Failed to follow Securities Act requirements
Lake Worth, Florida-based 1st Discount Brokerage, Inc along with Naples, Florida-based Alan Miller and Overland Park, Kansas-based Mark Miller are all players in a FINRA disciplinary action, according to the June 2015 FINRA Disciplinary Action Report.
Both Alan Miller and Mark Miller consented to the sanctions and entry of the findings, without admitting or denying the findings, that their firm did not follow appropriate Securities Act requirements when executing sales of large blocks of low-priced securities frequently referred to as penny stocks.
According to Section 5 of the Securities Act, firms must conduct a reasonable searching inquiry to determine whether the securities being sold are registered or the transactions are subject to an exemption from registration.
As it turns out, shares were, in fact, sold in contravention of Section 5 of the Securities Act as there was no registration statement in effect and the transactions were not exempt from registration.
According to the FINRA document, “firm customers engaged in a patter of depositing large blocks of low-priced securities in their accounts, then liquidating the low-priced securities and wiring the sale proceeds to an account outside the firm without re-investment.” These sales generated net proceeds of $2,754,512.68 and commissions of $63,348.75.
In addition to the above violation of Section 5 of the Securities Act, the disciplinary action also indicates the firm did not keep adequate written supervisory procedures relating to the deposit and liquidation of low-priced securities. Also identified as deficient was the firm’s Anti-Money Laundering Compliance Program and training.
As a result, 1st Discount Brokerage, Inc. was censured and fined $60,000, while Alan Miller was fined $10,000 and suspended from association with any FINRA member in any capacity for one month. Alan Miller was also ordered to pay $8,598.86 plus interest in disgorgement (payback) of commissions he received. Mark Miller was fined $10,000 and suspended from association with any FINRA member in any capacity for one month. He was ordered to pay $15,969.31 plus interest in disgorgement of commissions he received.
Low priced or penny stocks still seem to capture many people’s attention with dreams of discovering a tenbagger – a stock that multiplies 10 times in value. However, the microcap market is risky and FINRA routinely brings allegations against brokerage firms and financial advisors for the improper sale of penny stocks. Fortunately, investors have rights and may be able to recover their losses through securities arbitration.
If you have been financially affected by the actions of 1st Discount Brokerage, Inc., Alan Miller or Mark Miller, or the misconduct of any financial adviser, you may be entitled to some measures of recovery. Silver Law Group’s experienced attorneys seek to help you get back what you have lost at the hands of financial advisers.
You can expect a complimentary consultation with a skilled attorney who can help you navigate the sometimes overwhelming landscape of securities arbitration. Every case at Silver Law Group is handled on a contingent fee basis, in which you do not pay legal fees unless we win your case.
For more information, contact us today.