FINRA

Respondent Birkelbach failed to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance.

Letter

Suspension

All capacities

N/A

1/28/2021

2/24/2021

All capacities

n/a

12/22/2022

8/30/2023

Pursuant to Article VI, Section 3 of FINRA By-Laws, and FINRA Rule 9554, Respondent Birkelbach is suspended on January 28, 2021 for failure to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance. Suspension lifted on February 24, 2021. Pursuant to Article VI, Section 3 of FINRA By-Laws, and FINRA Rule 9554, on December 22, 2022, the suspension of Respondent Birkelbach is reinstated for failure to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance. Suspension lifted on August 30, 2023.

Carl Max Birkelbach was named in a customer complaint that asserted the following causes of action: Churning in Violation of § 10(b) of the Securities Exchange Act and Rule 10b-5; Unsuitability in Violation of § 10(b) of the Securities Exchange Act and Rule 10b-5; Violation of the Illinois Securities Law of 1953; Violation of the Illinois Consumer Fraud and Deceptive Business Practices Act; Common Law Fraud; Breach of Fiduciary Duty; Negligent Supervision; Negligent Hiring; Unjust Enrichment; and Violation of FINRA Rules

$8,300,000.00

The award against Birkelbach was stayed through the United States Bankruptcy Court for the Northern District of Illinois, Case #23-06133.

FINRA

WILLFULLY VIOLATED SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934, SEC RULE 10B-5, THEREUNDER; VIOLATED FINRA RULES 2010, 2360, NASD RULE 2310 - CARL BIRKELBACH ENGAGED IN EXCESSIVE AND UNSUITABLE TRADING IN FIVE CUSTOMER ACCOUNTS PURSUANT TO HIS APPROVED DISCRETIONARY AUTHORITY IN THE ACCOUNTS. THE TRADING HAD SUCH EXTRAORDINARILY HIGH TURNOVER AND COST-TO-EQUITY RATIOS THAT IT CONSTITUTED FRAUD IN VIOLATION OF SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 10B-5 THEREUNDER. THE ACCOUNTS WERE EXCESSIVE AND UNSUITABLE FOR THE CUSTOMERS BASED ON THEIR INVESTMENT OBJECTIVES, FINANCIAL SITUATION AND NEEDS, AND LACK OF KNOWLEDGE AND EXPERIENCE NECESSARY TO UNDERSTAND THE RISKS ASSOCIATED WITH THE RECOMMENDED TRANSACTIONS. THE CUSTOMERS' ACCOUNTS WOULD HAVE HAD TO EARN ANYWHERE FROM 22.97% TO 43.67% JUST TO BREAK EVEN.

Decision & Order of Offer of Settlement

Suspension

ALL CAPACITIES

TWO YEARS

7/15/2013

7/14/2015

WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, BIRKELBACH CONSENTED TO THE DESCRIBED SANCTION AND TO THE ENTRY OF FINDINGS; THEREFORE HE IS SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ALL CAPACITIES FOR TWO YEARS. RESPONDENT HAS SUBMITTED A SWORN FINANCIAL STATEMENT AND DEMONSTRATED AN INABILITY TO PAY. IN LIGHT OF THE FINANCIAL STATUS OF RESPONDENT, NO MONETARY SANCTIONS HAVE BEEN IMPOSED. THE SUSPENSION IS IN EFFECT FROM JULY 15, 2013, THROUGH JULY 14 2015.

FINRA

RESPONDENT BIRKELBACH FAILED TO PAY FINES AND/OR COSTS OF $15,000 IN FINRA CASE #2009016354101.

LETTER

Revocation

PURSUANT TO FINRA RULE 8320, RESPONDENT BIRKELBACH'S FINRA REGISTRATION IS REVOKED FOR FAILURE TO PAY FINES AND/OR COSTS.

FINRA

FINRA BY-LAWS ARTICLE IV, SECTION 1, ARTICLE V, SECTION 2, FINRA RULE 2010, NASD RULES 2110, 3010, 3070(A), 3070(B), INTERPRETATIVE MATERIAL 1000-1 - A MEMBER FIRM, ACTING THROUGH ITS CHIEF COMPLIANCE OFFICER/CHIEF EXECUTIVE OFFICER, CARL M. BIRKELBACH, FAILED TO ADEQUATELY SUPERVISE TO ENSURE THE TIMELY REPORTING OF CUSTOMER SETTLEMENTS AS REQUIRED BY NASD RULE 3070 AND THE FINRA BY-LAWS. BIRKELBACH RELIED UPON AN UNREGISTERED OUTSIDE CONSULTANT TO PROCESS RULE 3070 FILINGS AND AMENDMENTS TO FORMS BD AND U4, GAVE THE CONSULTANT INADEQUATE INSTRUCTIONS AND GUIDANCE AND DID NOT OTHERWISE ENSURE THAT TIMELY AND COMPLETE FILINGS AND AMENDMENTS WERE MADE. BIRKELBACH NEGLECTED TO HAVE THE CONSULTANT PROCESS DISCLOSURES EVEN AFTER FINRA ADVISED HIM OF THE DEFICIENCIES. BIRKELBACH FAILED TO TIMELY FILE 3070 DISCLOSURES REGARDING CUSTOMER SETTLEMENTS AND TO AMEND FORMS BD AND FORMS U4 TO DISCLOSE THIS INFORMATION. BIRKELBACH WILLFULLY FAILED TO TIMELY DISCLOSE A SETTLEMENT WITH A CUSTOMER ON HIS FORM U4.

Decision & Order of Offer of Settlement

Censure

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

$25,000.00

Requalification

Suspension

ANY CAPACITY

30 DAYS

9/19/2011

10/18/2011

ANY PRINCIPAL CAPACITY

90 DAYS

9/19/2011

12/17/2011

WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, BIRKELBACH CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, HE IS CENSURED, FINED $25,000, $10,000 OF WHICH IS JOINT AND SEVERAL, SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR 30 DAYS, SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY PRINCIPAL CAPACITY FOR 90 DAYS AND REQUIRED TO REQUALIFY AS A PRINCIPAL. THE FINE IS DUE AND PAYABLE EITHER IMMEDIATELY UPON REASSOCIATION WITH A MEMBER FIRM FOLLOWING THE 30-DAY SUSPENSION OR PRIOR TO ANY REQUEST FOR RELIEF FROM ANY STATUTORY DISQUALIFICATION RESULTING FROM THIS OR ANY OTHER EVENT OR PROCEEDING, WHICHEVER IS EARLIER. BIRKELBACH'S FAILURE TO TIMELY DISCLOSE A SETTLEMENT WITH A CUSTOMER ON HIS FORM U4 WAS NOT FOUND TO BE WILLFUL. THE SUSPENSION IN ANY CAPACITY IS IN EFFECT FROM SEPTEMBER 19, 2011 THROUGH OCTOBER 18, 2011. THE SUSPENSION IN ANY PRINCIPAL CAPACITY IS IN EFFECT FROM SEPTEMBER 19, 2011 THROUGH DECEMBER 17, 2011. THE $10,000 JOINT AND SEVERAL FINE WAS PAID IN FULL ON SEPTEMBER 1, 2011.

RESPONDENT ENTERED INTO SETTLEMENT FOR COST OF CONTINUED LITIGATION.

FINRA

NASD RULES 2110, 2860(B), 2860(B)(20), 3010 - BIRKELBACH, ACTING ON BEHALF OF HIS MEMBER FIRM, FAILED TO ESTABLISH AND MAINTAIN ADEQUATE WRITTEN SUPERVISORY PROCEDURES TO ENSURE AN EMPLOYEE'S ACTIVITIES RELATED TO OPTIONS TRADING WERE IN COMPLIANCE WITH SECURITIES LAWS AND REGULATIONS AND FAILED TO HAVE WRITTEN SUPERVISORY PROCEDURES WHICH PROVIDED THE CIRCUMSTANCES UNDER WHICH A REGISTERED REPRESENTATIVE WOULD BE SUBJECT TO SPECIAL SUPERVISION, AMONG OTHER THINGS, THE PRESENCE OF A DISCIPLINARY HISTORY OR REGULATORY ACTION. THE COMPLAINT ALLEGES THAT BIRKELBACH FAILED TO REASONABLY SUPERVISE A REPRESENTATIVE'S HANDLING OF CUSTOMERS' ACCOUNTS AND FAILED TO ADEQUATELY REVIEW DOCUMENTS TO PREVENT MISLEADING DOCUMENTS FROM BEING SENT TO CUSTOMERS.

Decision

Bar (Permanent)

All Capacities

Indefinite

10/20/2011

Monetary Penalty other than Fines

$13,013.97

EXTENDED PANEL DECISION RENDERED MAY 6, 2010 WHEREIN BIRKELBACH IS FINED $25,000, SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER FROM ACTING AS A GENERAL SECURITIES PRINCIPAL OR OPTIONS PRINCIPAL FOR SIX MONTHS, ORDERED TO REQUALIFY BEFORE SERVING IN THOSE PRINCIPAL CAPACITIES AND SHALL PAY COSTS OF $9,503.17, JOINTLY AND SEVERALLY. ON MAY 28, 2010, BIRKELBACH APPEALED TO THE NATIONAL ADJUDICATORY COUNCIL (NAC). NAC DECISION RENDERED OCTOBER 20, 2011 WHEREIN THE FINDINGS ARE AFFIRMED AND THE SANCTIONS IMPOSED INCREASED; THEREFORE, BIRKELBACH IS BARRED IN ALL CAPACITIES EFFECTIVE IMMEDIATELY WITH ISSUANCE OF THE NAC DECISION AND ORDERED TO PAY $9,503.17, JOINTLY AND SEVERALLY, IN HEARING COSTS AND $3,510.80 IN APPEAL COSTS, JOINTLY AND SEVERALLY. ON OCTOBER 28, 2011, BIRKELBACH APPEALED TO THE SEC. FINRA REPRESENTED IN ITS BRIEF TO THE SEC OPPOSING THE STAY OF THE BAR REQUESTED BY BIRKELBACH THAT FINRA WILL NOT MAKE THE BAR EFFECTIVE UNTIL THE SEC DECIDES THE MOTION FOR THE STAY. ON NOVEMBER 4, 2011, THE SEC DENIED THE REQUEST FOR A STAY. THE BAR IS EFFECTIVE AS OF NOVEMBER 4, 2011. SEC ADMIN RELEASE 34-69923, JULY 2, 2013: THE SEC ORDERED THAT THE DISCIPLINARY ACTION TAKEN AND THE COSTS IMPOSED BY FINRA ARE SUSTAINED. ON AUGUST 28, 2013, BIRKELBACH PETITIONED THE U.S. COURT OF APPEALS FOR THE SEVENTH CIRCUIT FOR REVIEW OF THE SEC'S ORDER. ON MAY 2, 2014, THE COURT OF APPEALS DENIED BIRKELBACH'S PETITION FOR REVIEW OF THE SEC ORDER. THE DECISION BECAME FINAL JULY 31, 2014. SEC Release- May 8, 2017: the United States District Court for the Northern District of Illinois -The U.S. Securities and Exchange Commission filed a suit in Illinois federal court seeking nearly $600,000 in disgorgement and another $13,000 in costs from a 2013 SEC decision relating to this FINRA case. The SEC asked the court for an order enforcing its monetary order so that FINRA can collect on the disgorgement and costs, none of which has been paid to date, according to the lawsuit.

EXTENDED PANEL DECISION RENDERED MAY 6, 2010 WHEREIN BIRKELBACH IS FINED $25,000, SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER FROM ACTING AS A GENERAL SECURITIES PRINCIPAL OR OPTIONS PRINCIPAL FOR SIX MONTHS, ORDERED TO REQUALIFY BEFORE SERVING IN THOSE PRINCIPAL CAPACITIES AND SHALL PAY COSTS OF $9,503.17, JOINTLY AND SEVERALLY. IF THIS DECISION BECOMES FINRA'S FINAL ACTION IN THIS MATTER, THE SUSPENSION SHALL BEGIN AT THE OPENING OF BUSINESS ON JULY 6, 2010 AND END AT THE CLOSE OF BUSINESS JANUARY 5, 2011. IF NO FURTHER ACTION, DECISION IS FINAL JUNE 23, 2010. APPEALED TO THE NAC ON MAY 28, 2010.

ILLINOIS SECURITIES DEPARTMENT

RESPONDENTS CARL BIRKELBACH AND BIRKELBACH INVESTMENT SECRITIES, INC. ARE SUBJECT TO REVOCATION BASED UPON UNAUTHORIZED TRADING, UNSUITABLE TRANSACTIONS AND EXCESSIVE TRADING INVOLVING ACCOUNTS OF ILLINOIS RESIDENTS AND CHURNING CUSTOMER ACCOUNTS.

Consent

Disgorgement/Restitution

Censure

Suspension

A CONSENT ORDER OF SUSPENSION AND RESTITUTION WAS ISSUED, APRIL 2, 1999. CARL BIRKELBACH IS SUSPENDED FOR A PERIOD OF SIX MONTHS. SUSPENSION WILL BE LIFTED AFTER SIX MONTHS, HE WILL HAVE TO PASS SERIES 7 EXAM. BIRLELBACH INVESTMENT SECURITIES AND CARL BIRKELBACH ARE CENSURED. BIRKELBACH INVESTMENT SECURITIES, INC. IS REQUIRED TO NAME AN ADDITIONAL PRINCIPAL QUALIFIED INDIVIDUAL, FOR A PERIOD OF TWO YEARS. CARL BIRKELBACH AND BIRKELBACH INVESTMENT SECURITIES ARE REQUIRED TO PAY $50,000 TO BE DISTRIBUTED TO FIVE ACCOUNT HOLDERS OVER A THREE MONTH PERIOD.

SEE ATTACHED.

UNAUTHORIZED TRADES AND "CHURNING" IN CUSTOMER ACCOUNT CLAIMANT REQUESTED DAMAGES OF $6940.00

$6,940.00

$500.00

RESPONDENT FOUND LIABLE $500.00 Not Provided