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Regulatory Sanctions

Was FINRA Fiddling While Windsor Street Capital Burned?

April 3, 2019

[Illustration: Nero Fiddling While Rome Burned / National Geographic Society]


by Howard Haykin


An individual recently agreed to pay a $20K fine and serve a 35-day suspension to settle FINRA charges that he had functioned in a principal capacity for which he was not registered and for which he had not passed the appropriate qualification exam. What’s surprising about this case ... is that this violative conduct lasted for over 3 years at a firm that was on FINRA Enforcement’s radar because it had an extensive disciplinary history. 
Ergo, the title of this post: “Was FINRA Fiddling While Windsor Street Capital (fka Meyers Associates) Burned?”



WHAT WENT WRONG.    The individual (“RK”) was associated with Windsor Street Capital (f/k/a Meyers Associates) from 1999 until May 2018. While he obtained his Series 7 General Securities Representative license in 2000, he did not obtain his Series 24 General Securities Principal license until 2017. At various points in time between 2009 and 2013, RK served as an Investment Banking Representative and as an Operations Professional.


However, from January 2013 through at least March 2016well before obtaining his Series 24 license, RK functioned as Windsor Street’s EVP and/or a Managing Partner, and he was actively engaged in numerous aspects of the management of Windsor Street’s investment banking and securities businesses, including managing its investment bank business.


  • RK was a Managing Director of investment banking, and served on the firm’s investment banking committee. In those capacities, RK approved new investment banking clients, negotiated advisory and private placement agreements on behalf of Windsor Street, reviewed term sheets and offering documents, and authorized sales of new unregistered securities by Windsor Street’s registered reps.


  • RK negotiated and reviewed agreements with Windsor Street’s clearing firms, auditors and other vendors.


  • RK negotiated billing disputes with Windsor Street’s vendors, participated in approving compensation advances to Windsor Street registered reps, and participated in handling various other financial matters for Windsor Street, including overseeing Windsor Street’s 2015 internal investigation concerning misconduct involving the Firm Accounts which was requested by the CEO.


  • RK violated NASD Rules 1021 and 1022 and FINRA Rule 2010 by serving as an unregistered General Securities Principal.


  • RK further violated FINRA Rules 3270 and 2010 - from April 2015 through May 2016 - by engaging in outside business activities involving a real estate and M&A advisory business without providing prior written notice to Windsor Street.



FINANCIALISH TAKE AWAYS.    Windsor Street Capital, as noted above, was a firm with an extensive disciplinary history. A FINRA member-firm since 1994, the New York, NY-based firm ran a general securities business - that is, until May 2018, when it was expelled from the industry. [For the record, until December 2016, the firm operated as Meyers Associates.]


One such complaint filed by FINRA Enforcement (AWC #2016048912703) accused Windsor Street of executing 2 separate fraudulent schemes, along with other regulatory failures, including deficient supervisory policies and procedures throughout the same period noted above - from January 2013 through March 2016. Among other things, …


  • In Scheme One ... an operations employee fraudulently allocated profitable day trades to his personal account and other favored accounts at Windsor while steering unprofitable trades to the Firm’s customers or to Windsor Street itself [aka “Cherry-Picking.”]
  • In Scheme Two ... at the direction of CEO (“BM”) and others, order clerks imposed undisclosed and, in many instances, excessive markups and markdowns on customer trades.
  • Unreported Outside Business Activities:  It turns out that CEO BM participated with RK in the aforementioned outside business activities involving a real estate and M&A advisory business. And, he too, never gave prior written notice to Windsor Street.



Based on the foregoing, it’s a wonder that FINRA never seemed to have gotten close enough to prevent or deter many of these violations. Which brings us back to RK and his '3 plus years' as an unregistered principal.
          Makes you wonder if "FINRA Fiddled While …"



This case was reported in FINRA Disciplinary Actions for March 2019.

For further details, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2016048912703.