Initiated By
FINRA
Allegations
WILLFULLY VIOLATED SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULES 10B-5 THEREUNDER, FINRA RULES 2010, 2020; VIOLATED FINRA RULES 2010, 2020, 2111, 3310(A), 3310(B), 4511, NASD RULE 2310, 3010, 3110: CARRIS ENGAGED IN A MANIPULATIVE SCHEME OF INTENTIONAL PREARRANGED TRADING TO MANIPULATE THE PRICE AND VOLUME OF A SECURITY IN THE OVER-THE-COUNTER MARKET. THIS SCHEME WAS MOTIVATED BY THE INTEREST IN INCREASING THE VOLUME AND PRICE OF SALES OF SHARES, INCLUDING IN ONGOING PRIVATE PLACEMENTS OF PUBLIC EQUITY (PIPES) FOR WHICH CARRIS' MEMBER FIRM ACTED AS A PLACEMENT AGENT. CARRIS CREATED VOLUME AND ALSO GAVE THE APPEARANCE OF GREATER LIQUIDITY, MANIPULATED THE PRICE BY WHICH THE SHARES WERE BOUGHT AND SOLD, AND PREVENTED LARGE SALES OF BLOCKS OF SHARES FROM BEING SOLD INTO THE MARKET (WHICH WOULD DEPRESS THE STOCK PRICE). THIS PREVENTED THE PRICE AND VOLUME FROM ACCURATELY REFLECTING MARKET ACTIVITY PRIOR TO AND DURING AN OFFERING. ALSO AS PART OF THE MANIPULATIVE SCHEME, CARRIS DIRECTED PURCHASES OF THE STOCK IN HIS CUSTOMER ACCOUNTS THAT HELD INSUFFICIENT FUNDS TO SATISFY THE PURCHASE. CONSEQUENTLY, THE FIRM'S CLEARING FIRM ORDERED THE FIRM TO SELL THE SHARES IN THE OPEN MARKET. WHEN THIS OCCURRED, CARRIS WOULD SET UP A PREARRANGED TRADE TO DIRECT THAT ANOTHER FIRM CUSTOMER PURCHASE THAT PRECISE NUMBER OF SHARES AT A PRECISE PRICE FROM THE UNDERFUNDED CUSTOMER. THIS PREARRANGED TRADING ACTIVITY WAS ALL MARKED "UNSOLICITED," GENERALLY DID NOT RESULT IN THE CHARGING OF A COMMISSION, AND DID NOT HAVE ANY LEGITIMATE BUSINESS PURPOSE. IN CONNECTION WITH SELF-OFFERINGS, CARRIS AND HIS FIRM FAILED TO PROVIDE POTENTIAL INVESTORS WITH MATERIAL INFORMATION REGARDING THE FIRM'S AND THE FIRM'S PARENT COMPANY'S FINANCIAL CONDITION AND OPERATIONS. AS A RESULT, THE REPRESENTATIONS IN THE SELF-OFFERING MATERIALS REGARDING THE FINANCIAL CONDITION OF THE FIRM AND THE FIRM'S PARENT COMPANY WERE MISLEADING AND OMITTED MATERIAL INFORMATION. THE FIRM'S PARENT COMPANY PAID "DIVIDENDS" TO PRIOR INVESTORS OUT OF NEW INVESTOR'S FUNDS, IN A PONZI-LIKE MANNER. THE MISREPRESENTATIONS AND OMISSIONS WERE WILLFUL AND KNOWING OR, AT MINIMUM, RECKLESS. CARRIS DID NOT SATISFY HIS REASONABLE BASIS SUITABILITY OBLIGATION WITH RESPECT TO THE SELF-OFFERINGS. NONETHELESS, HE RECOMMENDED THE SECURITIES TO FIRM CUSTOMERS. CARRIS ACTED AS A CUSTOMER-INTERFACING BROKER WHO SOLD SECURITIES DIRECTLY TO FIRM CUSTOMERS. CARRIS LACKED A REASONABLE BASIS TO BELIEVE THAT THE INVESTMENTS WERE SUITABLE TO SELL TO ANY INVESTOR BASED UPON REASONABLE DUE DILIGENCE. HE HAD NO REASONABLE GROUNDS TO EXPECT ECONOMIC GAINS FOR THEIR CUSTOMERS BASED UPON THESE INVESTMENTS. CARRIS CAUSED THE FIRM TO FALSELY CLASSIFY HIS PERSONAL EXPENSES AS LEGITIMATE BUSINESS EXPENSES. AS A RESULT, HE CAUSE THE FIRM TO MAINTAIN INACCURATE BOOKS AND RECORDS, IN VIOLATION OF SECTION 17(A) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 17A-3 THEREUNDER. CARRIS CAUSED HIS FIRM TO ISSUE HIM A FALSE W-2 FOR A YEAR, WHICH UNDERSTATED THE COMPENSATION HE RECEIVED, AND FAILED TO ISSUE HIM ANY YEAR-END TAX REPORTING FORMS, INCLUDING A W-2, FOR TWO YEARS. CARRIS FAILED TO ADEQUATELY ESTABLISH AND IMPLEMENT ADEQUATE ANTI-MONEY LAUNDERING (AML) PROCEDURES. CARRIS, NOR ANY OTHER FIRM EMPLOYEE TOOK STEPS TO MONITOR, DETECT OR INQUIRE ABOUT TRANSACTIONS IN ORDER TO DETERMINE WHETHER THEY CONSTITUTED SUSPICIOUS ACTIVITY. CARRIS FAILED TO ADEQUATELY SUPERVISE THE ACTIVITIES OF REGISTERED REPRESENTATIVES, REGISTERED PRINCIPALS, AND OTHER ASSOCIATED PERSONS IN A MANNER REASONABLY DESIGNED TO ACHIEVE COMPLIANCE AND TO PREVENT AND DETECT THE MISCONDUCT BY THE RESPONDENTS ALLEGED IN THIS COMPLAINT. CARRIS CAUSED THE FIRM TO OPERATE WITH DEFICIENT NET CAPITAL IN VIOLATION OF SEC RULE 15C-3. [CONTINUED IN COMMENTS]
Resolution
Decision
Bar
Bar (Permanent)
Registration Capacities Affected
All Capacities
Start Date
3/9/2015
Sanctions
Monetary Penalty other than Fines
Amount
$28,864.79
Regulator Statement
[CONTINUED FROM ALLEGATIONS]: CARRIS FAILED TO REMIT TO THE UNITED STATES TREASURY HUNDREDS OF THOUSANDS OF DOLLARS IN EMPLOYEE PAYROLL TAXES AFTER REPRESENTING TO EMPLOYEES THAT THOSE FUNDS HAD BEEN WITHHELD FROM THEIR PAYCHECKS FOR PAYROLL TAX PAYMENTS. IN ADDITION, CARRIS KNOWINGLY, OR AT A MINIMUM RECKLESSLY, PROVIDED SUBSTANTIAL ASSISTANCE TO HIS FIRM IN CONNECTION WITH ITS VIOLATIVE ACTIVITIES.
AS A RESULT, CARRIS WILLFULLY AIDED AND ABETTED HIS FIRM'S WILLFUL VIOLATIONS OF SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 10B-5 THEREUNDER AND FINRA RULES 2010 AND 2020. FINRA FILED FOR A TEMPORARY CEASE-AND-DESIST ORDER AGAINST CARRIS AND HIS FIRM TO IMMEDIATELY HALT SOLICITATIONS OF ITS CUSTOMERS TO PURCHASE FIBROCELL SCIENCE, INC. STOCK WITHOUT MAKING PROPER DISCLOSURES.
AMENDED EXTENDED HEARING PANEL DECISION RENDERED JANUARY 20, 2015. THE SANCTIONS WERE BASED ON FINDINGS THAT CARRIS WILLFULLY VIOLATED SECURITIES EXCHANGE ACT OF 1934, SECTION 10(B) AND RULE 10B-5 THEREUNDER BY KNOWINGLY OR, AT A MINIMUM, RECKLESSLY SELLING SECURITIES ISSUED BY HIS MEMBER FIRM'S PARENT COMPANY ON THE BASIS OF FALSE STATEMENTS OF MATERIAL FACT AND MISLEADING OMISSIONS OF MATERIAL FACT. THE FINDINGS STATED THAT CARRIS RECOMMENDED THE PURCHASE OF SECURITIES ISSUED BY THE FIRM'S PARENT COMPANY TO CUSTOMERS WITHOUT A REASONABLE BASIS. THE FINDINGS ALSO STATED THAT CARRIS WILLFULLY VIOLATED SECTION 10(B) OF THE EXCHANGE ACT AND RULE 10B-5 THEREUNDER BY MANIPULATING THE PRICE OF A STOCK THROUGH PREARRANGED TRADING AND IMPROPERLY PLACING STOCK IN CUSTOMER ACCOUNTS TO MAINTAIN THE PRICE AT AN ARTIFICIAL LEVEL. THE FINDINGS ALSO INCLUDED THAT CARRIS CAUSED THE FIRM TO CREATE AND MAINTAIN INACCURATE BOOKS AND RECORDS. FINRA FOUND THAT CARRIS FAILED TO REMIT EMPLOYEE PAYROLL TAXES TO THE UNITED STATES TREASURY AND OTHER TAXING AUTHORITIES. FINRA ALSO FOUND THAT CARRIS CAUSED THE FIRM TO OPERATE WITHOUT SUFFICIENT NET CAPITAL. IN ADDITION, FINRA DETERMINED THAT CARRIS FAILED TO IMPLEMENT ANTI-MONEY LAUNDERING POLICIES AND PROCEDURES THAT CAN BE REASONABLY EXPECTED TO DETECT AND CAUSE THE REPORTING OF SUSPICIOUS TRANSACTIONS. MOREOVER, FINRA FOUND THAT CARRIS FAILED TO ESTABLISH, MAINTAIN, AND ENFORCE A REASONABLE SUPERVISORY SYSTEM. FURTHERMORE, FINRA FOUND THAT THE EVIDENCE DID NOT SUPPORT THE CHARGE THAT THAT CARRIS WILLFULLY VIOLATED SECTION 10(B) OF THE EXCHANGE ACT AND RULE 10B-5 THEREUNDER BY AIDING AND ABETTING SECURITIES FRAUD IN CONNECTION WITH THE FIRM'S SALE OF THE STOCK, SO THIS CHARGE IS DISMISSED. THE EVIDENCE ALSO DID NOT SUPPORT THE CHARGE THAT CARRIS FAILED TO ISSUE YEAR-END TAX FORMS, FORMS W-2, AND ISSUED A FALSE FORM W-2 THAT UNDERREPORTED HIS COMPENSATION, SO THIS CHARGE IS DISMISSED.
THE DECISION BECAME FINAL MARCH 9, 2015.
