The Financial Industry Regulatory Authority (FINRA) expelled a Chicago-based broker with a checkered past and sanctioned his manager, both having been involved with high-risk brokerages in the past.
FINRA barred George Johnson from the industry on Friday, alleging he engaged in market manipulation by artificially inflating the value of a penny stock. The regulator claims that during an eight-day period in May 2012, Johnson urged customers to purchase stocks of the data services company IceWEB at increasingly higher and artificially inflated prices. Meanwhile, he recommended other clients sell their shares, matching the trades being made between his clients.
In addition to the IceWEB scheme, FINRA claims Johnson—who was working for Meyers Associates at the time of the incident—was involved in another penny stock fraud and attempted to cover up separate state securities violations.
Johnson has a history of customer disputes and regulatory actions going back to 1994, just two years after he became a registered broker. He also has worked for a number of suspect firms. Two of his former employers—Jesup & Lamont Securities and H.J. Meyers & Co.—have been expelled. Meyers Associates itself has been involved in five regulatory investigations, and FINRA accused Johnson’s most recent firm, Newport Coast Securities, of allowing its brokers to churn client accounts.
Johnson’s supervisor, Christopher Wynne, was also sanctioned and FINRA suspended him from working in the industry in any capacity for two years and barred him from ever working as a principal. He also was fined $25,000.
“Any broker engaging in manipulative activity poses a threat to market integrity and has no place in the securities industry,” said Brad Bennett, FINRA’s head of enforcement. “The branch office manager, who was the first line of defense in supervising George Johnson’s activities, completely failed to supervise his transactions to ensure compliance with securities laws and FINRA rules.”
FINRA also sanctioned Joseph Mahalick, another broker who worked with Johnson and Wynne to cover up the scheme. Mahalick was fined $20,000 and suspended for six months in a separate action.
Wynne and Johnson have worked together since the late 1990s, when both were employed at Denver-based American Fronteer Financial Corporation, which is no longer registered with FINRA. Since then, the two have changed firms together six times. Mahalick has worked with Johnson and Wynne at their last five firms.