Initiated By
FINRA
Allegations
NASD RULES 2110, 2310: TAKING ADVANTAGE OF HIS DISCRETIONARY AUTHORITY OVER CUSTOMER ACCOUNTS MACKE ENGAGED IN EXCESSIVE TRADING AND USE OF MARGIN IN THOSE ACCOUNTS. IN DOING SO, MACKE CAUSED THESE CUSTOMERS TO PAY EXCESSIVE MARGIN INTEREST, COMMISSIONS AND FEES; MACKE WAS THE BROKER OF RECORD FOR THESE ACCOUNTS. THESE CUSTOMERS WERE AN ELDERLY INDIVIDUAL LIVING IN A NURSING HOME WHO USED MONEY FROM THE BROKERAGE ACCOUNT TO PAY HEALTH CARE AND LIVING EXPENSES, AND THE OTHER CUSTOMERS WERE RETIRED INDIVIDUALS WHO USED MONEY FROM THEIR BROKERAGE ACCOUNT TO HELP PAY THEIR LIVING EXPENSES. THE ELDERLY CUSTOMER REQUESTED AND RECEIVED APPROVAL FOR THE USE OF MARGIN ON THE ACCOUNT WHEN OPENING THE ACCOUNT, AND THE RETIRED CUSTOMERS REQUESTED AND RECEIVED APPROVAL FOR THE USE OF MARGIN ON THEIR ACCOUNT SEVERAL MONTHS AFTER OPENING THE ACCOUNT; HOWEVER, THESE CUSTOMERS GAVE MACKE AUTHORITY OVER THEIR ACCOUNTS IN WRITING TO PURCHASE ONE STOCK POSITION A DAY AND TO SELL ANY POSITION AT ANY TIME; THIS WRITTEN DISCRETIONARY AUTHORITY WAS APPROVED BY MACKE'S SUPERVISOR. MACKE'S SUPERVISOR REVOKED THE APPROVAL FOR THE WRITTEN DISCRETIONARY AUTHORITY FOR THE CUSTOMERS' ACCOUNTS BECAUSE THE SUPERVISOR WAS UNCOMFORTABLE WITH THE LOSSES IN THESE ACCOUNTS. THE AMOUNT OF TRADING IN THE ACCOUNTS WAS INCONSISTENT WITH THE CUSTOMERS' FINANCIAL CIRCUMSTANCES AND INVESTMENT OBJECTIVES. IN LIGHT OF THE CUSTOMERS' EXPERIENCE, INVESTMENT OBJECTIVES, RISK TOLERANCE, AND FINANCIAL RESOURCES, THIS VOLUME OF TRADING WAS EXCESSIVE AND UNSUITABLE FOR THE CUSTOMERS. THE CUSTOMERS WERE UNABLE TO EVALUATE MACKE'S RECOMMENDATIONS AND TRADING STRATEGY, DID NOT UNDERSTAND THE USE OF MARGIN, AND WERE UNABLE TO EXERCISE INDEPENDENT JUDGMENT CONCERNING THE TRANSACTIONS IN THEIR ACCOUNTS; THE CUSTOMERS TRUSTED MACKE COMPLETELY TO MAKE AND EXECUTE RECOMMENDATIONS IN THEIR ACCOUNTS.
Resolution
Decision & Order of Offer of Settlement
Sanctions
Suspension
Registration Capacities Affected
ANY CAPACITY
Duration
TWO MONTHS
Start Date
5/7/2012
End Date
7/6/2012
Regulator Statement
WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, MACKE CONSENTED TO THE DESCRIBED SANCTION AND TO THE ENTRY OF FINDINGS; THEREFORE HE IS SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR TWO MONTHS FOR VIOLATING NASD CONDUCT RULES 2310 AND 2110. IN LIGHT OF THE FINANCIAL STATUS OF MACKE, NO MONETARY SANCTIONS HAVE BEEN IMPOSED. MACKE ENGAGED IN EXCESSIVE TRADING AND USE OF MARGIN IN CUSTOMERS' ACCOUNTS BY TAKING ADVANTAGE OF HIS DISCRETIONARY AUTHORITY OVER THE CUSTOMERS' ACCOUNTS. IN DOING SO, MACKE CAUSED THESE CUSTOMERS TO PAY EXCESSIVE MARGIN INTEREST, COMMISSIONS AND FEES. MACKE WAS THE BROKER OF RECORD FOR THESE ACCOUNTS. THESE CUSTOMERS RECEIVED APPROVAL FOR THE USE OF MARGIN ON THEIR ACCOUNTS, BUT THE CUSTOMERS GAVE MACKE AUTHORITY OVER THEIR ACCOUNTS IN WRITING TO PURCHASE ONE STOCK POSITION A DAY, WITH THIS PERMISSION BEING LIMITED TO THE LESSER OF 1,000 SHARES OR $50,000, AND TO SELL ANY POSITIONS AT ANY TIME. MACKE'S SUPERVISOR APPROVED THE WRITTEN DISCRETIONARY AUTHORITY. BEYOND HOLDING DISCRETIONARY AUTHORITY OVER THE ACCOUNTS, MACKE ACTUALLY CONTROLLED THE TRADING IN THE ACCOUNTS AND THE CUSTOMERS TRUSTED MACKE COMPLETELY TO MAKE AND EXECUTE RECOMMENDATIONS IN THEIR ACCOUNTS. FOR ONE OF THE ACCOUNTS, WHILE CONTROLLING THAT ACCOUNT; MACKE RECOMMENDED AND EFFECTED SEVERAL STOCK TRANSACTIONS IN THE ACCOUNT, WITH TOTAL PURCHASES OF $2,275,730.99. MANY OF THE STOCK PURCHASES WERE MADE USING MARGIN. DURING THIS TIME PERIOD, THE ACCOUNT LOST $52,905.21 IN VALUE, WITH THE CUSTOMERS PAYING $50,117.18 IN MARGIN INTEREST, FEES AND DISCOUNTED COMMISSIONS. THE ACCOUNT OF THE OTHER CUSTOMERS, WHILE CONTROLLING THAT ACCOUNT; MACKE RECOMMENDED AND EFFECTED SEVERAL STOCK TRANSACTIONS IN THE ACCOUNT, WITH TOTAL PURCHASES OF $900,433.11. MANY OF THE STOCK PURCHASES WERE MADE USING MARGIN. DURING THIS TIME PERIOD, THE ACCOUNT BALANCE DROPPED FROM $118,422.62 TO $95,741.36. THE CUSTOMERS PAID $32,403.32 IN MARGIN INTEREST, FEES AND DISCOUNTED COMMISSIONS. THESE VOLUMES OF TRADING WERE EXCESSIVE AND UNSUITABLE FOR THE CUSTOMERS. THE AMOUNT OF TRADING IN THE ACCOUNTS WAS INCONSISTENT WITH THE CUSTOMERS' FINANCIAL CIRCUMSTANCES AND INVESTMENT OBJECTIVES. THE SUSPENSION IS IN EFFECT FROM MAY 7, 2012, THROUGH JULY 6, 2012.
Broker Comment
THIS WAS NOT A CUSTOMER COMPLAINT, IN FACT ONE OF THE CUSTOMERS DEFENDED MY ACTIONS & REFUSED TO FILE A COMPLAINT WHEN ASKED BY FINRA. FINRA DID ACKNOWLEDGE THE DISCOUNTED COMMISSIONS & REMOVED FROM THE COMPLAINT INEXPERIENCE & UNEDUCATED WHEN DESCRIBING MY CLIENTS.
