(FINRA Case #2016050430201)

Matthew Christopher Maczko (CRD #1888519, Downers Grove, Illinois) submitted an Accept, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Maczko consented to the sanction and to the entry of findings that he engaged in excessive trading in an elderly customer’s accounts.

The findings stated that Maczko effectively controlled these accounts, which had an average aggregate value of $3 million. Maczko’s transactions in these accounts generated approximately $581,650 in commissions, $84,270 in other fees, and approximately $397,000 in trading losses. This level of trading was unsuitable for the customer given her investment profile, including her age, risk tolerance and income needs.

FINRA Case #2016049383801

Adam Stuart Fritzsche (CRD #2821218, Canterbury, Connecticut) submitted an Accept, Wavier and Consent in which he was suspended from association with any FINRA member in any capacity for one year. In light of Fritzsche’s financial status, no monetary sanction has been imposed. Without admitting or denying the findings, Fritzsche consented to the sanction and to the entry of findings that he made unsuitable recommendations to customers that were inconsistent with the customers’ investment objectives and resulted in over- concentration of their liquid net worth in an alternative investment. The findings stated that, according to its registration statement, the investment was suitable only as a long-term investment for persons of adequate financial means who had no need for liquidity.

At the time of Fritzsche’s recommendations, all of the customers were retired and had conservative investment objectives. Fritzsche’s recommendations resulted in an undue concentration of the customers’ liquid net worth in a single, high-risk, illiquid investment.

(FINRA Case #2014041137501)

Kelly Clayton Althar (CRD #2666723, San Pablo, California) submitted an Offer of Settlement in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the allegations, Althar consented to the sanction and to the entry of findings that he made unsuitable recommendations and engaged in excessive trading in accounts held by an elderly customer.

The FINRA findings stated that Althar engaged in high-volume trading to generate commissions and over- concentrated the customer’s accounts in risky securities, despite the fact that the customer was close to retirement and only wanted low-risk investments. Althar’s trading decimated the customer’s accounts, which constituted the bulk of her net worth and retirement savings.

(FINRA Case #2016048760501)

Edward D. Jones & Co., L.P. (CRD #250, St. Louis, Missouri) submitted an Accept, Waiver and Consent in which the firm was censured and fined $125,000. Without admitting or denying the findings, the
firm consented to the sanctions and to the entry of findings that it overcharged interest
on margin loans totaling approximately $708,000 to the owners of customer accounts.

The FINRA findings stated that the overcharges occurred because the firm did not adequately supervise its system for determining the interest rates on those loans. The firm did not
test its automated system for grouping accounts for the assignment of interest rates on margin loans. Instead, the firm supervised interest on margin loans by reviewing a monthly report from one of its vendors, but that report incorporated the problem with the logic of the firm’s automated system.

Dawn Deshean Davenport (CRD #6280800) Chicago, Illinois
(February 13, 2017)

FINRA Case #2015047703701

Davenport voluntarily resigned while under internal review at J. P. Morgan Securities LLC on October 9, 2015 for performing external bank account transfers to her personal chase bank account without sufficient funds available

(FINRA Case #2015045020501)

James Rose (CRD #4842996, Asheville, North Carolina) was assessed a deferred fine of $25,000 and suspended from association with any FINRA member in any capacity for six months. The suspension is in effect from February 6, 2017, through August 5, 2017.

Without admitting or denying the findings, Rose consented to the sanctions and to the entry of findings that he engaged in six outside business activities without seeking approval from or disclosing these outside business activities to his member firm, United Advisors Service.

Statim Holdings Inc., an Atlanta-based firm that has guaranteed investors that its Arjun hedge fund won’t lose money, is under investigation by the U.S. Securities and Exchange Commission and the Georgia Securities Division.

Georgia regulators began a probe into Statim Holdings Inc. in 2015 after the company failed to submit to a surprise audit. Statim filed some but not all of the required paperwork related to audits. The missing paperwork was among multiple irregularities that led to the investigation.

Statim, led by Joseph A. Meyer, said that he employs a computerized system of his own design but invests most of his clients’ money in safe Treasury bonds.  Statim and Meyer have not been accused of any wrongdoing and an investigation doesn’t mean they will face legal action.

Without admitting or denying the findings, Falla consented to the sanction and to the findings that he failed to disclose the use of non-market foreign exchange (FX) rates in connection with a series of bond swap transactions in retail customer accounts. Effective February 9, 2017 Falla barred from association with any FINRA member in any capacity.

The findings stated that Falla’s member firm, operating through Falla, executed numerous retail customer transactions with inaccurate valuations when converted into U.S. dollars, which affected multiple customer accounts.

The findings also stated that the firm’s confirmations and account statements did not disclose to customers the use of a non-market FX rate or the excessive nature of the markups in connection with the bond swap transactions. Falla did not disclose that he used non-market FX rates away from the spot rate to value retail customer bond transactions, and did not disclose to retail customers its impact on the valuation of the bond swap transactions.

SBLs are loans that use stocks and bonds for collateral.  It offers borrowers cheap and fast money without having to sell their underlying securities. It is a risky form of debt marketed to wealthy investors who typically use it to buy large assets.  It is a great option for the borrower when the Dow is growing.

If the market takes a nose dive, brokers can sell the collateral holdings at discounted prices and go after the asset purchased with the loan.

As interest rates and stocks rise, individuals with a high net-worth are using SBLs to borrow against stocks and bonds in their portfolios.  It is not clear how much debt has been taken out in the form of SBLs.  FINRA and the Securities and Exchange Commission doesn’t track SBLs but both have warned investors about the risks.