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Veteran Broker is Barred: Was it the Loans, PSTs or Lies?
[Photo: Money Manager Irving Kahn, who shorted the '29 crash, died in 2015 at age 109 / Huffingtonpost ]
by Howard Haykin
WHAT WENT WRONG. Well, here's what went down. During his 13-year association with Oberweis Securities, this broker was charged with the following violative conduct.
IMPERMISSIBLE BORROWING FROM A CUSTOMER. From October 2012 through January 2014, he accepted at least 6 loans from “VLH,” a customer in his 80’s, totaling $32,000. The broker did not obtain written pre-approval from the firm, and he denied the existence of the loans on ACQs (annual compliance questionnaires) that were submitted for 2012, 2013, and 2014. [Violations of FINRA Rule 3240, Borrowing from or Lending to Customers.]
PRIVATE SECURITIES TRANSACTIONS. Between July 2013 and April 2014, he participated in private securities transactions (“PSTs”) for compensation, involving investments made by VLH in a pharmaceutical start-up company. The broker did not provide prior written notice to, or receive prior written approval from Oberweis. VLH’s investments in Reven Pharmaceuticals included: (i) 1,000,000 shares of stock, 4,200,000 in convertible notes, and $1,250,000 in stock options, valued at $2,550,000. For assisting with and facilitating in the transaction between Reven and VLH, the broker received selling compensation in the form of 1,155,000 shares of Reven stock and $12,500 in cash. [Violation of NASD Rule 3040, Private Securities Transactions of an Associated Person.]
PROVIDING FALSE AND MISLEADING INFORMATION TO FINRA. In response to FINRA’s requests for information ("RFIs"), the broker provided several false statements. [In violation of FINRA Rule 8210, Provision of Information and Testimony and Inspection and Copying of Books.]
- In response to FINRA’s first request, the broker falsely stated that … (i) "[n]either I— nor to my knowledge, Oberweis - received any consideration or remuneration of any kind from Reven in connection with [VLH's] investments with Reven;" (ii) he "received no compensation from Reven at any time or in any amount;" and (iii) he "never accepted a loan from a customer" other than a $16,000 loan from customer VLH in January 2014.
- In response to a FINRA’s second request, the broker falsely stated that … he had only borrowed $16,000 from customer VLH in January 2014, and approximately $10,000 or $11,000 in the late 1980s or early 1990s.
This case was reported in FINRA Disciplinary Actions for February 2019.
For further details, go to ... FINRA Disciplinary Actions Online, and refer to Case #2017055306401.