FINRA is cracking down at firms such as Global Arena Capital Corp. which hire troubled brokers who move from one risky firm to another. The practice, known as "cockroaching" or "broker migration," occurs when a troubled broker hops from one firm to another, thus staying ahead of trailing FINRA investigations and sanctions.
FINRA specifically barred or otherwise sanctioned the Global Arena cockroach brokers for engaging in securities fraud, using misleading sales pitches and high pressure sales tactics to sell junk bonds, and/or churning customer accounts by making unsuitable recommendations, such as frequent or unnecessary trades.
The barred Global Arena Capital Corp. associates include former president Barbara Desiderio, representatives David Awad (aka David Bennett), James Torres, Peter Snetzko, Alex Wildermuth, and Michael Tannen, while FINRA also barred former principals Kevin Hagan and Richard Bohack from acting as supervisors, and sanctioned two additional former representatives—Niaz Elmazi (aka Nick Morrisey) and Andrew Marzec for failing to cooperate with the investigation. Elmazi and Marzec are the only two who did not consent to entry of FINRA's findings.
The firm itself also received a permanent expulsion, while FINRA noted that it previously sanctioned other firm associates for fraud, including fraudulent actions those employees committed while associated with a previous firm, before they migrated to Global Arena.
The results of cockroaching can be devastating. In its current action, FINRA noted that the 10 former Global Arena representatives engaged in cold-calling customers, including the elderly, to make recommendations of securities. The misleading sales pitches first occurred at the now-expelled firm HFP Capital Markets LLC, but by the time FINRA had the opportunity to investigate HFP, its troubled brokers had already jumped ship and migrated to Global Arena.
Barred broker James Torres, for instance, worked at HFP Capital for over four and a half years before joining Global Arena, and spent two years at Global Arena before FINRA finally investigated and barred him for material misrepresentations, omission of material facts, and other willful violations of the Securities Exchange Act, including churning, excessive trading, and unsuitable and misleading recommendations.
One pending customer dispute listed in Torres' BrokerCheck report alleges damages of $26,000 for negligence and breach of fiduciary duty.
Michael Tannen not only worked at HFP Capital for four years before joining Global Arena, he worked for nine years at Eastbrook Capital Group, which FINRA expelled from the industry in 2009. Tannen's BrokerCheck report indicates nine total disclosures totaling several hundreds of thousands of dollars, including several settled customer disputes alleging excessive trading, unsuitable transactions, excessive commissions, and other securities violations.
If you have invested with a broker or financial adviser who has migrated from one troubled firm to the next and whose misconduct such as excessive trading or other securities fraud 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.