Initiated By
FINRA
Allegations
WILLFULLY VIOLATED SECURITIES EXCHANGE ACT SECTION 10(B),RULE 10B-5 THEREUNDER, VIOLATED SECURITIES EXCHANGE ACT RULES 17A-3, 17A-4, FINRA RULES 2010, 2020, 4511(A), 5240, 5320, 8210, NASD RULES 2320, 3010, CAUSED THE VIOLATIONS OF SEC RULES 17A-3(A)(6) AND 17A-4(B)(1) - A MEMBER FIRM, THROUGH THE FIRM'S CHIEF EXECUTIVE OFFICER (CEO), ANASTASIOS BELESIS, AND ITS BRANCH OFFICE MANAGER (BOM), SOLD OVER 800,000 SHARES OF A SECURITY AT PRICES THAT WOULD HAVE SATISFIED OUTSTANDING CUSTOMER ORDERS TO SELL THIS STOCK ON THE SAME SIDE OF THE MARKET. THE FIRM RECEIVED CUSTOMER ORDERS ONE AFTERNOON BUT DID NOT EXECUTE MOST OF THEM IN THE SIZE AND AT THE SAME PRICE OR BETTER AT WHICH IT EXECUTED THE PROPRIETARY SHARES. BELESIS INSTRUCTED THE BOM TO SELL AS MUCH OF THE FIRM'S PROPRIETARY POSITION AS POSSIBLE, EFFECTIVELY PREVENTING REGISTERED REPRESENTATIVES FOM INTERRUPTING THE BOM WHILE SHE WAS SUBMITTING FIRM ORDERS TO THE CLEARING FIRM. THE FIRM, THROUGH BELESIS, ITS BOM AND A TRADER, FAILED TO USE REASONABLE DILIGENCE TO EXECUTE CUSTOMER ORDERS THAT DAY SO THAT CUSTOMER ORDERS WERE NOT FILLED AT A PRICE AS FAVORABLE AS POSSIBLE UNDER PREVAILING MARKET CONDITIONS. SOME ORDERS WERE EXECUTED THE FOLLOWING DAY AND THEREAFTER AT PRICES THAT WERE INFERIOR TO THE PRICES AVAILABLE THE DAY BEFORE AND SOME CUSTOMERS DID NOT SELL AT ALL. THE FIRM TOOK INSUFFICIENT STEPS TO FOLLOW CUSTOMER INSTRUCTIONS. THE FIRM AND BELESIS, THROUGH THE BOM AND THE CHIEF COMPLIANCE OFFICER (CCO), STATED TO REGISTERED REPRESENTATIVES THAT CUSTOMER ORDERS TO SELL THE STOCK COULD NOT BE ENTERED DUE TO A PROBLEM WITH THE CLEARING FIRM AND THE REGISTERED REPRESENTATIVES CONVEYED THIS MISREPRESENTATION TO CUSTOMERS. THE FIRM TOOK INADEQUATE STEPS, IF ANY TO TIMELY ENTER ORDERS FOR EXECUTION. BELESIS TOOK NO STEPS AT ALL. BELESIS REFUSED TO CANCEL THE SALE OF THE FIRM'S SHARES AND REBILL THEM TO CUSTOMER ACCOUNTS, STATING THAT THE CUSTOMERS' SHARES WERE RESTRICTED, WHICH WAS UNTRUE. THE FIRM, THROUGH BELESIS AND THE BOM, FAILED TO MAKE AND KEEP CURRENT RECORDS OF THESE ORDERS AS REQUIRED BY THE SEC. THE FIRM, THROUGH BELESIS AND THE BOM, FAILED TO PRESERVE RECORDS FOR AT LEAST THE UNEXECUTED CUSTOMER ORDERS IT RECEIVED AS REQUIRED BY THE SEC. THESE TICKETS WERE REQUIRED TO BE PRESERVED FOR AT LEAST THREE YEARS. BELESIS, AS THE CEO, WAS RESPONSIBLE FOR ASSURING COMPLIANCE BY THE FIRM WITH APPLICABLE LAWS, RULES AND REGULATIONS. THE FIRM HAD WRITTEN SUPERVISORY PROCEDURES (WSPS) THAT PURPORTED TO ADDRESS TRADING AHEAD OF CUSTOMER EQUITY ORDERS THAT STRICTLY PROHIBITED FRONT RUNNING BUT THE IMPLEMENTATION OF THESE PROCEDURES WAS NOT FOLLOWED. ALTHOUGH THE FIRM DESIGNATED A TRADER WITH RESPONSIBILITY FOR ENSURING COMPLIANCE WITH THESE PROCEDURES, IT FAILED TO NOTIFY HIM OF SUCH OR PROVIDE HIM WITH THE INFORMATION NECESSARY TO BE ABLE TO DO SO. THE FIRM, THROUGH BELESIS AND THE BOM, CREATED CIRCUMSTANCES WHERE AS THE CUSTOMERS' ORDERS WERE NOT BEING ENTERED: THE TRADER WHO HAD BEEN AT THE FIRM FOR APPROXIMATELY TWO WEEKS WAS RESPONSIBLE FOR ENTERING THE ORDERS AND THE BOM COULD NOT BE BOTHERED TO ASSIST HIM BECAUSE SHE WAS BUSILY SELLING THE FIRM'S PROPRIETARILY-HELD SHARES. THE FIRM ALSO FAILED TO ESTABLISH AND MAINTAIN A SUPERVISORY SYSTEM REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH FINRA RULE 4511 AND SEC RULES 17A-3 AND 17A-4. THE FIRM, BELESIS AND THE BOM FAILED TO ESTABLISH AND MAINTAIN A SUPERVISORY SYSTEM WITH RESPECT TO ITS TRADING FUNCTION AND RECORDKEEPING PRACTICES THAT WAS REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH SECURITIES LAWS, REGULATIONS AND RULES. [CONTINUED IN COMMENT.]
Resolution
Decision
Bar
Bar (Permanent)
Registration Capacities Affected
All Capacities
Start Date
2/26/2015
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount
$100,000.00
Sanctions
Disgorgement
Amount
$1,047,288.01
Sanctions
Suspension
Registration Capacities Affected
ANY CAPACITY
Duration
TWO YEARS
Start Date
3/2/2015
End Date
3/1/2017
Regulator Statement
ALLEGATIONS CONTINUED: BELESIS PROVIDED FALSE AND MISLEADING INFORMATION TO FINRA DURING ON THE RECORD INTERVIEWS. BELESIS VIOLATED ANTIFRAUD PROVISIONS BY SELLING PROPRIETARILY HELD STOCK WHILE KNOWINGLY OR RECKLESSLY PREVENTING THE ENTRY AND EXECUTION OF MARKETABLE CUSTOMER SELL ORDERS IN THE STOCK AND MAKING MATERIAL MISREPRESENTATIONS TO CUSTOMERS, REGISTERED REPRESENTATIVES AND OTHER FIRM PERSONNEL, THAT SUCH ORDERS COULD NOT BE ENTERED BECAUSE A PROBLEM EXISTED WITH THE CLEARING FIRM; THE CUSTOMERS' SHARES WERE UNREGISTERED UNDER THE 1933 ACT AND NOT SUBJECT TO AN EXEMPTION FROM REGISTRATION; AND THERE WAS INSUFFICIENT VOLUME IN THE STOCK. BELESIS, EITHER RECKLESSLY OR INTENTIONALLY, FAILED TO CONTACT THE APPROPRIATE PERSON AT THE CLEARING FIRM TO HAVE A TRADING RESTRICTION REMOVED UNTIL AFTER THE CLOSE OF THE MARKETS. THE FIRM, ACTING THROUGH BELESIS AND THE BOM, ATTEMPTED TO CONCEAL THE MISCONDUCT BY FAILING TO MAINTAIN ORDER TICKETS FOR SOME ORDERS AND CREATING FALSIFIED TICKETS FOR SOME OF THE ORDERS. AS A RESULT OF THE FIRM'S SALE OF ITS PROPRIETARILY-HELD SHARES, IT REAPED PROCEEDS OF APPROXIMATELY $1,080,135. THE FIRM, THROUGH BELESIS AND THE BOM, FAILED TO OBSERVE HIGH STANDARDS OF COMMERCIAL HONOR AND JUST AND EQUITABLE PRINCIPLES OF TRADE BY SELLING PROPRIETARILY HELD STOCK WHILE PREVENTING THE SALE OF SUCH STOCK BY CUSTOMERS AND MAKING MATERIAL MISREPRESENTATIONS AND OMISSIONS TO CUSTOMERS AND REPRESENTATIVES CONCERNING THE REASONS THAT ORDERS TO SELL THE STOCK WERE NOT FULLY EXECUTED OR EXECUTED AT ALL. BELESIS CONDUCTED BUSINESS IN A THREATENING, INTIMIDATING AND COERCIVE MANNER BY PHYSICALLY THREATENING AND INTIMIDATING REPRESENTATIVES WHO DISAGREED WITH HIS BUSINESS PRACTICES AND BY THREATENING TO END REPRESENTATIVES' FINANCIAL CAREERS BY FILING FORMS U5 AND AMENDMENTS FALSELY STATING THAT THEY ENGAGED IN SERIOUS WRONGDOING.
EXTENDED HEARING PANEL DECISION RENDERED JANUARY 9, 2015. THE SANCTIONS WERE BASED ON FINDINGS THAT BELESIS TRADED AHEAD OF CUSTOMER ORDERS, AND FAILED TO MAINTAIN ACCURATE AND COMPLETE BOOKS AND RECORDS. THE FINDINGS STATED THAT BELESIS PROVIDED FALSE AND MISLEADING INFORMATION TO FINRA. THE FINDINGS ALSO STATED THAT BELESIS FAILED TO OBSERVE HIGH STANDARDS OF COMMERCIAL HONOR AND JUST AND EQUITABLE PRINCIPLES OF TRADE. THE FINDINGS ALSO INCLUDED THAT BELESIS HARASSED AND INTIMIDATED INDIVIDUALS ASSOCIATED WITH A MEMBER FIRM. FINRA FOUND THAT THE EVIDENCE DOES NOT SUPPORT THE CHARGES THAT BELESIS BREACHED HIS DUTY OF BEST EXECUTION OR FAILED TO FOLLOW CUSTOMER INSTRUCTIONS, THEREFORE, THOSE CHARGES ARE DISMISSED. FINRA ALSO FOUND THAT THE EVIDENCE DOES NOT SUPPORT THE CHARGES THAT BELESIS MADE MISREPRESENTATIONS TO CUSTOMERS OR FAILED TO SUPERVISE, THEREFORE, THOSE CHARGES ARE DISMISSED.
THE DECISION BECAME FINAL FEBRUARY 26, 2015.
Broker Comment
ALLEGATIONS CONTINUED: BELESIS PROVIDED FALSE AND MISLEADING INFORMATION TO FINRA DURING ON THE RECORD INTERVIEWS. BELESIS VIOLATED ANTIFRAUD PROVISIONS BY SELLING PROPRIETARILY HELD STOCK WHILE KNOWINGLY OR RECKLESSLY PREVENTING THE ENTRY AND EXECUTION OF MARKETABLE CUSTOMER SELL ORDERS IN THE STOCK AND MAKING MATERIAL MISREPRESENTATIONS TO CUSTOMERS, REGISTERED REPRESENTATIVES AND OTHER FIRM PERSONNEL, THAT SUCH ORDERS COULD NOT BE ENTERED BECAUSE A PROBLEM EXISTED WITH THE CLEARING FIRM; THE CUSTOMERS' SHARES WERE UNREGISTERED UNDER THE 1933 ACT AND NOT SUBJECT TO AN EXEMPTION FROM REGISTRATION; AND THERE WAS INSUFFICIENT VOLUME IN THE STOCK. BELESIS, EITHER RECKLESSLY OR INTENTIONALLY, FAILED TO CONTACT THE APPROPRIATE PERSON AT THE CLEARING FIRM TO HAVE A TRADING RESTRICTION REMOVED UNTIL AFTER THE CLOSE OF THE MARKETS. THE FIRM, ACTING THROUGH BELESIS AND THE BOM, ATTEMPTED TO CONCEAL THE MISCONDUCT BY FAILING TO MAINTAIN ORDER TICKETS FOR SOME ORDERS AND CREATING FALSIFIED TICKETS FOR SOME OF THE ORDERS. AS A RESULT OF THE FIRM'S SALE OF ITS PROPRIETARILY-HELD SHARES, IT REAPED PROCEEDS OF APPROXIMATELY $1,080,135. THE FIRM, THROUGH BELESIS AND THE BOM, FAILED TO OBSERVE HIGH STANDARDS OF COMMERCIAL HONOR AND JUST AND EQUITABLE PRINCIPLES OF TRADE BY SELLING PROPRIETARILY HELD STOCK WHILE PREVENTING THE SALE OF SUCH STOCK BY CUSTOMERS AND MAKING MATERIAL MISREPRESENTATIONS AND OMISSIONS TO CUSTOMERS AND REPRESENTATIVES CONCERNING THE REASONS THAT ORDERS TO SELL THE STOCK WERE NOT FULLY EXECUTED OR EXECUTED AT ALL. BELESIS CONDUCTED BUSINESS IN A THREATENING, INTIMIDATING AND COERCIVE MANNER BY PHYSICALLY THREATENING AND INTIMIDATING REPRESENTATIVES WHO DISAGREED WITH HIS BUSINESS PRACTICES AND BY THREATENING TO END REPRESENTATIVES' FINANCIAL CAREERS BY FILING FORMS U5 AND AMENDMENTS FALSELY STATING THAT THEY ENGAGED IN SERIOUS WRONGDOING.
