FINRA Expels NY Brokerage Firm for Fraud

FINRA Expels NY Brokerage Firm for Fraud

The Financial Industry Regulatory Authority brought the hammer down on a New York wealth management firm on Thursday, expelling the firm and barring its CEO from the securities industry for allegedly defrauding its clearing house and customers to cover day-trading losses.

FINRA said in a statement released Thursday that Hudson Valley Capital Management’s CEO Mark Gillis fraudulently used a firm account to “improperly day trade” millions of dollars of stock in 2012, causing significant losses to both firm and customer accounts.

Executive Vice President of FINRA's Office of fraud detection and market intelligence Cameron Funkhouser said that agency worked address as quickly as possible suspected misconduct by brokers.

“In this instance, FINRA fully investigated Mr. Gillis and Hudson Valley Capital Management within weeks of Gillis perpetrating his fraudulent scheme, and obtained evidence that led to the disciplinary action,” Funkhouser explained.

According to FINRA, Gillis used firm funds to engage in day trading, withdrawing the proceeds from accounts he controlled. But when alleged fraudulent trading resulted in significant losses, FINRA claimed Gillis made unauthorized trades involving customer accounts in an attempt to cover the shortfalls.

To cover up his alleged misconduct, Gillis lied to customers when confronted by customers over the unauthorized trades, the agency said. FINRA also noted that the former CEO also lied to the regulator’s staff during a sworn testimony.

In expelling Hudson Valley Capital, the largest independent securities regulator in the U.S. claimed that the firm had failed to properly supervise Gillis, saying the trader was able to conduct his fraudulent trading scheme without restriction

Hudson Valley Capital sustained more than $350,000 in losses because of the former CEO’s actions, while at least one customer lost more than $400,000 in the scheme.

The firm was not immediately available for comment on Thursday.

TAGS: Industry
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