Initiated By
FINRA
Allegations
FINRA BY-LAWS, ARTICLE V, SECTIONS 1, 2 AND 3, NASD BY-LAWS ARTICLE V, SECTION 2, 2(A), AND 3, FINRA RULES 1122, 2010, 3130, 8210, NASD RULES 1021(A), 2110, 3010, 3010(D)(2), 3011(A), 3011(C), 3012, 3013, 3110, INTERPRETATIVE MATERIAL-1000-1: A PRINCIPAL OF GIUGLIANO'S MEMBER FIRM WAS BARRED BY THE SEC FROM ACTING IN A SUPERVISORY CAPACITY. THE FIRM REMOVED THE PRINCIPAL AS ITS CEO IN THE FINRA CONTACT SYSTEM, CLAIMING THAT IT WAS REPLACING HIM AS CEO WITH GUIGLIANO BY LETTER TO FINRA GUIGLIANO SPECIFIED STEPS THE FIRM HAD TAKEN TO MAKE SURE THAT THE BARRED PRINCIPAL DOES NOT ACT IN A SUPERVISORY CAPACITY. CONTRARY TO THE FIRM AND THE GUIGLIANO'S STATEMENTS TO FINRA, AND DESPITE THE BARRED PRINCIPAL'S LACK OF A PRINCIPAL LICENSE AND THE SEC BAR, THE FIRM AND GUIGLIANO PERMITTED, AND CONTINUE TO PERMIT, THE BARRED PRINCIPAL TO BE, ACT AS, AND HOLD HIMSELF OUT AS, THE FIRM'S CEO AND AS PRINCIPAL. THE PRINCIPAL'S CONTINUED ASSOCIATION WITH THE FIRM IN A SUPERVISORY CAPACITY VIOLATED THE SEC BAR. THE FIRM AND THE NASD ENTERED INTO A MEMBERSHIP AGREEMENT WHERE, IN ITS CERTIFICATION, THE FIRM REPRESENTED THAT THE INFORMATION IT HAD FILED WITH THE NASD WAS CURRENT, TRUE AND COMPLETE AND IT AGREED THAT THE INFORMATION CONTAINED IN FORM BD WILL BE KEPT CURRENT AND ACCURATE; GIUGLIANO SIGNED ON BEHALF OF THE FIRM. THE FIRM AND FINRA ENTERED INTO AN AMENDED MEMBERSHIP AGREEMENT WHERE THE FIRM MADE THE SAME REPRESENTATIONS IN ITS CERTIFICATIONS; GIUGLIANO SIGNED DIRECTLY BELOW THE CERTIFICATIONS, WITH THE SAME REPRESENTATIONS BY THE FIRM. THE FIRM HAS NOT KEPT ITS INFORMATION WITH RESPECT TO ITS CEO AND A BARRED PRINCIPAL'S CONDUCT CURRENT AND ACCURATE IN ITS FORM BD. THE FIRM'S ANNUAL SUPERVISORY REPORT WAS NOT SUBMITTED TO A PERSON ELIGIBLE TO SERVE AS A MEMBER OF ITS SENIOR MANAGEMENT OR ELIGIBLE TO MEET TO DISCUSS THE ANNUAL SUPERVISORY REPORT. THE FIRM DID NOT HAVE A PERSON ELIGIBLE TO SERVE AS ITS CEO EXECUTE ITS ANNUAL CERTIFICATION OF COMPLIANCE AND SUPERVISORY PROCESSES. INSTEAD, THE BARRED PRINCIPAL SIGNED THIS CERTIFICATION AS THE FIRM'S PURPORTED CEO. FINRA REQUESTED THAT THE FIRM AND GIUGLIANO ASSERT THE STEPS THE FIRM HAD TAKEN TO COMPLY WITH THE SEC SANCTION IMPOSED AGAINST THE BARRED PRINCIPAL. THE FIRM AND GIUGLIANO REPRESENTED TO FINRA THAT THE BARRED PRINCIPAL WAS NO LONGER THE FIRM'S CEO, A PRINCIPAL OF THE FIRM, OR ACTING IN A SUPERVISORY CAPACITY. ALL OF THESE STATEMENTS WERE FALSE AND/OR MISLEADING, AND GIUGLIANO KNEW, OR SHOULD HAVE KNOWN, THEM TO BE FALSE AND/OR MISLEADING. THE FIRM, ACTING THROUGH THE BARRED PRINCIPAL, EXECUTED A SUBORDINATED LOAN AGREEMENT WITH ITS CLEARING FIRM. THE FIRM SUBMITTED THIS LOAN AGREEMENT TO NASD FOR ITS APPROVAL AND BASED ON THE FIRM'S REPRESENTATIONS, NASD APPROVED THIS LOAN AGREEMENT, AS WELL AS TWO SUBSEQUENT REQUESTS TO EXTEND THE LOAN. IN FACT, WHEN THE BARRED PRINCIPAL SIGNED THIS LOAN AGREEMENT ON BEHALF OF THE FIRM, HE HAD ALREADY ENTERED INTO AN UNDISCLOSED SIDE AGREEMENT. THIS UNDISCLOSED SIDE AGREEMENT WAS MATERIAL AS IT ENABLED THE FIRM TO CARRY ON ITS BOOKS AND RECORDS AN ALLEGEDLY SUBORDINATED LOAN WHICH WAS IN FACT NOT SUBORDINATED. BY SIGNING THIS LOAN AGREEMENT AND SUBMITTING THE LOAN EXTENSION REQUESTS TO FINRA, KNOWING THAT THE LOAN AGREEMENT CONTAINED A MATERIALLY FALSE REPRESENTATION, THE FIRM MADE MATERIAL MISREPRESENTATIONS TO FINRA. NONE OF THE MATERIAL MISREPRESENTATIONS HAVE BEEN CORRECTED TO DATE. THE FIRM FAILED TO ESTABLISH AND IMPLEMENT AN ANTI-MONEY LAUNDERING (AML) COMPLIANCE PROGRAM COMPLIANT WITH NASD AND MSRB RULES. GIUGLIANO AND ANOTHER PRINCIPAL KNEW, OR SHOULD HAVE KNOWN, OF THESE FAILURES. (CONTINUED IN COMMENT SECTION)
Resolution
Decision & Order of Offer of Settlement
Bar
Bar (Permanent)
Registration Capacities Affected
Any Principal Capacity
Duration
Indefinite
Start Date
10/12/2012
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount
$150,000.00
Sanctions
Suspension
Registration Capacities Affected
ANY CAPACITY
Duration
12 MONTHS
Start Date
11/5/2012
End Date
11/4/2013
Regulator Statement
(CONTINUED FROM ALLEGATIONS): AS A RESULT OF THE FIRM'S DEFICIENT AML COMPLIANCE PROGRAM, THE FIRM FAILED TO DETECT RED FLAGS SUGGESTING POSSIBLE SUSPICIOUS ACTIVITY, WHICH WOULD HAVE REQUIRED THE FIRM TO PERFORM DUE DILIGENCE TO ASSESS WHETHER IT WAS NECESSARY FOR IT TO FILE A SUSPICIOUS ACTIVITY REPORT (SAR) OR ADEQUATELY DOCUMENT ITS REASONS FOR DETERMINING THAT FILING A SAR WAS NOT NECESSARY. THE PRINCIPAL AND GIUGLIANO KNEW, OR SHOULD HAVE KNOWN, THAT THE FIRM HAD FAILED TO TIMELY DETECT, INVESTIGATE AND REPORT THIS SUSPICIOUS ACTIVITY. FINRA ADVISED THE FIRM IN WRITING THAT, WITHOUT THE REQUIRED NET CAPITAL, THE FIRM COULD NOT ENGAGE IN THE SECURITIES BUSINESS, OTHER THAN CUSTOMER LIQUIDATIONS. HOWEVER, DESPITE HAVING DEFICIENT NET CAPITAL, THE FIRM CONTINUED CONDUCTING A SECURITIES BUSINESS. THE FIRM FAILED TO CREATE AND MAINTAIN CURRENT AND ACCURATE BOOKS AND RECORDS RELATING TO THE FIRM'S FINANCIAL CONDITION, RESULTING IN THE FIRM SUBMITTING TO FINRA INACCURATE NET CAPITAL COMPUTATIONS. THE FIRM FAILED TO FILE ACCURATE NOTIFICATIONS OF ITS FAILURES TO MAKE AND KEEP CURRENT BOOKS AND RECORDS, TO MAINTAIN ITS REQUIRED MINIMUM NET CAPITAL, AND OF ITS NET CAPITAL FALLING BELOW THE EARLY WARNING THRESHOLD. THE FIRM FAILED TO REPORT THAT ITS NET CAPITAL HAD DECLINED BELOW THE MINIMUM REQUIRED AMOUNT; FAILED TO REPORT THAT ITS AGGREGATE INDEBTEDNESS WAS IN EXCESS OF ITS NET CAPITAL; AND FAILED TO REPORT THAT IT'S BOOKS AND RECORDS WERE NOT CURRENT. THE FIRM INACCURATELY REPORTED ITS LIABILITIES AND ITS NET CAPITAL ON ITS FOCUS REPORTS TO FINRA. THE FIRM FAILED TO ACCURATELY REFLECT ALL LIABILITIES INCURRED BY THE FIRM AND FAILED TO MAINTAIN ALL BILLS, PAID OR UNPAID, FOR A PERIOD OF NOT LESS THAN THREE YEARS, INCLUDING FOR TWO YEARS IN AN EASILY ACCESSIBLE PLACE. THE FIRM FURTHER FAILED TO MAINTAIN DOCUMENTS REFLECTING A PURPORTED LOAN FROM A PRINCIPAL AND GIUGLIANO, A CLEARING FIRM'S ACCOUNT AND A PURPORTED FIRM ASSET HELD AT A BANK IN THE NAME OF THE FIRM'S COUNSEL WITH NO SUCH CORRESPONDING ENTRY ON THE FIRM'S BOOKS. THE FIRM FAILED TO DISCLOSE UNSATISFIED JUDGMENTS AND LIENS ON A PRINCIPAL'S AND GIUGLIANO'S RESPECTIVE FORMS U4 IN A TIMELY MANNER. THE FIRM FAILED TO REPORT IN TIMELY MANNER MATERIAL FACTS ON REGISTERED REPRESENTATIVES' FORMS U4 OR FORMS U5 TO DISCLOSE A REPORTABLE EVENT. THE FIRM FAILED TO MAKE A FORM U4 FILING WITHIN 30 DAYS OF HIRE FOR REGISTERED REPRESENTATIVES. THE FIRM DID NOT ADEQUATELY SUPERVISE ITS REGISTERED REPRESENTATIVES AND ASSOCIATED PERSONS, INCLUDING AMONG OTHER PROCEDURES RELATING TO HEIGHTENED SUPERVISION; AND FAILED TO CONDUCT A REASONABLE INDEPENDENT MAIN OFFICE INSPECTION. THE FIRM VIOLATED CORRESPONDENCE RETENTION AND REVIEW RULES BY FAILING TO MAINTAIN EMAILS, AND ELECTRONIC CORRESPONDENCE AND MESSAGES; FAILING TO EVIDENCE REVIEW OF INCOMING AND OUTGOING CORRESPONDENCE AND EMAILS; AND FAILING TO EVIDENCE SUPERVISORY REVIEW OF EMAILS. GIUGLIANO FAILED TO PROVIDE FINRA REQUESTED DOCUMENTS AND INFORMATION.
WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, GIUGLIANO CONSENTED TO THE DESCRIBED SANCTION AND TO THE ENTRY OF FINDINGS; THEREFORE HE IS FINED $150,000, BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN A PRINCIPAL CAPACITY, AND SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR 12 MONTHS. THE SUSPENSION IS IN EFFECT FROM NOVEMBER 5, 2012, THROUGH NOVEMBER 4, 2013.
Broker Comment
AS A RESULT OF THE FIRM'S DEFICIENT AML COMPLIANCE PROGRAM, THE FIRM FAILED TO DETECT RED FLAGS SUGGESTING POSSIBLE SUSPICIOUS ACTIVITY, WHICH WOULD HAVE REQUIRED THE FIRM TO PERFORM DUE DILIGENCE TO ASSESS WHETHER IT WAS NECESSARY FOR IT TO FILE A SAR OR ADEQUATELY DOCUMENT ITS REASONS FOR DETERMINING THAT FILING A SAR WAS NOT NECESSARY. THE PRINCIPAL AND GIUGLIANO KNEW, OR SHOULD HAVE KNOWN, THAT THE FIRM HAD FAILED TO TIMELY DETECT, INVESTIGATE AND REPORT THIS SUSPICIOUS ACTIVITY. FINRA ADVISED THE FIRM IN WRITING THAT, WITHOUT THE REQUIRED NET CAPITAL, THE FIRM COULD NOT ENGAGE IN THE SECURITIES BUSINESS, OTHER THAN CUSTOMER LIQUIDATIONS. HOWEVER, DESPITE HAVING DEFICIENT NET CAPITAL, THE FIRM CONTINUED CONDUCTING A SECURITIES BUSINESS. THE FIRM FAILED TO CREATE AND MAINTAIN CURRENT AND ACCURATE BOOKS AND RECORDS RELATING TO THE FIRM'S FINANCIAL CONDUCTION, RESULTING IN THE FIRM SUBMITTING TO FINRA INACCURATE NET CAPITAL COMPUTATIONS. THE FIRM FAILED TO FILE ACCURATE NOTIFICATIONS OF ITS FAILURES TO MAKE AND KEEP CURRENT BOOKS AND RECORDS, TO MAINTAIN ITS REQUIRED MINIMUM NET CAPITAL, AND OF ITS NET CAPITAL FALLING BELOW THE EARLY WARNING THRESHOLD. THE FIRM FAILED TO REPORT THAT ITS NET CAPITAL HAD DECLINED BELOW THE MINIMUM REQUIRED AMOUNT; FAILED TO REPORT THAT ITS AGGREGATE INDEBTEDNESS WAS IN EXCESS OF ITS NET CAPITAL; AND FAILED TO REPORT THAT ITS BOOKS AND RECORDS WERE NOT CURRENT. THE FIRM INACCURATELY REPORTED ITS LIABILITIES AND ITS NET CAPITAL ON ITS FOCUS REPORTS TO FINRA. THE FIRM FAILED TO ACCURATELY REFLECT ALL LIABILITIES INCURRED BY THE FIRM. THE FIRM ALSO FAILED TO MAINTAIN ALL BILLS, PAID OR UNPAID, FOR A PERIOD OF NOT LESS THAN THREE YEARS, INCLUDING FOR TWO YEARS IN AN EASILY ACCESSIBLE PLACE. THE FIRM FURTHER FAILED TO MAINTAIN DOCUMENTS REFLECTING A PURPORTED LOAN FROM A PRINCIPAL AND GIUGLIANO, A CLEARING FIRM'S ACCOUNT AND A PURPORTED THE FIRM ASSET HELD AT A BANK IN THE NAME OF THE FIRM'S COUNSEL WITH NO SUCH CORRESPONDING ENTRY ON THE FIRM'S BOOKS. THE FIRM WILLFULLY VIOLATED EXCHANGE ACT RULES. THE FIRM FAILURES TO DISCLOSE UNSATISFIED JUDGMENTS AND LIENS ON A PRINCIPAL'S AND GIUGLIANO'S RESPECTIVE FORMS U4 IN A TIMELY MANNER; THEREFORE, THE FIRM, ACTING THROUGH THE PRINCIPAL AND GIUGLIANO, WILLFULLY VIOLATED FINRA BY-LAWS ARTICLE V, SECTION 2, NASD BY-LAWS ARTICLE V, SECTION 2(A), NASD RULE 2110 AND IM 1000-1; THE FIRM, ACTING THROUGH GIUGLIANO, WILLFULLY VIOLATED FINRA RULE 1122, 2010. THE FIRM FAILED TO REPORT IN TIMELY MANNER MATERIAL FACTS ON REGISTERED REPRESENTATIVES FORM U4 OR FORM U5 TO DISCLOSE A REPORTABLE EVENT. THE FIRM FAILED TO MAKE A FORM U4 FILING WITHIN 30 DAYS OF HIRE FOR REGISTERED REPRESENTATIVES. AS A RESULT, THE FIRM ACTING THROUGH A PRINCIPAL AND GIUGLIANO, WILLFULLY VIOLATED FINRA BY-LAWS, ARTICLE V, SECTION 2 AND 3, NASD BY-LAWS ARTICLE V, SECTION 2 AND 3, NASD RULE 2110, ACTING THROUGH GIUGLIANO, WILLFULLY VIOLATED FINRA RULE 2010. THE FIRM DID NOT ADEQUATELY SUPERVISE ITS REGISTERED REPRESENTATIVES AND ASSOCIATED PERSONS, INCLUDING AMONG OTHER PROCEDURES RELATING TO HEIGHTENED SUPERVISION; AND FAILED TO CONDUCT A REASONABLE INDEPENDENT MAIN OFFICE INSPECTION. THE FIRM VIOLATED CORRESPONDENCE RETENTION AND REVIEW RULES BY FAILING TO MAINTAIN EMAILS, AND ELECTRONIC CORRESPONDENCE AND MESSAGES; FAILING TO EVIDENCE REVIEW OF INCOMING AND OUTGOING CORRESPONDENCE AND EMAILS; AND FAILING TO EVIDENCE SUPERVISORY REVIEW OF EMAILS. GIUGLIANO FAILED TO PROVIDE FINRA REQUESTED DOCUMENTS AND INFORMATION.
