[ by Howard Haykin ]

Back in 2007, FINRA Department of Enforcement brought a disciplinary proceeding against respondents ACAP Financial, Inc., Vincent McGuire and Gary Hume in 2007, related to sales of unregistered securities in 2005.  At the time of the transactions, McGuire was a Registered Rep with ACAP, and Hume was ACAP's CCO and AMLCO.

• The First Cause of Action alleges that, between 5/9/05 and 6/30/05, ACAP sold into the open market over 27 million shares of unregistered shares of Greyfield Capital, Inc.  Those sales resulted in proceeds of approximately $46,000 for ACAP customers. 

• The Second Cause of Action alleges that ACAP and Hume, McGuire's supervisor, failed to

1. reasonably supervise McGuire in connection with the sale of the unregistered securities; and,
2. establish, maintain, and enforce WSPs reasonably designed to achieve compliance with the applicable securities laws and regulations.

Fast forward to 11/5/10, and we have RR Vincent McGuire, alone, accepting FINRA's settlement offer - that calls for a 45-day suspension and a $15K fine.  Respondents ACAP and Hume, however, did not accept any settlement and instead file a Joint Motion as to Stipulations, Liability, and Procedures - which effectively ended any further hearings at this point in time. 

The hearing officer had little choice but to issue a ruling based on prior written record.   The hearing officer's ruling, released 5/3/11, essentially affirmed the findings issued by FINRA Enforcement, and referred to the supervisory violations by ACAP and Hume as "egregious" - because both ACAP and Hume ignored "red flags" associated with the sale of the unregistered Greyfield securities. 

ACAP was fined $25,000 for failing to supervise RR McGuire, and fined an additional $50,000 for failing to maintain and enforce adequate WSPs, among other sanctions.  Gary Hume was fined $10,000 and suspended in all principal capacities for one year, among other sanctions. 

In a ruling issued 9/26/12, and included in FINRA's Disciplinary Actions for December 2012, the NAC panel affirmed the findings from earlier hearings, but chose to revise the respondents' sanctions.

• ACAP's fine was raised to $50,000 for its supervisory failures and another $50,000 for failing to maintain and enforce adequate WSPs, among other sanctions.  Gary Hume received a higher fine of $25,000, up from $10,000, and received a full 6-month suspension.

Once again, Respondents ACAP and Gary Hume have appealed their sanctions.  This time to the SEC. 

For further details, go to:  [FINRA Disciplinary Actions for December 2012] and [FINRA AWC #2007008239001].