FINRA

SEC REGULATION S-P RULES 10 AND 30, ARTICLE V, SECTIONS 1 AND 3 OF FINRA BY-LAWS, FINRA RULES 1122 AND 2010, NASD RULES 2110, 2210, 3010, 3012, AND, INTERPRETATIVE MATERIAL 1000-1 : SCHULTZ PERMITTED INDIVIDUALS TO DELAY TAKING THEIR EXAMS, TAKING AS LONG AS A YEAR PASS THE LICENSING EXAMINATION AFTER BECOMING ASSOCIATED WITH THE MEMBER FIRM. ELEVEN UNLICENSED INDIVIDUALS SUPERVISED BY SCHULTZ SOLD SECURITIES WITHOUT BEING REGISTERED, AND SCHULTZ WAS NEGLIGENT IN NOT KNOWING ABOUT THEIR SALES OF SECURITIES. SCHULTZ DID NOT PREVENT SIX OF THE ELEVEN INDIVIDUALS FROM CONTINUING TO SELL SECURITIES EVEN AFTER THEY FAILED THE EXAM. THE ELEVEN UNLICENSED INDIVIDUALS SOLD MORE THAN $4.7 MILLION IN PRIVATE PLACEMENT OFFERINGS TO 73 CUSTOMERS WITHOUT BEING REGISTERED. SCHULTZ FILED TWENTY FORM U5 FILINGS THAT OMITTED MATERIAL INFORMATION AND CONTAINED MATERIALLY FALSE, MISLEADING, AND INACCURATE INFORMATION AND SIGNED EACH ELECTRONICALLY, VERIFYING THE ACCURACY AND COMPLETENESS. SCHULTZ FILED A FORM U5 INACCURATELY INDICATING THAT AN INDIVIDUAL'S TERMINATION WAS "VOLUNTARY" WHEN THE INDIVIDUAL WAS TERMINATED FOR ENGAGING IN THE UNAUTHORIZED SALE OF MUNICIPAL SECURITIES, WHICH THE FORM U5 DID NOT DISCLOSE. SCHULTZ FILED NINETEEN MATERIALLY FALSE, MISLEADING, AND INACCURATE FORM U5 FILINGS, SUGGESTING THE INDIVIDUALS WERE "PERMITTED TO RESIGN" FOR STEALING MONEY FROM THE FIRM WHEN THEY VOLUNTARILY LEFT AND WERE SUSPECTED OF SELLING AWAY FROM THE FIRM. FOURTEEN OF THE NINETEEN ALSO INACCURATELY IDENTIFIED THE DATE THE INDIVIDUAL LEFT THE FIRM. FOUR OF THE NINETEEN FALSELY REPORTED THAT THE INDIVIDUAL WAS PERMITTED TO RESIGN AFTER ALLEGATIONS WERE MADE THAT ACCUSED THE INDIVIDUAL OF VIOLATING INVESTMENT-RELATED STATUTES, REGULATIONS, RULES OR INDUSTRY STANDARDS OF CONDUCT, FRAUD OR WRONGFUL TAKING OF PROPERTY OR FAILURE TO SUPERVISE WHEN SUCH ALLEGATIONS HAD NOT BEEN MADE. SCHULTZ FILED AT LEAST FOURTEEN FORM U5 FILINGS LATE, AS MUCH AS FOUR MONTHS AFTER THE INDIVIDUAL LEFT THE FIRM WHEN SCHULTZ HAD THIRTY DAYS AFTER THE INDIVIDUAL'S ASSOCIATION WITH THE FIRM ENDED. THE FIRM'S EMPLOYEES USED ADVERTISING AND SALES LITERATURE IN CONNECTION WITH SALES OF PRIVATE PLACEMENTS THAT CONTAINED FALSE AND MISLEADING STATEMENTS, CREATED BY THE ISSUER. SCHULTZ, AS A REGISTERED PRINCIPAL OF THE FIRM, APPROVED THESE MISLEADING PIECES OF ADVERTISING AND SALES LITERATURE FOR USE AND FAILED TO MAINTAIN COPIES REFLECTING HIS REVIEW AND APPROVAL. AS CCO, SCHULTZ WAS RESPONSIBLE FOR THE FIRM'S COMPLIANCE WITH RECORDKEEPING REQUIREMENTS AND FAILED TO CAUSE THE FIRM TO MAKE AND PRESERVE THE ACCURATE BOOKS AND RECORDS, CAUSING THE FIRM'S VIOLATIONS OF EXCHANGE ACT RULES 17A-3 AND 17A-4 AND NASD RULE 3110. THE FIRM FAILED TO MAINTAIN A BLOTTER, TRANSACTION DOCUMENTS, BRANCH OFFICE RECORDS, AND COPIES OF ALL COMMUNICATIONS RELATING TO ITS SECURITIES BUSINESS FOR INDIVIDUALS USING NON-FIRM EMAIL ACCOUNTS. SCHULTZ DID NOT RETRIEVE OR TAKE ACTION TO PROTECT HARD COPY BUSINESS RECORDS CONTAINING THE FIRM'S CUSTOMERS' NON-PUBLIC PERSONAL INFORMATION AND FAILED TO SAFEGUARD CONFIDENTIAL INFORMATION, MAKING IT AVAILABLE TO NONAFFILIATED THIRD PARTIES WITHOUT THE APPROPRIATE NOTICE TO FIRM CUSTOMERS. SCHULTZ FAILED TO ESTABLISH AND ENFORCE A SUPERVISORY CONTROL SYSTEM TO TEST AND VERIFY ITS SUPERVISORY PROCEDURES WERE REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS AND REGULATIONS, AND WITH APPLICABLE FINRA RULES, AND CREATE ADDITIONAL OR AMEND SUPERVISORY PROCEDURES WHERE THE NEED IS IDENTIFIED. SCHULTZ FAILED TO ESTABLISH, MAINTAIN, AND ENFORCE THE FIRM'S WRITTEN PROCEDURES TO SUPERVISE THE TYPES OF BUSINESS IN WHICH THE FIRM ENGAGED AND TO SUPERVISE THE ACTIVITIES OF EMPLOYEES. IN ADDITION, SCHULTZ HAD INDIVIDUAL SUPERVISORY RESPONSIBILITIES THAT HE FAILED TO CARRY OUT. (CONTINUED IN COMMENTS)

Acceptance, Waiver & Consent(AWC)

Bar (Permanent)

Any Principal Capacity

Indefinite

10/24/2011

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

$30,000.00

Suspension

ANY CAPACITY

SIX MONTHS

11/7/2011

5/6/2012

(CONTINUED FROM ALLEGATIONS) SCHULTZ FAILED TO IMPLEMENT EFFECTIVE PROCEDURES TO: PREVENT THE UNLICENSED SALES OF SECURITIES, CAUSE FORMS U5 FILINGS TO BE FILED IN A TIMELY MANNER, PREVENT INDIVIDUALS FROM CONDUCTING SECURITIES BUSINESS THROUGH NON-FIRM EMAIL ACCOUNTS, REVIEW AND APPROVAL OF NON-EMAIL, WRITTEN COMMUNICATIONS WITH THE PUBLIC, THE HANDLING OF PRIVATE PLACEMENT MEMORANDA, SUBSCRIPTION DOCUMENTS, AND INVESTOR FUNDS FOR PRIVATE PLACEMENTS SOLD BY FIRM EMPLOYEES, COMPLIANCE WITH THE ADVERTISING CONSENT STANDARDS FOR ADVERTISING AND SALES LITERATURE, DUE DILIGENCE OF PRIVATE PLACEMENT OFFERINGS PRIOR TO THE FIRM'S APPROVAL FOR SALE, MAINTAIN DAILY TRANSACTIONS RECORDS OF TRANSACTIONS AT EACH BRANCH AND BRANCH MANAGER REVIEW OF SUCH RECORDS, BRANCH OFFICE INSPECTIONS, AND DETERMINE THAT ALL SUPERVISORY PERSONNEL WERE QUALIFIED. WITHOUT ADMITTING OR DENYING THE FINDINGS, SCHULTZ CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS, THEREFORE HE IS FINED $30,000, SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR SIX MONTHS, AND BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY PRINCIPAL CAPACITY. THE FINE SHALL BE DUE AND PAYABLE EITHER IMMEDIATELY UPON REASSOCIATION WITH A MEMBER FIRM FOLLOWING THE SUSPENSION, OR PRIOR TO ANY APPLICATION OR REQUEST FOR RELIEF FROM ANY STATUTORY DISQUALIFICATION RESULTING FROM THIS OR ANY OTHER EVENT OR PROCEEDINGS, WHICHEVER IS EARLIER. THE SUSPENSION IS IN EFFECT FROM NOVEMBER 7, 2011, THROUGH MAY 6, 2012.