FINRA

Wright was named a respondent in a FINRA complaint alleging that his member firm, acting through Wright, permitted an unregistered individual to engage in securities business through the firm by participating in the sale of bonds and preferred shares of a single issuer to the firm's retail customers. The complaint alleges that the individual engaged in securities business by and through the firm while he was not registered with FINRA in any capacity, and he was permitted to do so by the firm and Wright. The complaint also alleges that the firm and Wright permitted the individual to associate with the firm while he was statutorily disqualified. The complaint further alleges that the firm, acting through Wright, paid the individual compensation totaling more than $100,000 derived from commissions generated by his customers' purchases of bonds and preferred shares of a single issuer through the firm, while the individual was not registered with FINRA. In addition, the complaint alleges that Wright, as the firm's custodian of records, failed to provide information and documents requested by FINRA during its investigation of all sales of bonds and preferred shares of a single issuer through the firm, including those purchased by the individual's customers.

Decision

Bar (Permanent)

All Capacities

Indefinite

8/18/2023

Default decision rendered July 24, 2023. The sanction was based on findings that Wright and his member firm permitted an unregistered person to act in a registered capacity. The findings stated that the firm, acting through Wright as its majority owner, CEO, CCO, and Financial and Operations Principal, contracted with an individual to introduce his former customers to the firm. In exchange, the firm, acting through Wright, agreed to pay the individual 90 percent of all commissions generated from those customers' transactions for a period of two years, and 30 percent of all such commissions for two years after that. Because the individual had a prior disciplinary history, Wright determined that the firm would not sponsor his registration with FINRA. The individual introduced nine customers to the firm, who made 14 separate securities purchases totaling more than $1.8 million. Wright identified himself as the registered representative for the customers' accounts. Other than approving the accounts and purchases, Wright had no role in the completion of subscription agreements or other documents required to open the customers' accounts or purchase securities in their accounts. Rather, Wright sent the individual the documents required to open accounts with the firm and purchase securities. The individual communicated with the customers and coordinated execution of the documents, and thereafter returned those documents to Wright. The findings also stated that the firm and Wright permitted a disqualified person to associate with the firm. While engaged by the firm, the individual consented to findings in a Letter of Acceptance, Waiver, and Consent ("AWC") that he exercised unauthorized discretion in multiple customer accounts and falsified firm records while with his former employer. FINRA suspended the individual from associating with a FINRA member from August 5, 2019, to November 4, 2020. The Individual also was statutorily disqualified from conducting any securities business by virtue of the suspension. The firm and Wright were aware of regulatory actions involving the individual, yet they did not submit a Form MC-400 application and they permitted the individual to improperly associate with the firm and engage in securities business until his termination. The findings also included that the firm and Wright shared commissions with an unregistered person. The firm, acting through Wright, paid $101,598 to the individual in compensation derived from commissions generated by the customers' purchases of securities. The individual was not registered with FINRA during this period. Moreover, of the individual's compensation, the firm paid $19,125 while he was statutorily disqualified from engaging in securities business and suspended from associating with a FINRA member. FINRA found that Wright failed to respond to FINRA's requests for information and documents related to the quantity of securities and principal amount invested in the securities by firm customers; the suitability of the securities purchased by the firm's customers, including the individual's customers; compensation paid by the firm, acting through Wright, to any individuals in connection with the sale of the securities; Wright's supervision of the suitability of investments in securities by the firm's customers; whether the firm, through Wright, conducted reasonable due diligence into securities sold prior to selling them to the firm's customers; and whether the firm's WSPs were reasonably designed to comply with its obligations under FINRA rules and the federal securities laws. The decision is final on August 18, 2023.

Michigan

The administrator may revoke, suspend, condition or limit Respondent's agent registration pursuant to sections 412(2), 412(4)(i), and 412(8) of the Securities Act, MCL 451.2412(2), MCL 451.2412(4)(i), and MCL 451.2412(8), and may fine Respondent under section 412(3), MCL 451.2412(3), because it is in the public interest, and because Respondent, as the control person of Brokerbank Securities, Inc., failed to reasonably supervise XXXX, a securities agent subject to his supervision who committed violations of the Securities Act, rules, and orders thereunder, within the previous 10 years.

Administrative Consent Agreement and Order

Civil and Administrative Penalty(ies)/Fine(s)

$2,500.00

Revocation

See Order at www.michigan.gov/lara

FINRA

Wright was named a respondent in a FINRA complaint alleging that his member firm, while acting through him as its CEO and CCO, issued misleading press releases in violation of FINRA rules. The complaint alleges that the press releases, which referenced research reports on specific companies, falsely implied that the firm was the author of the research and, in some instances, falsely implied that the firm was recommending securities covered in the research report. The complaint also alleges that the firm merely acted as a conduit for a non-registered entity which paid the firm a fee to submit the press releases to a newswire service. The firm fronted for the non-registered entity because the newswire service would only accept press releases from a registered broker-dealer or from the covered companies themselves. Some of the press releases failed to disclose that the firm was being paid to issue the press release. In other instances, the press releases and accompanying research reports were misleading because they omitted material negative information about the covered companies, specifically that they were subject to "going concern" qualifications by their auditors. The complaint further alleges that the firm had no policies or procedures to ensure the press releases complied with NASD and FINRA rules. Neither the firm's supervisory system nor its written policies and procedures addressed this business line. Wright was responsible for ensuring that the firm had adequate written procedures and an adequate supervisory system to address all business lines in which the firm engaged. Wright failed to establish such written policies or supervisory system relating to the press releases.

Decision & Order of Offer of Settlement

Civil and Administrative Penalty(ies)/Fine(s)

$15,000.00

$10,000.00

Suspension

All Capacities

one month

6/20/2016

7/19/2016

Without admitting or denying the allegations, Wright consented to the sanctions and to the entry of findings that he and his member firm issued press releases that falsely implied that the firm was the author of the press releases and research analyst reports, or recommended securities covered in the analyst reports, when in fact the firm merely acted as a conduit for a non-registered entity, which paid the firm a fee to submit the press releases to a newswire service. The findings stated the press releases and associated research reports failed to disclose material adverse information about the covered companies, namely that they were subject to a "going concern" qualification by their auditors. The findings also stated that Wright was responsible for ensuring that the firm had proper written procedures and an adequate supervisory system to ensure that the press releases complied with NASD/FINRA rules, neither of which the firm had in place. Fines paid in full on January 17, 2018.