The Commission sustained FINRA disciplinary action against World Trade Financial Corp., a FINRA member firm, and three associated persons: Rodney Preston Michel, Jason Troy Adams, and Frank Edward Brickell. It also sustained FINRA’s imposition of fines against the firm, Michel, Adams, and Brickell totalling $110,000 and suspensions against Michel, Adams, and Brickell for their misconduct.
The Commission found that World Trade and Brickell violated Section 5 of the Securities Act of 1933 and NASD Rule 2110 by unlawfully selling securities for their customers without a registration statement in effect or an available exemption. The security involved was iStorage, Inc., a little-known, thinly traded penny stock, which in late 2004 and early 2005 was subject of a spam e-mail campaign touting the sale of the stock on the Pink Sheets. According to the Commission’s decision, Brickell and World Trade conducted “no inquiry” into their customers’ proposed iStorage sales, despite indications that the sales were part of an illegal distribution. The Commission also found that, in connection with these unlawful sales, World Trade, Michel, and Adams failed to reasonably supervise Brickell and that World Trade and Michel failed to maintain adequate supervisory procedures in violation of NASD Rules.
In sustaining FINRA’s sanctions, the Commission stated that Applicants’ unregistered sales of securities and related supervisory failings “deprived investors of the protections afforded by the registration and disclosure requirements of the Securities Act.” The Commission’s Opinion stressed “that violations of the antifraud and other provisions of the securities laws frequently depend for their consummation . . . on the activities of broker-dealers who fail to make diligent inquiry to obtain sufficient information to justify their activity in the security.” (Rel. 34-66114; File No. 3-14307)
The foregoing information, which is publicly available on the SEC’s website, is provided by The White Law Group. The White Law Group, LLC is a national securities fraud, securities arbitration, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
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