FINRA Tracks and Banishes Bad Brokers

FINRA Tracks and Banishes Bad Brokers

FINRA's sanctions announced Tuesday serve as a cautionary tale for firms who hire reps from high-risk firms.

The Financial Industry Regulatory Authority turned up the heat on a firm that took in brokers from a previously expelled broker/dealer, finding that over half a dozen individuals had taken their bad habits with them.

The industry self-regulator sanctioned and barred 10 individuals—including the firm’s former president—from Global Arena Capital Corp. and canceled the firm’s membership, claiming the New York-based broker/dealer hired brokers from a high-risk firm that used misleading sales pitches and engaged in customer account churning.

As part of FINRA’s ongoing efforts to monitor brokers moving from expelled or high-risk firms to other broker/dealers, the regulator tracked advisors who moved from HFP Capital Markets LLC—a firm FINRA expelled—to Global Arena, which opened a branch office in October 2013 staffed with a number of former HFP employees.

During Global Arena’s 2014 regulatory exam, FINRA subjected the firm to heightened scrutiny and found that 10 individuals—eight brokers and two former branch managers—used misleading sales pitches and engaged in high-pressure tactics such as cold calling to sell junk bonds and other products to investors, including senior citizens. Seven of the 10 individuals involved in the sanctions had moved from HFP.

Those barred from the industry in all capacities included the former Global Arena President Barbara Desiderio, along with five former brokers—David Awad, a.k.a. "David Bennett," James Torres, Peter Snetzko, Alex Wildermuth, and Michael Tannen). For their supervisory failures, FINRA barred two former principals of the firm, Kevin Hagan and Richard Bohack, from serving in a principal capacity in the future. And two former brokers, Niaz Elmazi, a.k.a. "Nick Morrisey" and Andrew Marzec, were sanctioned for failing to cooperate with FINRA's investigation.

Additionally, FINRA canceled Global Arena's membership in July 2015. The firm's de facto owner and three other former Global Arena brokers had been previously barred for fraud in a separate FINRA action related to HFP in July.

"FINRA carefully monitors broker migration particularly with respect to brokers that move in groups from an expelled or high-risk firm to other securities firms, based on a variety of risk factors,” Susan Axelrod, FINRA's executive vice president of regulatory operations, said in a statement Tuesday.

She added the regulator would continue to leverage this data to expedite examinations and enforcement investigations “to rid the industry of individuals who prey on vulnerable investors."

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