FINRA

WILLFULLY VIOLATED SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934, SEC RULE 10B-5, WILLFULLY VIOLATED ARTICLE V, SECTION 2(C) OF THE FINRA BYLAWS AND FINRA RULE 1122, VIOLATED FINRA RULES 2010, 2020, 3270, NASD RULE 2310, INTERPRETATIVE MATERIAL 2310-2 - BERNARD MCGEE RECOMMENDED THAT HIS CUSTOMER SURRENDER VARIABLE ANNUITIES, VALUED AT APPROXIMATELY $494,000, WHICH REPRESENTED APPROXIMATELY HALF HER NET WORTH AND PURCHASE A CHARITABLE GIFT ANNUITY (CGA) FROM AN ENTITY FOR WHICH SHE INCURRED APPROXIMATELY $36,500 IN SURRENDER CHARGES. THE REMAINDER OF THE PROCEEDS WAS INVESTED WITH THE ENTITY AND MCGEE WAS PAID MORE THAN $59,000 IN FEES FOR THE CUSTOMER'S CGA INVESTMENT. MCGEE MADE MATERIAL MISREPRESENTATIONS AND OMISSIONS TO INDUCE THE CUSTOMER TO SURRENDER HER VARIABLE ANNUITIES AND PURCHASE THE CGA. MCGEE FALSELY TOLD HER THAT SHE WAS FACING A LARGE TAX LIABILITY AND THAT THE CGA WOULD OFFSET THAT LIABILITY AND HE FAILED TO DISCLOSE THAT THE ENTITY WOULD PAY HIM A FEE OF APPROXIMATELY 13 PERCENT FOR HER PURCHASE OF THE CGA. MCGEE HAD NO REASONABLE BASIS FOR HIS RECOMMENDATION BECAUSE HE FAILED TO CONDUCT DUE DILIGENCE OF THE ENTITY AND ITS CGA PRODUCT. HIS RECOMMENDATION WAS NOT SUITABLE IN LIGHT OF THE CUSTOMER'S FINANCIAL CONDITION, INVESTMENT OBJECTIVES AND THE LARGE SURRENDER FEES SHE INCURRED. MCGEE DID NOT PROVIDE PRIOR WRITTEN NOTICE TO HIS MEMBER FIRM REGARDING HIS OUTSIDE BUSINESS ACTIVITY WITH THE ENTITY. MCGEE FAILED TO TIMELY DISCLOSE HIS NEW ADDRESS ON HIS FORM U4 AND IN A CONTINUING EFFORT TO HIDE HIS RELATIONSHIP WITH THE ENTITY FROM HIS FIRM, HE MISREPRESENTED THE OFFICE ADDRESS OF HIS PERSONAL ENTITY ON A FIRM COMPLIANCE QUESTIONNAIRE. MCGEE PROVIDED FALSE INFORMATION TO HIS FIRM WHEN HE REPRESENTED ON FIVE ANNUAL COMPLIANCE QUESTIONNAIRES THAT HE HAD DISCLOSED ALL OUTSIDE BUSINESS-RELATED EMAIL ADDRESSES. MCGEE FALSELY REPRESENTED TO HIS FIRM ON ONE QUESTIONNAIRE THAT HE HAD NOT BEEN INVOLVED IN ANY OFFERS OR SALES OF ANY SECURITY OR INVESTMENT, WHETHER OR NOT REGISTERED WITH THE SEC, THAT WERE NOT PROCESSED THROUGH HIS FIRM, WITHOUT WRITTEN FIRM PERMISSION. MCGEE'S REPRESENTATIONS WERE FALSE AND HE KNEW THEY WERE FALSE WHEN HE MADE THEM.

Decision

Bar (Permanent)

All Capacities

Indefinite

7/18/2016

Monetary Penalty other than Fines

$14,068.38

Restitution

$237,643.25

plus interest on restitution

EXTENDED HEARING PANEL DECISION RENDERED DECEMBER 22, 2014 WHEREIN MCGEE IS BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY, ORDERED TO PAY $236,202.50, PLUS INTEREST, IN RESTITUTION TO A CUSTOMER, AND ORDERED TO PAY $59,264, PLUS INTEREST, IN DISGORGEMENT. THE SANCTIONS WERE BASED ON FINDINGS THAT MCGEE WILLFULLY FAILED TO DISCLOSE TO HIS CUSTOMER THAT HE WOULD MAKE NEARLY $60,000 ON HER PURCHASE OF A CHARITABLE GIFT ANNUITY FROM AN ENTITY. THE FINDINGS STATED THAT BY NOT DISCLOSING THE EXPECTED COMPENSATION, MCGEE MADE A MATERIAL OMISSION THAT VIOLATED SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 10B-5. THE FINDINGS ALSO STATED THAT MCGEE MADE AN UNSUITABLE RECOMMENDATION TO THE CUSTOMER. MCGEE RECOMMENDED THE CUSTOMER LIQUIDATE HER VARIABLE ANNUITIES AND INVEST IN THE ENTITY-OFFERED CHARITABLE GIFT ANNUITY. MCGEE DID NOT PERFORM SUFFICIENT DUE DILIGENCE ON EITHER THE ENTITY OR THE CHARITABLE GIFT ANNUITIES TO KNOW WHETHER THE PRODUCT WAS SUITABLE FOR A CUSTOMER. THE FINDINGS ALSO INCLUDED THAT MCGEE FAILED TO DISCLOSE HIS OUTSIDE BUSINESS ACTIVITIES WITH THE ENTITY TO HIS MEMBER FIRM. MCGEE'S RELATIONSHIP WITH THE ENTITY INCLUDED ACCEPTING RENT-FREE OFFICE SPACE, TAKING STEPS TO FORM A JOINT VENTURE, AND RECEIVING A COMMISSION PAYMENT FOR REFERRING A CLIENT. FINRA FOUND THAT MCGEE WILLFULLY FAILED TO TIMELY UPDATE HIS FORM U4 TO REFLECT THE CHANGE OF ADDRESS FOR HIS SECURITIES BUSINESS. FINRA ALSO FOUND THAT MCGEE MADE FALSE STATEMENTS ON HIS FIRM'S ANNUAL COMPLIANCE QUESTIONNAIRES. MCGEE FALSELY RESPONDED THAT HE HAD NOT ENGAGED, WITHOUT THE FIRM'S PERMISSION, IN ANY SECURITIES TRANSACTIONS OR OTHER INVESTMENT ACTIVITY THAT WAS NOT PROCESSED THROUGH THE FIRM. ADDITIONALLY, HE FALSELY REPRESENTED THAT HE HAD DISCLOSED ALL OF HIS BUSINESS RELATED EMAIL ADDRESSES. FINRA FAILED TO ESTABLISH THAT MCGEE MADE A MATERIAL MISREPRESENTATION TO THE CUSTOMER REGARDING A PURPORTED IMPENDING TAX LIABILITY, IN VIOLATION OF SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND SEC RULE 10B-5. ACCORDINGLY, THAT CHARGE IS DISMISSED. THIS MATTER HAS BEEN APPEALED TO THE NAC AND THE SANCTIONS ARE NOT IN EFFECT PENDING REVIEW. NAC decision rendered July 18, 2016 wherein the findings made are affirmed and sanctions imposed by the Hearing Panel are modified. McGee is ordered to pay $237,643.25, plus interest, in restitution to the customer, pay hearing costs of $12,325.34 and appeal costs of $1,743.04, and was barred from association with any FINRA member in any capacity. The bar is in effect as of July 18, 2016. On August 17, 2016, McGee appealed the decision to the Securities and Exchange Commission. The bar in any capacity remains in effect. SEC Admin Release 34-80314, March 27, 2017: The SEC ordered that the disciplinary action taken by FINRA against McGee be, and it hereby is, sustained. On April 26, 2017, McGee appealed the decision to the U.S. Court of Appeals for the Second Circuit. The bar remains in effect while on appeal. A United States Court of Appeals for the Second Circuit Summary Order rendered May 9, 2018, wherein the U.S Court of Appeals denied McGee's petition for review following appeal of an SEC decision. The decision became final August 7, 2018.

EXTENDED HEARING PANEL DECISION RENDERED DECEMBER 22, 2014 WHEREIN MCGEE IS BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY, ORDERED TO PAY $236,202.50 PLUS INTEREST IN RESTITUTION TO A CUSTOMER AND ORDERED TO PAY $59,264 PLUS INTEREST IN DISGORGEMENT. FINDINGS, SANCTIONS AND CONCLUSIONS ARE UNDER APPEAL WHICH OPERATES AS A STAY OF THE DECISION UNTIL THE NATIONAL ADJUDICATORY COUNCIL ISSUES A DECISION PURSUANT TO RULE 9349.

CADARET, GRANT & CO., INC.

Permitted to Resign

FAILURE TO DISCLOSE AN OUTSIDE BUSINESS ACTIVITY IN VIOLATION OF FIRM POLICIES AND PROCEDURES.

CUSTOMERS ATTORNEY ALLEGED THAT ON OR ABOUT MARCH 17, 2012, TWO HARTFORD ANNUITIES & TWO PACIFIC LIFE ANNUITIES OWNED BY THE CLIENT WERE LIQUIDATED UNDER MR MCGEE'S SUPERVISION YIELDING $ 454,990. THESE TRANSACTIONS RESULTED IN ABOUT $ 44,000 IN PENALTIES BEING LOST. IT WAS ALLEGED THAT CHARITABLE DONATIONS OF $217,152 WERE MADE WITH THE FUNDS AND THAT THREE DIFFERENT LINCOLN FINANCIAL CHARITABLE ANNUITIES WERE PURCHASED WITH THE REMAINING FUNDS.

$454,990.00

$269,375.15

CUSTOMER SENT A COMPLAINT LETTER TO CADARET GRANT DATED AUGUST 1, 2012. CUSTOMER HAS NOT INITIATED A FORMAL PROCEEDING OF ANY KIND AGAINST MR. MCGEE. NO PAYMENT HAS BEEN MADE BY MR. MCGEE TO THE CUSTOMER.

CUSTOMER CLAIMS SHE HAS LOST MONEY IN HER INVESTMENT.

$50,000.00

CLIENTS ALLEGE THAT MR. MCGEE DID NOT DISCUSS SURRENDER CHARGES WHEN HE ADVISED THEM TO TRANSFER THEIR MONIES FROM A VARIABLE ANNUITY INTO A MUTUAL FUND IN MARCH OF 2006.

$5,001.00

CLIENT FEEL'S MR. MCGEE'S NEGLIGENCE IN ADEQUATELY INVESTIGATING HIS PREVIOUS INVESTMENTS LEAD TO TAX LIABILITY AND SURRENDER CHARGES HE HAD NOT ANTICIPATED REGARDING THE VARIABLE ANNUITY HE PURCHASED IN APRIL OF 2000.

UNSUITABLE RECOMMENDATION

$7,500.00

LITIGATION WAS SETTLED AS A TRI-PARTITE MUTUAL GENERAL RELEASE FOR $7,500. REPRESENTATIVE'S COST WAS $1.00.

CLIENTS ALLEGED THAT THE REPRESENTATIVE NEVER TOLD THEM OF THE CHARGES ASSOCIATED WITH THE VARIABLE ANNUITY THEY PURCHASED. THEY ALSO QUESTIONED THE REASON FOR INVESTING THEIR IRA IN AN ANNUITY WHEN THE IRA ALREADY HAD TAX-DEFFERED STATUS.

$5,060.79

THE CLIENT STATES THAT HE REQUESTED THE ACCOUNTS TO BE CLOSED AND HAVE THE PROCEEDS TRANSFERRED. THE CLIENT ALLEGES THAT THE REPRESENTATIVE FAILED TO SELL THE SECURITIES AS REQUESTED AND ALLEGES THAT ADDITIONAL SECURITIES WERE PURCHASED.

$43,000.00

DURING THE TIME PERIOD IN QUESTION, MR. MCGEE WAS REGISTERED WITH ROYAL ALLIANCE ASSOCIATES, INC. IN ADDITION, THE ACCOUNT NUMBERS REFERENCED BY THE CLIENT WERE NOT NEW ENGLAND SECURITIES ACCOUNT NUMBERS. THEREFORE, THE COMPANY RECOMMENDED TO THE CLIENT THAT HE PURSUE HIS CONCERNS WITH ROYAL ALLIANCE ASSOCIATES.