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FINRA Expels NY Broker-Dealer, Bars CEO, Suspends President
Hallmark Investments, Steven Dash and Stephen Zipkin agreed to settle FINRA charges that they participated in a scheme to sell shares of stock to customers at fraudulently inflated prices, among other violative activiites. Hallmark was expelled; CEO Steven Dash agreed to be barred; President Stephen Zipkin agreed to serve a 2-year suspension and to pay over $18K in restitution to affected customers.
- Hallmark Investments. A NYC-based broker-dealer that first became registered in 2005. From March 2014 to March 2015, the relevant period, the firm employed about 6 registered reps. FINRA suspended Hallmark in March 2017 and, in May 2017, the firm withdrew its registration (Form BDW).
- Steven Dash … had been in the securities business for 22 years with 10 firms. He founded Hallmark Investments in 2005 and served as CEO until 2017. He held the Series 7 and Series 24 licenses. He's currently not associated with any firm.
- Stephen Zipkin … has been in the securities business for 19 years with 8 firms. He joined Hallmark in late 2005 and served as the firm's President until 2017. He's currently not associated with any firm.
FINRA FINDINGS. In November 2014, Hallmark, Dash and Zipkin sold 39,600 unregistered shares of thinly-traded Avalanche Int'l Corp. (AVLP), which the firm had acquired pursuant to a consulting agreement, to some 14 firm customers at fraudulently inflated prices. In the process, they made material misrepresentations and omitted material facts. Here are the details.
- Received 40,000 shares in September 2014 in exchange for providing Avalanche with unspecified "consulting services." The shares had a cost basis of $500.
- They tried but failed to deposit the 40,000 AVLP shares with Hallmark's clearing firm, COR Clearing.
- In mid-October 2014, Dash opened as account in Hallmark's name at Scottrade, for which he was the sole signatory. Dash deposited the 40,000 AVLP shares into the newly-opened Scottrade account.
- On 11/20/14, Dash place a GTC sell order to sell 39,600 of the shares held at Scottrade at a price of approximately $3 a share.
- On 11/21/14, at Dash's direction, Hallmark used pre-arranged trading to sell 39,600 of the 40,000 shares back to Hallmark.
- On 11/21/14, Zipkin placed a limit order on behalf of Hallmark to buy the 39,600 shares at a price of ~$3.00 a share.
► The market price for AVLP based on bid prices in the open market was approximately $2.05 a share; the closing price for AVLP on 11/21/14 was $2.36.
- On 11/21/14, Hallmark, Dash and Zipkin sold 39,600 shares to 14 Hallmark, customers bringing in proceeds of $118,740; the shares were transferred from Scottrade account to an account at COR where they were then allocated among the 14 customers.
- Including mark-ups and fees, Hallmark received a total $122K from the sales; its cost basis was $500.
- Hallmark issued trade confirmation to the 14 customers that failed to disclose: (i) that Hallmark was acting as a principal for its own account; and, (ii) the difference between the price Hallmark charged it customer for the AVLP shares and the cost to Hallmark to acquire the AVLP shares. The confirms also listed the trades as “unsolicited.”
Other Violative Activities. Prior to the Avalanche transactions, the firm sold around 195,000 shares of Microphase Corp. to customers of the firm from March 2014 to July 2014. At the time of these sales, the Microphase shares were not registered with the SEC, nor were the sales exempt from registration. Zipkin sold approximately 67,500 unregistered Microphase shares to 3 customers of the firm.
On at least 8 occasions, Hallmark conducted a securities business while failing to maintain its required minimum net capital.