[ by Howard Haykin ]

FINRA filed a complaint Monday against New York broker-dealer John Thomas Financial (JTF), its Chief Executive Officer, and others - including the CCO - in connection with the sale of America West Resources, Inc. common stock. Charges included intimidation of registered reps, trading ahead, failing to provide best execution for customer orders and various other violations.

Profile of Respondents.   John Thomas Financial (JTF), a New York-NY-based broker-dealer, was founded in 2007 and has been registered with FINRA since that time.  In February 2012, the firm employed over 125 registered reps ("RRs").

Anastasios "Tommy" Belesis ("Belesis"), JTF's Chief Executive Officer, and founder, has since January of 2007 been its CEO.  Belesis either directly or indirectly owns over 75% of the firm. He holds the Series 7 and 63 licenses, the Series 24 license, and the Series 9 and 10 licenses.  He has been employed by several different FINRA member firms from 1996 through the present.

Joseph Castellano, Chief Compliance Officer since February 2009, owns less than 5% of JTF. He holds the following licenses:  Series 7, Series 63, Series 55, and Series 24.  Castellano has been employed by several different FINRA member firms from 1995 through the present. 

Ronald Vincent Cantalupo, Regional Managing Director since February 2008, holds the following licenses:   Series 7 Series 63 license, and Series 24.  He has been employed by several different FINRA member firms from 1998 through the present.

Michele Misiti, Branch Office Manager ("BOM") since November of 2011, previously served as Assistant BOM with the firm from March 2009 through November 2011.  Misiti owns less than 5% of JTF.  She holds the following licenses:   Series 7, Series 63, Series 24, Series 65, Series 4.  She has been employed by several different FINRA member firms from 1991 through the present.

John Ward, JTF trader since ~ 2/9/12.  He holds the following licenses:  Series 7, Series 63, and Series 55.  He has been employed by several different FINRA member firms during most of the period, 2000 through the present.

FINRA Findings and Allegations.    This case involves, among other things, the following allegations against respondents:

• fraud
• intimidation of RRs
• improper trading ahead of customer equity orders
• breach of the duty of best execution
• failure to follow customer instructions
• misrepresentations to RRs, customers and FINRA
• falsification of, and failure to, maintain order tickets
• failure to reasonably supervise

JTF and many of its customers owned AWSR stock as a result of participation in the company's private financings.  According to the FINRA complaint, on 2/23/12, the price of AWSR common stock - which at the time was thinly traded on the OTC Bulletin Board - spiked higher, by more than 600%.  It opened at $0.28 per share, peaked at $1.80 per share, and closed the day at $1.29 per share.  That same day, JTF sold 855,000 shares, which accounted for most of its proprietary position in AWSR.  The sales generated over $1 million in proceeds.

During the time that JTF was selling its shares on 2/23 (at the height of the price spike), at least 15 customers submitted orders to sell more than 1 million shares.  However, it's alleged that only one of these orders was entered for execution on this date.  Some of the orders received on 2/23 were, instead were executed on subsequent days - all at prices that were grossly inferior to those obtained by the firm on 2/23/12/  Still other customer orders allegedly were not entered or executed at all. 

AWSR is now in bankruptcy and the customers' investments are virtually worthless.

Other FINRA Allegations.   In addition to issues related to the selling of AWSR shares:

• JTF and Belesis, through Misiti and Castellano, lied to the firm's RRs and customers about the reasons the customer shares could not be sold on 2/23. 

-  e.g.,  the reasons given allegedly included:  (i) there was a problem with the clearing firm's trading systems;  (ii) there was insufficient volume on that day to fill the orders;  and, (iii) the shares could not be sold because they were restricted under the Securities Act of 1933.

• JTF and Belesis, through Misiti, tried to conceal that customer orders were received on 2/23/12 during the price spike and that the firm failed to execute them, by blaming that tickets for customer orders received on 2/23 had been lost - and 6 of those tickets were replaced - presumably with falsified tickets dated 2/24. 

• Belesis and Misiti also allegedly made misrepresentations to FINRA concerning Belesis' role in the misconduct.

• JTF, Belesis, Castellano and Cantalupo allegedly violated FINRA's anti-intimidation rule by physically threatening - e.g., threatening to have them "run over", harassing and assaulting RRs who disagreed with Belesis' business practices;  allegedly they further threatened to ruin RRs' financial careers by improperly marking their industry records.

Requested Sanctions.   FINRA Enforcement requests that the Panel of Hearing Officers:

• Make findings of fact and conclusions of law that Respondents committed the violations charged and alleged herein.
• Order that one or more of the sanctions provided under FINRA Rule 8310(a) - including monetary sanctions, be imposed - including disgorgement of any/all ill-gotten gains, as well as full and complete restitution together with interest.
• Order Respondents to bear such costs of legal proceeding.
• Make specific findings that JTF and Belesis willfully violated Exchange Act Section 10(b) and Rule 10b-5 thereunder, and that JTF, Belesis and Misiti willfully violated Exchange Act Section 17(a), Rules 17a-3 and 17a-4 thereunder.

Good Luck Collecting!
 

For further details, go to:   [FINRA News Release, 4/15/13] and [John Thomas Financial, Inc. Action with FINRA, AWC #20120334673-01].