MULTIPLE ACCOUNTS ATTHE FIRM, ENGAGED IN MATCHED TRADING IN THE ENTITY BETWEEN HISACCOUNT AND A JOINT ACCOUNT TITLED IN HIS AND HIS SPOUSE'SNAMES. THERE WERE NO CUSTOMER TRANSACTIONS IN THE ENTITY ATOR AROUND THE DATES OF THE MATCHED TRADES AND ON TWO OF HISTRADING DAYS, THE ACTIVITY COMPRISED 100 PERCENT OF THE TOTALMARKET VOLUME IN THE ENTITY. THE PRINCIPAL WHO APPROVED THETRANSACTIONS WAS THE BRANCH OFFICE MANAGER WHO SERVED ONTHE ENTITY'S BOARD. THIS SUSPICIOUS ACTIVITY WENT UNDETECTEDAND WAS NOT INVESTIGATED BY ANYONE AT THE FIRM. DUE TO THEFIRM'S INADEQUATE AML PROGRAM, AS WRITTEN AND AS IMPLEMENTED,THE FIRM FAILED TO DETECT AND INVESTIGATE CUSTOMER WITH AQUESTIONABLE BACKGROUND POTENTIALLY SUSPICIOUS ACTIVITY. THESEC HAD SUSPENDED THE CUSTOMER'S SPOUSE, FROM APPEARING ORPRACTICING BEFORE THE SEC AS AN ACCOUNTANT. INTERNETSEARCHES REFLECTED THAT THE CUSTOMER AND HER SPOUSE WERELINKED TO SEVERAL PUBLICLY TRADED COMPANIES. SPECIFICALLY, THESPOUSE WAS THE INTERIM CHIEF FINANCIAL OFFICER AT A PINK SHEETCOMPANY. FOR ABOUT SIX MONTHS, THE CUSTOMER'S ACCOUNT AT THEFIRM RECEIVED AND SOLD OVER 500 MILLION SHARES OF THISPARTICULAR PINK SHEET COMPANY. THE TRADING ACTIVITY IN THECUSTOMER'S ACCOUNT GENERALLY CONSISTED OF DEPOSITING LARGEBLOCKS OF STOCK, SELLING THOSE SHARES, AND WIRING OUT THEPROCEEDS.


Initiated By: FINRA




Allegations: ALLEGED VIOLATION OF FINRA RULES 2010, 3310(A) AND (B) BETWEENJANUARY 1, 2008 AND DECEMBER 31, 2010. ALLEGED VIOLATION OFESTABLISHING AND IMPLEMENTING POLICIES AND PROCEDURES THATCOULD BE REASONABLY EXPECTED TO DETECT AND CAUSE THEREPORTING OF SUSPICIOUS TRANSACTIONS. FINRA ALLEGES THAT THEFIRMS'S ANTI-MONEY LAUNDERING SYSTEMS, PROCEDURES ANDINTERNAL CONTROLS WERE INADEQUATE.









Other





Resolution:

Other Sanctions Ordered: AN UNDERTAKING

Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS. THEFIRM WAS CENSURED AND FINED $100,000.00 AND AN UNDERTAKINGTHAT THE FIRM'S POLICIES AND PROCEDURES MONITOR FORSUSPICIOUS TRANSACTIONS TO ACHIEVE COMPLIANCE WITH FINRA RULE3310.



Disclosure 4 of 8

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Initiated By: NEVADA


Docket/Case Number: I10-185-BLM

URL for Regulatory Action:


Other Product Type(s): VIATICAL SETTLEMENT INVESTMENTS ON BEHALF OF GWG LIFESETTLEMENTS, LLC

Allegations: RESPONDENT OFFERED SECURITIES IN NEVADA OF GWG, GWGLIFENOTES, SERIES I, SECURED NOTES, PURSUANT TO A CLAIMEDEXEMPTION FROM REGISTRATION PURSUANT TO REGULATION DPROMULGATED BY THE SEC AND THAT GWG FAILED TO FILE A REQUIREDNOTICE OF ITS INTENT TO RELY ON AN EXEMPTION TO CONDUCT SALESIN THE STATE OF NEVADA, AND THAT THE RESPONDENT DID NITPERFORM DUE DILIGENCE TO VERIFY THE REQUIRED NOTICE WAS FILEDIN NEVADA









Other


COSTS OF INVESTIGATION

Other Product Type(s):SETTLEMENTS, LLC


Resolution:

Other Sanctions Ordered: COST OF INVESTIGATION -$4,000FEE FOR INSPECTION OF RECORDS - $1,000

Sanction Details: COSTS AND FEES PAID IN FULL

Regulator Statement WITHOUT ADMITTING OR DENYING THE STATEMENT OF FACTS ANDCONCLUSIONS OF LAW CONTAINED IN THIS ORDER, RESPONDENTCONSENTED TO THE ENTRY OF THIS ORDER. CONTACT THE DIVISIONWITH ANY QUESTIONS


No

Sanctions Ordered:

Consent


Initiated By: NEVADA


Other


Docket/Case Number: I10-185-BLM


Other Product Type(s): GWG LIFE SETTLEMENTS, LLC

Allegations: ALLEGED FAILURE TO ASSURE COMPLIANCE WITH NEVADA REVISEDSTATUES CHAPTER 90 AND NEVADA ADMINISTRATIVE CODE CHAPTER 90,IN THAT GWG FAILED TO FILE A REQUIRED NOTICE OF ITS INTENT TORELY ON A EXEMPTION TO CONDUCT SALES IN NEVADA.









COSTS OF INVESTIGATION


Resolution:

Other Sanctions Ordered: COST OF INVESTIGATION - $4,000FEE FOR INSPECTION OF RECORDS - $1,000

Sanction Details: COSTS AND FEES PAID IN FULL

Firm Statement WITHOUT ADMITTING OR DENYING THE STATEMENT OF FACTS ANDCONCLUSIONS OF LAW CONTAINED IN THIS ORDER, RESPONDENTCONSENTED TO THE ENTRY OF THIS ORDER.

Sanctions Ordered:

Consent

Disclosure 5 of 8

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Initiated By: UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Allegations: SEC ADMIN RELEASE 34-59533, MARCH 6, 2009: THE SECURITIES ANDEXCHANGE COMMISSION ("COMMISSION") DEEMS IT APPROPRIATE ANDIN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE PROCEEDINGSBE, AND HEREBY ARE, INSTITUTED PURSUANT TO SECTION 15(B) OF THESECURITIES EXCHANGE ACT OF 1934 ("EXCHANGE ACT"), AGAINST GRANTBETTINGEN, INC. ("GBI" OR "RESPONDENT") - GBI FAILED REASONABLY TOSUPERVISE A REPRESENTATIVE WITHIN THE MEANING OF SECTION(15)(B)(4)(E) OF THE SECURITIES EXCHANGE ACT - GBI FAILEDREASONABLY TO SUPERVISE A REGISTERED REPRESENTATIVE INCONNECTION WITH PURPORTED PRIVATE PLACEMENT OFFERINGS OFSECURITIES FROM JANUARY 2004 TO DECEMBER 2005. DURING THISTIME, THE REPRESENTATIVE WAS ASSOCIATED WITH GBI, A REGISTEREDBROKER-DEALER. THE REPRESENTATIVE MISREPRESENTED TOINVESTORS AND INSTRUCTED THE SALES AGENTS HE SUPERVISED TOMISREPRESENT TO INVESTORS THAT THEY WOULD RECEIVE AT LEAST1% MONTHLY RETURNS OF PROFITS FROM AN ISSUER'S ALLEGEDLYLUCRATIVE DISTRESSED DEBT BUSINESS AND OFFERED AND SOLDSECURITIES, AND INSTRUCTED THE SALES AGENTS HE SUPERVISED TOOFFER AND SELL THE SECURITIES THROUGH GENERAL SOLICITATIONS.GBI FAILED REASONABLY TO SUPERVISE BECAUSE IT DID NOT HAVE ASUPERVISORY POLICY IN PLACE REGARDING THE SALE OF SECURITIES INPRIVATE PLACEMENT OFFERINGS UNTIL NOVEMBER 2004, ALMOST AYEAR AFTER THE REPRESENTATIVE BEGAN SELLING THE SECURITIES.










Docket/Case Number: FILE 3-13403


Other Product Type(s): PRIVATE PLACEMENT OFFERINGS


Resolution:


Sanction Details: SOLELY FOR THE PURPOSE OF THESE PROCEEDINGS AND ANY OTHERPROCEEDINGS BROUGHT BY OR ON BEHALF OF THE COMMISSION, OR TOWHICH THE COMMISSION IS A PARTY, AND WITHOUT ADMITTING ORDENYING THE FINDINGS HEREIN, EXCEPT AS TO THE COMMISSION'SJURISDICTION OVER IT AND THE SUBJECT MATTER OF THESEPROCEEDINGS, WHICH ARE ADMITTED, RESPONDENT CONSENTS TO THEENTRY OF THIS ORDER INSTITUTING ADMINISTRATIVE PROCEEDINGSPURSUANT TO SECTION 15(B) OF THE SECURITIES EXCHANGE ACT OF1934, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AS TOGRANT BETTINGEN, INC. ("ORDER"). IT IS HEREBY ORDERED THAT: GBI ISCENSURED. IT IS FURTHER ORDERED THAT RESPONDENT GBI SHALL,WITHIN 30 DAYS OF THE ENTRY OF THIS ORDER, PAY DISGORGEMENT OF$88,675.00 AND PREJUDGMENT INTEREST OF $8,460.51, FOR A TOTALPAYMENT OF $97,135.51 TO THE COURT-APPOINTED RECEIVER FOR THESECURITIES' ISSUERS PURSUANT TO RULE 1102 OF THE COMMISSION'SRULES ON FAIR FUND AND DISGORGEMENT PLANS [17C.F.R. 201.1102]. IF TIMELY PAYMENT IS NOT MADE, ADDITIONAL INTERESTSHALL ACCRUE PURSUANT TO 31 U.S.C. 3717.


No

Sanctions Ordered: CensureDisgorgement/Restitution

Order

iReporting Source: 26©2015 FINRA. All rights reserved. Report# 20916-34106 about NEWPORT COAST SECURITIES, INC. Data current as of Wednesday, September 02, 2015.






Reporting Source: Firm

Initiated By: UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Censure



Docket/Case Number: FILE 3-13403


Other Product Type(s): PRIVATE PLACEMENT OFFERINGS

Allegations: ALLEGED FAILURE TO SUPERVISE A REPRESENTATIVE WITHIN THEMEANING OF SECTION (15)(B)(4)(E) OF THE SECURITIES EXCHANGE ACT.



Resolution:


Sanction Details: SOLELY FOR THE PURPOSE OF THESE PROCEEDINGS AND WITHOUTADMITTING OR DENYING THE FINDINGS HEREIN, RESPONDENTCONSENTS TO THE ENTRY OF THIS ORDER. GBI IS CENSURED. GBI ISORDERED TO PAY WITHIN 30 DAYS OF THE ENTRY OF THIS ORDER,DISGORGEMENT OF $88,675.00 AND PREJEDGMENT INTEREST OF$8460.51, FOR A TOTAL PAYMENT OF $97,135.51.

Sanctions Ordered: CensureDisgorgement/Restitution

Consent

Disclosure 6 of 8

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Allegations: SEC RULES 15C2-4, 15C3-1, NASD RULE 2110 - GRANT BETTINGEN, INC.PARTICIPATED IN PRIVATE PLACEMENT OFFERINGS OF STOCK FORWHICH THE PRIVATE PLACEMENT MEMORANDA PROVIDED THAT THEOFFERINGS WERE CONTINGENT UPON RECEIVING SUBSCRIPTIONAGREEMENTS FOR A CERTAIN AMOUNT; THE FIRM FAILED TO TRANSMITINVESTOR FUNDS TO AN UNAFFILIATED BANK TO HOLD IN ESCROW UNTILTHE CONTINGENCY WAS MET. THE FIRM UTILIZED THEINSTRUMENTALITIES OF INTERSTATE COMMERCE TO ENGAGE IN THESECURITIES BUSINESS WHILE FAILING TO MAINTAIN REQUIRED MINIMUMNET CAPITAL.








Initiated By: NASD




Docket/Case Number: E022005007302



INSTRUMENTALITIES OF INTERSTATE COMMERCE TO ENGAGE IN THESECURITIES BUSINESS WHILE FAILING TO MAINTAIN REQUIRED MINIMUMNET CAPITAL.


Resolution:


Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS;THEREFORE, THE FIRM IS CENSURED AND FINED $10,000.


No




Allegations: SEC RULES 15C2-4, 15C3-1, AND NASD RULES 2110 -GRANT BETTINGEN,INC. PARTICIPATED IN PRIVATE PLACEMENT OFFERINGS OF STOCK FORWHICH THE PRIVATE PLACEMENT MEMORANDA PROVIDED THAT THEOFFERINGS WERE CONTINGENT UPON RECEIVING SUBSCRIPTIONAGREEMENTS FOR A CERTAIN AMOUNT; THE FIRM FAILED TO TRANSMITINVESTOR FUNDS TO AN UNAFFILIATED BANK TO HOLD IN ESCROW UNTILTHE CONTINGENCY WAS MET. THE FIRM UNILIZED THEINSTRUMENTALITIES OF INTERSTATE COMMERCE TO ENGAGE IN THESECURITIES BUSINESS WHILE FAILING TO MAINTAIN REQUIRED MINIMUMNET CAPITAL.






http://disciplinaryactions.finra.org/Search.aspx?CaseNB=E022005007302


Initiated By: NASD


Censure


FINED


Docket/Case Number: E0220050073


Other Product Type(s): PRIVATE PLACEMENT OF STOCK

INSTRUMENTALITIES OF INTERSTATE COMMERCE TO ENGAGE IN THESECURITIES BUSINESS WHILE FAILING TO MAINTAIN REQUIRED MINIMUMNET CAPITAL.


Resolution:


Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEFIRM WAS CENSURED AND FINED $10,000. THE FINE HAS BEEN PAID.



Disclosure 7 of 8

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Initiated By: OHIO DIVISION OF SECURITIES


Denial


Docket/Case Number: 00-436


Principal Product Type: Equity Listed (Common & Preferred Stock)


Allegations: UNLICENSED SECURITIES TRANSACTIONS










Denial


CEASE AND DESIST


Resolution:

Other Sanctions Ordered: NONE

Sanction Details: APPLICATION FOR OHIO SECURITIES DEALER LICENSE WAS DENIED ANDCEASE AND DESIST ORDER ISSUED TO SUBJECT.

Regulator Statement SUBJECT APPLIED FOR AN OHIO SECURITIES DEALER LICENSE ON12/21/99 AND SUBSEQUENTLY DISCLOSED THAT APPROXIMATELY 377SECURITIES TRANSACTIONS HAD OCCURRED IN TWO ACCOUNTS OF ONEOHIO RESIDENT WHILE UNLICENSED IN OHIO. SUBJECT WAS GIVEN ANOPPORTUNITY TO REQUEST A HEARING TO CONTEST THE ALLEGATIONS,BUT DID NOT DO SO. AS A RESULT, SUBJECT'S OHIO DEALER LICENSEAPPLICATION WAS DENIED AND A CEASE AND DESIST ORDER WASISSUED FOR VIOLATING THE OHIO SECURITIES ACT.

Sanctions Ordered: Cease and Desist/InjunctionRevocation/Expulsion/Denial

Order


Initiated By: OHIO DIVISION OF SECURITIES


Denial


CEASE AND DESIST


Docket/Case Number: 00-436

Principal Product Type: Equity Listed (Common & Preferred Stock)


Allegations: UNLICENSED SECURITIES TRANSACTIONS



Resolution: Order








Other Sanctions Ordered: NONE

Sanction Details: APPLICATION FOR OHIO SECURITIES DEALER LICENSE WAS DENIED ANDA CEASE AND DESIST ORDER WAS ISSUED.

Sanctions Ordered: Cease and Desist/InjunctionRevocation/Expulsion/Denial

Disclosure 8 of 8

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Initiated By: VERMONT SECURITIES DIVISION




Docket/Case Number: 97-037-S


Principal Product Type:


Allegations: TRANSACTING BUSINESS IN VERMONT AS ANUNREGISTERED BROKER-DEALER.



Resolution:


Sanction Details: RESPONDENT ENTERED INTO A CONSENT ORDER WHEREINIT NEITHER ADMITTED NOR DENIED THE DIVISION'S ALLEGATIONS.RESPONDENT AGREED TO PAY A $250 FINE, $250 IN COSTS AND $331 INBACK REGISTRATION FEES AND INTEREST. RESPONDENT WILL BEALLOWEDTO REGISTER.

Regulator Statement CONTACT: ENFORCEMENT ATTORNEY 802-828-3420

Sanctions Ordered: Monetary/Fine $250.00

Order








Initiated By: STATE OF VERMONT SECURITIES DIVISION


Civil and Administrative Penalt(ies) /Fine(s)



Docket/Case Number: 97-037S

Principal Product Type: Equity - OTC


Allegations: GRANT BETTINGEN, INC. TRANSACTED SECURITIES BUSINESS INVERMONT AS AN UNREGISTERED BROKER-DEALER IN VIOLATION OF THEVERMONT SECURITIES ACT



Resolution:


Sanction Details: APPLICATION FOR VERMONT SECURITIES LICENSE WAS APPROVED ANDA CONSENT ORDER WAS ISSUED. FINED $250 FOR ADMINISTRATIVEPENALTY, $331 FOR BACK REGISTRATION FEES AND INTEREST AND $250FOR DEPOSIT INTO THE SECURITIES DIVISION INVESTIGATION FUND.

Sanctions Ordered: Monetary/Fine $831.00

Consent







Regulatory - Pending

This type of disclosure event may include a pending formal proceeding initiated by a regulatory authority (e.g., a statesecurities agency, self-regulatory organization, federal regulatory agency such as the Securities and ExchangeCommission, foreign financial regulatory body) for alleged violations of investment-related rules or regulations.

Disclosure 1 of 2


Allegations: THE FIRM WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGINGTHAT IT FAILED TO ESTABLISH AND MAINTAIN A SUPERVISORY SYSTEMREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLESECURITIES LAWS, REGULATIONS AND RULES AND BY FAILING TOENFORCE THE FIRM'S WRITTEN SUPERVISORY PROCEDURES (WSPS)WITH RESPECT TO A (FORMER) FIRM REGISTERED REPRESENTATIVE ANDHIS BUSINESS ACTIVITIES. THE COMPLAINT ALLEGES THAT THE FORMERREPRESENTATIVE FACILITATED A PRIVATE SECURITIES TRANSACTION BYCAUSING AN ELDERLY CUSTOMER'S SECURITIES TO BE TRANSFERREDFROM THE CUSTOMER'S ACCOUNT AT THE FIRM TO AN ACCOUNTCONTROLLED BY THE FORMER REPRESENTATIVE AT THE FIRM WITHOUTTHE CUSTOMER'S APPROVAL. AN INDIVIDUAL, ACTING IN HIS ROLE ASTHE FIRM'S CHIEF OPERATIONS OFFICER (COO) AND/OR COMPLIANCEMANAGER, ON BEHALF OF THE FIRM, APPROVED THE OPENING OF THEACCOUNT INTO WHICH THESE SECURITIES WERE DEPOSITED, AND ALSOREVIEWED AND APPROVED THE ACTUAL TRANSFER OF THE CUSTOMER'SSECURITIES INTO THE FORMER REPRESENTATIVE-CONTROLLEDACCOUNT AT THE FIRM, DESPITE THE FACT THAT THE WSPS PROHIBITEDITS REPRESENTATIVES FROM PARTICIPATING IN PRIVATE SECURITIESTRANSACTIONS, THE TRANSACTION DID NOT COMPLY WITH NASD RULE3040(C), AND OTHER WSPS WERE NOT ADHERED TO SUCH AS THEPROHIBITION AGAINST TRANSFERRING CUSTOMER SECURITIES INTO ANEMPLOYEE-CONTROLLED ACCOUNT. THE FIRM FAILED TO RECORD THETRANSACTION IN ITS BOOKS AND RECORDS AND IT, ALONG WITH THECOO, DID NOT SUPERVISE THE FORMER REPRESENTATIVE'SPARTICIPATION IN THE TRANSACTION, WHICH WAS DONE WITHOUT THEAPPROVAL OR AUTHORIZATION OF THE ELDERLY CUSTOMER. NO ONEFROM THE FIRM (OTHER THAN THE FORMER REPRESENTATIVE)CONTACTED THE CUSTOMER REGARDING THIS TRANSACTION. THECOMPLAINT ALSO ALLEGES THAT THE FIRM AND COO'S FAILURE TOADEQUATELY SUPERVISE THE PRIVATE SECURITIES TRANSACTION ANDTO ENFORCE THE FIRM'S OWN WSPS AND THEIR FAILURE TO MAKEREASONABLE INQUIRIES OR OTHERWISE FOLLOW UP ON NUMEROUSRED FLAGS ENABLED THE FORMER REPRESENTATIVE TO MAKEIMPROPER USE OF THE CUSTOMER'S SECURITIES AND PROCEEDS TOFACILITATE THE PRIVATE SECURITIES TRANSACTION AND ENRICHHIMSELF AT THE CUSTOMER'S EXPENSE.

Current Status: Pending






Initiated By: FINRA







HIMSELF AT THE CUSTOMER'S EXPENSE.


Initiated By: FINRA







Allegations: ALLEGED FAILURE TO ESTABLISH AND MAINTAIN A SUPERVISORYSYSTEM REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITHAPPLICABLE SECURITES LAWS, REGULATIONS AND RULES AND BYFAILING TO ENFORCE THE FIRM'S WRITTEN SUPERVISORY PROCEDURESWITH RESPECT TO A FORMER REPRESENTATIVE AND HIS BUSINESSACTIVITIES.


Disclosure 2 of 2

i


Allegations: THE FIRM WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGINGTHAT IT AND FIVE OF ITS REGISTERED REPRESENTATIVES EXCESSIVELYTRADED AND CHURNED CUSTOMERS' ACCOUNTS. THE COMPLAINTALLEGES THAT THE MISCONDUCT SHOULD HAVE QUICKLY DRAWNSCRUTINY, AND BEEN STOPPED, BECAUSE COST-TO-EQUITY RATIOSWERE OFTEN OVER 100 PERCENT; TURNOVER RATES WERE OFTEN OVER100; THERE WERE EXTRAORDINARY AMOUNTS OF IN-AND-OUT TRADING;CUSTOMER ACCOUNTS WERE HIGHLY MARGINED AND OFTENCONCENTRATED IN ONE SECURITY; THERE WERE LARGE NUMBERS OFTRANSACTIONS IN WHICH THE TOTAL COMMISSION/MARKUP PER TRADEEXCEEDED THREE PERCENT AND, IN MANY INSTANCES, EXCEEDED FOURPERCENT; THERE WAS A DECEPTIVE MIX OF RISKLESS PRINCIPAL ANDAGENCY TRADING IN NUMEROUS ACCOUNTS, NAMELY, HIGHER COSTTRADES IN WHICH MARKUPS ALMOST ALWAYS EXCEEDED THREEPERCENT (AND GENERALLY EXCEEDED $1,000 PER TRADE) WEREEXECUTED ON A RISKLESS PRINCIPAL BASIS WHEREAS LOWER COSTTRADES, TYPICALLY INVOLVING SALES OF THE SAME SECURITIES, WEREEXECUTED ON AN AGENCY BASIS; INVERSE AND/OR LEVERAGEDEXCHANGE TRADED FUNDS (ETFS) AND EXCHANGE TRADED NOTES(ETNS) REMAINED IN ACCOUNTS FOR MULTIPLE TRADING SESSIONS;SOLICITED TRADES WERE INACCURATELY CHARACTERIZED ASUNSOLICITED; AND NEARLY ALL OF THE CUSTOMER ACCOUNTS AT ISSUEEXHIBITED LARGE LOSSES. THE TRADING IN THE CUSTOMERS'ACCOUNTS WAS EXCESSIVE IN LIGHT OF, AND INCONSISTENT WITH, THECUSTOMERS' INVESTMENT OBJECTIVES AND FINANCIAL SITUATION. THEFIRM AND THE REPRESENTATIVES ENGAGED IN A MANIPULATIVE,DECEPTIVE AND FRAUDULENT SCHEME BY CHURNING THE ACCOUNTSOF CUSTOMERS. THEY ACTED WITH INTENT TO DEFRAUD AND/OR WITHRECKLESS DISREGARD OF THEIR CUSTOMERS' INTERESTS BY SEEKINGTO MAXIMIZE THEIR OWN REMUNERATION IN DISREGARD OF THEINTERESTS OF THEIR CUSTOMERS AND AS A RESULT, WILLFULLYVIOLATED SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934AND RULE 10B-5 THEREUNDER, FINRA RULES 2010 AND 2020, AND NASDRULES 2110 AND 2120. THE FIRM IS LIABLE FOR THE EXCESSIVE TRADING,QUANTITATIVELY UNSUITABLE RECOMMENDATIONS, AND THEFRAUDULENT MISCONDUCT BY THE REPRESENTATIVES, UNDER THEDOCTRINE OF RESPONDEAT SUPERIOR. THE COMPLAINT ALSO ALLEGESTHAT THE FIRM FAILED TO ADEQUATELY SUPERVISE ITSREPRESENTATIVES, FAILED TO ADDRESS THE MULTIPLE RED FLAGSSUGGESTING THAT THE REPRESENTATIVES WERE EXCESSIVELYTRADING, CHURNING, AND GENERALLY MAKING UNSUITABLERECOMMENDATIONS, AND FAILED TO TAKE ANY MEANINGFUL MEASURETO ADDRESS THE MISCONDUCT AND TO ENSURE THAT THE FIRM'SREPRESENTATIVES ACTED IN A MANNER THAT WAS COMPLIANT WITHAPPLICABLE LAWS, REGULATIONS AND RULES. THE COMPLAINT FURTHERALLEGES THAT THE FIRM OFFERED AND SOLD STRUCTURED PRODUCTSAND INVERSE/LEVERAGED EXCHANGE TRADED PRODUCTS (ETPS). YET,THE FIRM NEITHER OFFERED NOR PROVIDED ANY TRAINING ON THESECOMPLEX PRODUCTS TO ITS REGISTERED REPRESENTATIVES. THE FIRMALSO LACKED PROCEDURES AND POLICIES TO ADDRESS THESUPERVISION OF THE SALES OF ETPS. THE FIRM HAD NO SYSTEM ORPROCEDURE TO FLAG, FOR SUPERVISORY REVIEW, CUSTOMERACCOUNTS THAT WERE POTENTIALLY UNSUITABLY CONCENTRATED INSTRUCTURED PRODUCTS OR INVERSE/LEVERAGED ETPS.









Allegations:THAT IT AND FIVE OF ITS REGISTERED REPRESENTATIVES EXCESSIVELYTRADED AND CHURNED CUSTOMERS' ACCOUNTS. THE COMPLAINTALLEGES THAT THE MISCONDUCT SHOULD HAVE QUICKLY DRAWNSCRUTINY, AND BEEN STOPPED, BECAUSE COST-TO-EQUITY RATIOSWERE OFTEN OVER 100 PERCENT; TURNOVER RATES WERE OFTEN OVER100; THERE WERE EXTRAORDINARY AMOUNTS OF IN-AND-OUT TRADING;CUSTOMER ACCOUNTS WERE HIGHLY MARGINED AND OFTENCONCENTRATED IN ONE SECURITY; THERE WERE LARGE NUMBERS OFTRANSACTIONS IN WHICH THE TOTAL COMMISSION/MARKUP PER TRADEEXCEEDED THREE PERCENT AND, IN MANY INSTANCES, EXCEEDED FOURPERCENT; THERE WAS A DECEPTIVE MIX OF RISKLESS PRINCIPAL ANDAGENCY TRADING IN NUMEROUS ACCOUNTS, NAMELY, HIGHER COSTTRADES IN WHICH MARKUPS ALMOST ALWAYS EXCEEDED THREEPERCENT (AND GENERALLY EXCEEDED $1,000 PER TRADE) WEREEXECUTED ON A RISKLESS PRINCIPAL BASIS WHEREAS LOWER COSTTRADES, TYPICALLY INVOLVING SALES OF THE SAME SECURITIES, WEREEXECUTED ON AN AGENCY BASIS; INVERSE AND/OR LEVERAGEDEXCHANGE TRADED FUNDS (ETFS) AND EXCHANGE TRADED NOTES(ETNS) REMAINED IN ACCOUNTS FOR MULTIPLE TRADING SESSIONS;SOLICITED TRADES WERE INACCURATELY CHARACTERIZED ASUNSOLICITED; AND NEARLY ALL OF THE CUSTOMER ACCOUNTS AT ISSUEEXHIBITED LARGE LOSSES. THE TRADING IN THE CUSTOMERS'ACCOUNTS WAS EXCESSIVE IN LIGHT OF, AND INCONSISTENT WITH, THECUSTOMERS' INVESTMENT OBJECTIVES AND FINANCIAL SITUATION. THEFIRM AND THE REPRESENTATIVES ENGAGED IN A MANIPULATIVE,DECEPTIVE AND FRAUDULENT SCHEME BY CHURNING THE ACCOUNTSOF CUSTOMERS. THEY ACTED WITH INTENT TO DEFRAUD AND/OR WITHRECKLESS DISREGARD OF THEIR CUSTOMERS' INTERESTS BY SEEKINGTO MAXIMIZE THEIR OWN REMUNERATION IN DISREGARD OF THEINTERESTS OF THEIR CUSTOMERS AND AS A RESULT, WILLFULLYVIOLATED SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934AND RULE 10B-5 THEREUNDER, FINRA RULES 2010 AND 2020, AND NASDRULES 2110 AND 2120. THE FIRM IS LIABLE FOR THE EXCESSIVE TRADING,QUANTITATIVELY UNSUITABLE RECOMMENDATIONS, AND THEFRAUDULENT MISCONDUCT BY THE REPRESENTATIVES, UNDER THEDOCTRINE OF RESPONDEAT SUPERIOR. THE COMPLAINT ALSO ALLEGESTHAT THE FIRM FAILED TO ADEQUATELY SUPERVISE ITSREPRESENTATIVES, FAILED TO ADDRESS THE MULTIPLE RED FLAGSSUGGESTING THAT THE REPRESENTATIVES WERE EXCESSIVELYTRADING, CHURNING, AND GENERALLY MAKING UNSUITABLERECOMMENDATIONS, AND FAILED TO TAKE ANY MEANINGFUL MEASURETO ADDRESS THE MISCONDUCT AND TO ENSURE THAT THE FIRM'SREPRESENTATIVES ACTED IN A MANNER THAT WAS COMPLIANT WITHAPPLICABLE LAWS, REGULATIONS AND RULES. THE COMPLAINT FURTHERALLEGES THAT THE FIRM OFFERED AND SOLD STRUCTURED PRODUCTSAND INVERSE/LEVERAGED EXCHANGE TRADED PRODUCTS (ETPS). YET,THE FIRM NEITHER OFFERED NOR PROVIDED ANY TRAINING ON THESECOMPLEX PRODUCTS TO ITS REGISTERED REPRESENTATIVES. THE FIRMALSO LACKED PROCEDURES AND POLICIES TO ADDRESS THESUPERVISION OF THE SALES OF ETPS. THE FIRM HAD NO SYSTEM ORPROCEDURE TO FLAG, FOR SUPERVISORY REVIEW, CUSTOMERACCOUNTS THAT WERE POTENTIALLY UNSUITABLY CONCENTRATED INSTRUCTURED PRODUCTS OR INVERSE/LEVERAGED ETPS.






Initiated By: FINRA






Other Product Type(s): EXCHANGED TRADED FUNDS; EXCHANGE TRADED NOTES; EXCHANGETRADED PRODUCTS

AND INVERSE/LEVERAGED EXCHANGE TRADED PRODUCTS (ETPS). YET,THE FIRM NEITHER OFFERED NOR PROVIDED ANY TRAINING ON THESECOMPLEX PRODUCTS TO ITS REGISTERED REPRESENTATIVES. THE FIRMALSO LACKED PROCEDURES AND POLICIES TO ADDRESS THESUPERVISION OF THE SALES OF ETPS. THE FIRM HAD NO SYSTEM ORPROCEDURE TO FLAG, FOR SUPERVISORY REVIEW, CUSTOMERACCOUNTS THAT WERE POTENTIALLY UNSUITABLY CONCENTRATED INSTRUCTURED PRODUCTS OR INVERSE/LEVERAGED ETPS.


Initiated By: FINRA






Other Product Type(s): EXCHANGE TRADED FUNDS; EXCHANGE TRADED NOTES, EXCHANGETRADED PRODUCTS

Allegations: ALLEGED FAILURE TO PROPERLY SUPERVISE AND PROVIDE ADEQUATESUPERVISORY SYSTEMS.









Arbitration Award - Award/Judgment

Brokerage firms are not required to report arbitration claims filed against them by customers; however, BrokerCheckprovides summary information regarding FINRA arbitration awards involving securities and commodities disputesbetween public customers and registered securities firms in this section of the report. The full text of arbitration awards issued by FINRA is available at www.finra.org/awardsonline.

Disclosure 1 of 1


Type of Event: ARBITRATION

Arbitration Forum:

Case Initiated:

Case Number:

Allegations:

Disputed Product Type:

Sum of All Relief Requested:

Disposition:

Disposition Date:

Sum of All Relief Awarded:

FINRA

05/18/2012

12-01753

ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNTACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OFFACTS; ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNTRELATED-FAILURE TO SUPERVISE

OTHER TYPES OF SECURITIES

$100,000.00

AWARD AGAINST PARTY

07/02/2013

$45,860.01

There may be a non-monetary award associated with this arbitration.Please select the Case Number above to view more detailed information.





http://finraawardsonline.finra.org/Search.aspx?CaseNum=12-01753


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