FINRA suspended broker Gregory Evan Goldstein of Southern California after Goldstein failed to respond to FINRA requests for information concerning a consulting business he operates. Following an interim ruling on Goldstein's appeal, the broker began serving his suspension on February 15, 2013.
According to terms of the sanction imposed on January 4, 2013, if Goldstein's suspension is not terminated within three months by complying with FINRA's requests, Goldstein will be barred and fined $50,000.
Goldstein, meanwhile, filed an application for review and motion to stay with the SEC, charging that FINRA lacks the authority to require he produce documents relating to "a third party"—his consulting business "Wall Street at Home.com Inc." Specifically, Goldstein alleged a violation of his due process rights.
After review, the SEC denied Goldstein's request on February 11, 2013.
In reaching its decision, the SEC determined, in part that (1) Goldstein was a FINRA-associated person, (2) FINRA sought information related to Goldstein's business activities, (3) Goldstein possessed and controlled such information and (4) Wall Street at Home was not "entirely independent" from the FINRA-member firm Goldstein operated.
In fact, the SEC found Wall Street at Home "is closely tied to both Goldstein and Marquis [Financial Services of Tarzana, California] (the regulated entity through which Goldstein conducts his securities business)."
Specifically, FINRA's investigation determined that Marquis Financial customers purchased minority interests in Wall Street at Home through the Tarzana-based firm.
The SEC also rejected Goldstein's allegation that FINRA's requests for information raised impermissible "privacy and confidentiality issues," finding that FINRA investigations are indeed "non-public and confidential."
The SEC recently approved a rule change—effective February 25, 2013—clearly delineating FINRA's authority to request and investigate documents in "possession, custody or control" of FINRA-associated persons, when relevant to an investigation.
In its closing, the SEC found that Goldstein's failure to comply with FINRA's request for information "poses a particularly significant risk" as FINRA claims to be seeking information regarding possible "serious securities violations, including selling away, front running, market timing and fraud."
As of February 22, 2013, Goldstein's BrokerCheck Report shows one pending customer dispute alleging various causes of action including Goldstein's "failure to supervise" the brokerage activities at Marquis Financial Services. A recent Reuters article cites FINRA's concern regarding suspicious penny stock trading activity at Marquis Financial.
When FINRA requests information pursuant to industry rules, its purpose is to "enable both member firms and FINRA to oversee and, if necessary, investigate associated persons' activities away from member firms." When associated persons fail to respond to such requests, FINRA's ability to oversee and investigate may be significantly compromised. As a result, FINRA generally takes strong action against unresponsive parties.
This becomes especially pertinent when activities away from the brokerage firm pose potential threats to the investing public, such as the aforementioned link of Marquis Financial selling interests in Wall Street at Home.
The Law Offices of Jonathan W. Evans & Associates presently has a FINRA arbitration case pending against Goldstein, his firm Marquis Financial, and stockbroker Stephen Wilshinsky. That cases is based in part on the sales of penny stocks in three companies, Kensington Leasing, Lenco, and Oceanfreight.
If you have invested with Gregory Evan Goldstein or any financial professional who has engaged in misconduct that has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.
News: Backlash over FINRA probe goes badly for broker so far (Reuters)