FINRA

Without admitting or denying the findings, Newton consented to the sanction and to the entry of findings that he refused to provide on-the-record testimony in connection with an investigation into potential securities law violations during the time Newton was associated with his member firm.

Acceptance, Waiver & Consent(AWC)

Bar (Permanent)

All Capacities

Indefinite

7/28/2017

FAILURE TO SUPERVISE. 2000-2004.

$398,000.00

$13,500.00

THIS CLAIM WAS FILED MORE THAN 11 YEARS AFTER THE INVESTMENTS WERE MADE, WHICH IS WELL PAST THE FINRA ALLOWED SIX YEAR WINDOW TO FILE A CLAIM. THIS CLAIM WAS SETTLED SOLELY TO MINIMIZE COSTS, AS IT HAD NO MERIT. NEWTON SHOULD NOT HAVE BEEN NAMED AS HE HAD NO CONTACT WITH THE INVESTOR, AND DID NOT HAVE ANY DIRECT SUPERVISION RESPONSIBILITIES.

FAILURE TO SUPERVISE. 2004-2008.

$725,000.00

$40,000.00

THIS CLAIM WAS FILED MORE THAN 7 YEARS AFTER THE INVESTMENTS WERE MADE, WHICH IS WELL PAST THE FINRA ALLOWED SIX YEAR WINDOW TO FILE A CLAIM. THIS CLAIM WAS SETTLED SOLELY TO MINIMIZE COSTS, AS IT HAD NO MERIT. NEWTON SHOULD NOT HAVE BEEN NAMED AS HE HAD NO CONTACT WITH THE INVESTOR, AND DID NOT HAVE ANY DIRECT SUPERVISION RESPONSIBILITIES.

FAILURE TO SUPERVISE. 2003-2006.

$123,039.00

$13,500.00

THIS CLAIM WAS FILED MORE THAN 9 YEARS AFTER THE INVESTMENTS WERE MADE, WHICH IS WELL PAST THE FINRA ALLOWED SIX YEAR WINDOW TO FILE A CLAIM. THIS CLAIM WAS SETTLED SOLELY TO MINIMIZE COSTS, AS IT HAD NO MERIT. NEWTON SHOULD NOT HAVE BEEN NAMED AS HE HAD NO CONTACT WITH THE INVESTOR, AND DID NOT HAVE ANY DIRECT SUPERVISION RESPONSIBILITIES.

FINRA

WITHOUT ADMITTING OR DENYING THE FINDINGS NEWTON CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT NEWTON'S MEMBER FIRM, THROUGH ITS BRANCH OFFICE MANAGER, SOLD OR CAUSED THE SALE OF INVESTMENTS OF AN ENTITY WITHOUT ADEQUATELY DISCLOSING MATERIAL INFORMATION TO INVESTORS. THE FINDINGS STATED THAT AT TIMES, THE ENTITY GAVE MONEY TO THE BRANCH OFFICE MANAGER THAT HE USED TO PAY THE FIRM'S REPRESENTATIVES A $2,000 MONTHLY SALARY IN ADVANCE OF THEIR DRAWS. SOME BROKERS DID NOT REPAY THE SALARY ADVANCES. THE ENTITY SECURITIES' OFFERING DOCUMENTS DID NOT ADEQUATELY DISCLOSE THAT THE ENTITY WAS INDIRECTLY COMPENSATING THE FIRM'S REGISTERED REPRESENTATIVES THROUGH ITS BRANCH OFFICE MANAGER, AND THIS WAS A MATERIAL OMISSION. NEWTON WAS THE DESIGNATED SUPERVISOR OF THE BRANCH OFFICE MANAGER AND THE BRANCH AND HE FAILED TO SUPERVISE THE ACTIVITIES IN THE BRANCH. NEWTON IMPROPERLY DELEGATED SUPERVISION OF THE BRANCH TO THIS BRANCH OFFICE MANAGER, AND HE FAILED ADEQUATELY TO OVERSEE THE BRANCH.

Acceptance, Waiver & Consent(AWC)

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

$10,000.00

Suspension

ANY PRINCIPAL CAPACITY

20 DAYS

8/4/2014

8/23/2014

FINE PAID IN FULL ON AUGUST 7, 2014.

UNFAIR TRADE PRACTICES;BREACH OF CONTRACT;UNJUST ENRICHMENT PROMISSORY ESTOPPEL;BREACH OF FIDUCIARY DUTY;NEGLIGENCE RESPONDENT SUPERIOR;INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS NEGLIGENT INFLICTION OF EMOTIONAL DISTRESS;FRAUDLANT MISREPRESENTATION PURCHASES OCCURED 1994 THROUGH 2001.

REGARDING QUESTION #6, ENTERED WITH 0.00 BECAUSE DAMAGES UNSPECIFIED.

UTAH DIVISION OF SECURITIES

SALE OF UNREGISTERED SECURITIES BY AGENTS OF THE FIRM, EMPLOYING UNLICENSED AGENTS, FAILURE TO SUPERVISE, SECURITIES FRAUD

Stipulation and Consent

Monetary/Fine

$25,000.00

Disgorgement/Restitution

MERIT AND NEWTON AGREE TO OFFER SETTLEMENT TO UTAH CLIENTS IN THE PENDING NASD ARBITRATION NO. 00-04224 IN THE PRINCIPAL AMOUNT OF $30,945; NEWTON AGREES THAT HE WILL NOT SUPERVISE ANY AGENTS LICENSED IN UTAH; MERIT AND NEWTON AGREE TO REIMBURSE THE DIVISION FOR THE COSTS OF THE AUDIT CONDUCTED IN CONNECTION WITH THIS INVESTIGATION; AS A CONDITION OF THIS SETTLEMENT, THE DIVISON WILL DISMISS THE PENDING ADMINSTRATIVE ACTIONS AGAINST RESPONDENTS RYAN AND FITZPATRICK.

OFFER SETTLEMENT TO UTAH CLIENTS; FINE; REIMBURSE DIVISION FOR COSTS OF INVESTIGATION; NEWTON AGREES NOT TO SUPERVISE ANY AGENTS LICENSED IN UTAH.

THIS SETTLEMENT WAS MADE TO AVOID THE COSTS OF PROTRACTED LITIGATION. AS CEO OF MERIT CAPITAL I WAS NOT RESPONSIBLE FOR SUPERVISING BRANCH ACTIVITY OR REGISTRATION ISSUES. I HAD NO CONTACT WITH UTAH CLIENTS, WAS NOT AWARE OF , NOR DID I SUPERVISE ANY SALES ACTIVITY IN UTAH. **THE PRINCIPAL OF THE FIRM WAS NOT FOUND TO HAVE VIOLATED ANY INVESTMENT RELATED STATUES.

FLORIDA DIVISION OF SECURITIES AND INVESTOR PROTECTION

MERIT CAPITAL ASSOCIATES, INC. OPERATED A BRANCH OFFICE WITHOUT THE BENEFIT OF REGITRATION, FAILED TO SUPERVISE AN ASSOCIATED PERSON WHO OPERATED FROM THE UNREGISTERED OFFICE, FAILED TO UPDATE ITS WRITTEN SUPERVISORY PROCEDURES MANUAL, FAILED TO MAINTAIN A RECORD OF EACH CASH AND MARGIN ACCOUNT, AND SOLD UNREGISTERED SECURITIES. NEWTON HAS BEEN THE CHAIRMAN OF MERIT CAPITAL ASSOCIATES, INC. DURING THE TIME THAT THE VIOLATIONS HAVE OCCURRED.

Stipulation and Consent

Monetary/Fine

$30,000.00

Cease and Desist/Injunction

NO DISCRETIONARY AUTHORITY IN ANY ACCOUNT OF ANY PERSON. IMMEDIATELY REPORT ALL COMPLAINTS AND/OR ACTIONS FILED DIRECTLY TO THE DEPARTMENT. (THESE STIPULATIONS ARE IN EFFECT FOR TWO YEARS) IN ADDITION, ALL FLORIDA BRANCHES OF MERIT CAPITAL AND THEIR INDEPENDENT CONTRACTORS WILL NOT ENGAGE IN "MARKET MAKING"

THE STATE OF FLORIDA ALLEGED OPERATION OF AN UNREGISTERED BRANCH, FAILURE TO SUPERVISE THE BRANCH, INCOMPLETE RECORD KEEPING AT THAT BRANCH, SALE OF UNREGISTERED SECURITIES AT THAT BRANCH. THE BRANCH WAS CLOSED AND ALL PERSONNEL TERMINATED EARLY IN 1998 VOULUNTARILY BY THE FIRM.** THE PRINCIPAL OF THE FIRM WAS NOT FOUND TO HAVE VIOLATED ANY INVESTMENT RELATED STATUES.

THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.

RESPONDENT MERIT CAPITAL ASSOCIATES, INC. AND RESPONDENT RUSSELL W. NEWTON MADE COMMISSION PAYMENTS OF APPROXIMATELY $167,500 TO INDIVIDUALS WHO WERE STATUTORILY DISQUALIFIED AND COULD NOT WORK IN THE SECURITIES INDUSTRY UNLESS AND UNITL EACH RECEIVED PERMISSION FROM THE NASD;RESPONDENT MEMBER PERMITTED REGISTERED REPRESENTATIVES OF A BRANCH OFFICE TO USE SALES SCRIPTS THAT WERE MATERIALLY MISLEADING IN THAT THEY CONTAINED EXAGGERATED AND UNWARRANTED CLAIMS AND OTHER REGISTERED REPRESENTATIVES USED LETTERHEADS AND BUSINESS CARDS WHICH DID NOT PROMINENTLY AND CLEARLY SET FORTH THE MEMBER'S NAME;FAILED TO DISCLOSE REQUIRED INFORMATION ON CONFIRMATIONS REGARDING THE PRICE OF THE TRANSACTION, THE CAPACITY OF THE FIRM, AND THE MARK-UPS OR MARK-DOWNS CHARGED TO EACH CUSTOMER IN VIOLATION OF SEC RULE 10B-10; REPORTED TO ACT TRANSACTIONS AS AGENCY CROSSES WHEN THEY SHOULD HAVE BEEN REPORTED AS PRINCIPAL TRADES; FAILED TO ESTABLISH AND MAINTAIN A SYSTEM TO SUPERVISE THE ACTIVITIES OF EACH REGISTERED REPRESENTATIVE AND ASSOCIATED PERSON REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITY LAWS, REGULATIONS, AND NASD RULES; RESPONDENT MEMBER ACTING THROUGH RESPONDENT NEWTON FAILED TO ESTABLISH AND MAINTAIN A SYSTEM TO SUPERVISE THE ACTIVITIES OF EACH REGISTERED REPRESENTATIVE AND ASSOCIATED PERSON REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS, REGULATIONS, AND NASD RULES, MORE SPECIFICALLY THE FIRM'S SUPERVISORY SYSTEM FAILED TO ADEQUATELY PROVIDE FOR SUPERVISION AND COMPLIANCE WITH THE REQUIREMENT THAT TRANSACTION-BASED COMPENSATION ONLY BE PAID TO PROPERLY ASSOCIATED AND REGISTERED PERSONS, DISCLOSURE OF REQUIRED INFORMATION TO CUSTOMERS ON CONFIRMATION OF TRANSACTIONS, RULES CONCERNING COMMUNICATIONS WITH THE PUBLIC, AND SUPERVISORY RESPONSIBILITIES CONCERNING REQUIRED INTERNAL INSPECTIONS OF BRANCH OFFICES AND OSJ(NASD RULES 1031,2110,2210(F), 2210(D)(1)(B), 2210(D)(2)(A),3010,6130(D)(6),6170, SEC RULES 10B-10 AND CFR 240.10B-10.

Acceptance, Waiver & Consent(AWC)

Monetary/Fine

$180,000.00

Censure

Suspension

REQUALIFICATION UNDERTAKING-MERIT CAPITAL SHALL SUBMIT TO THE NASD WITHIN 30 DAYS THE REPORT PREPARED BY THE INDEPENDENT CONSULTANT ALONG WITH A WRITTEN STATEMENT FROM THE FIRM SUMMARIZING EACH RECOMMENDATION MADE BY THE IC AND THE METHOD OF IMPLEMENTATION OF EACH RECOMMENDATION.

$180,000 FINE, J&S, PROVIDED THAT CONTEMPORANEOUSLY WITH THIS SETTLEMENT MERIT WILL MAKE PAYMENT OF $75,000 TO CONNECTICUT IN CONNECTION WITH SETTLEMENT OF RELATED MATTERS AND THE NASD WILL BE DEEMED PAID $75,000 OF THE $180,000 UPON PROOF OF PAYMENT TO CONN.

MR. NEWTON, CEO OF MERIT WAS HELD ULTIMATELY RESPONSIBLE FOR THESE ALLEGED VIOLATIONS WHICH WERE TECHNICAL IN NATURE. NO CLIENTS INCURRED ANY LOSSES, NOR WERE ANY CLIENTS HARMED IN ANY WAY BY THESE ALLEGED VIOLATIONS. THIS ISSUE WAS SETTLED IN ORDER TO AVOID THE OPTION OF EXTENDED LITAGATION.