FINRA

NASD RULE 2110: COLES EFFECTED THREE SET OF TRANSACTIONS BY CAUSING TEN JOURNAL ENTRY TRANSFERS OF CASH AND/OR SECURITIES BETWEEN CUSTOMER ACCOUNTS WITHOUT EMPLOYING HIS MEMBER FIRM'S TRADING SYSTEM, ALLOWING THE CUSTOMERS TO EXCHANGE CASH OR SECURITIES FOR SECURITIES WITHOUT UTILIZING PROPER FIRM ORDER-ENTRY PROCEDURES FOR THE PURCHASE OR SALE OF SECURITIES BY CUSTOMERS, CAUSING HIS FIRM TO ISSUE INACCURATE STATE AND FEDERAL TAX REPORTING DOCUMENTS TO CUSTOMERS, AND CAUSING OPERATIONS ERRORS, IN CONNECTION WITH TWO OF THE TRANSACTIONS, WHICH RESULTED IN CUSTOMER HARM. THE FIRM DID NOT PERFORM A SALES SUPERVISORY REVIEW AT THE TIME THE TRANSACTIONS OCCURRED BECAUSE THEY DID NOT APPEAR ON THE FIRM'S SALES AND PURCHASE BLOTTER, WHICH IS THE FIRM'S TOOL FOR INITIAL SUPERVISORY REVIEW, BUT RATHER, THE TRANSACTIONS APPEARED ON THE FIRM'S JOURNAL ENTRY BLOTTER, WHICH WAS NOT USED FOR SALES PRACTICE REVIEW. IN ADDITION, THE TRANSACTIONS WERE NOT REPORTED TO THE MARKETPLACE IN THE ORDINARY COURSE OF THE FIRM'S BUSINESS.

Acceptance, Waiver & Consent(AWC)

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

$5,000.00

Suspension

ALL CAPACITIES

ONE MONTH

8/16/2010

9/15/2010

WITHOUT ADMITTING OR DENYING THE FINDINGS, COLES CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS, THEREFORE HE IS FINED $5,000 AND SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR ONE MONTH. THE SUSPENSION IS IN EFFECT FROM AUGUST 16, 2010, THROUGH SEPTEMBER 15, 2010.

COMPLAINT ALLEGED MISREPRESENTATIONS DURING THE RECOMMENDATION OF HFLIX (PURCHASED ON MARCH 29, 2007) AND ALLEGED THE SALE OF HFLIX ON SEPTEMBER 12, 2007 AND THE PURCHASE OF EATON VANCE LTD INCOME AUCTIN RATE PRD ON SEPTEMBER 17, 2007 WERE UNAUTHORIZED.

$30,000.00

$20,000.00

CLIENTS DEPOSITED $900,000 INTO THEIR INVESTMENT ACCOUNT WITH A 18 MONTH TO 2 YEAR TIME FRAME. CLIENT RECEIVED PROSPECTUS AND MONTHLY STATEMENTS. CLIENTS WERE GOING TO USE THE MONEY TO RENOVATE THEIR PROPERTY. UNFORTUNATELY, DO TO HIGH COST OF MATERIALS, CLIENTS WANTED TO HOLD OFF INDEFINITELY ON THE RENOVATION. IN THE FIRST MEETING, AS PER THE COMPLAINT STATES, CLIENT WAS OFFERED A MONEY MARKET POSITION OR FLOATING RATE MUTUAL FUND. CLIENT CHOSE TO USE FLOATING RATE MUTUAL FUND WITH FULL KNOWLEDGE OF RISK AND TIMEFRAMES FOR THE PORTFOLIO. AT NO TIME DID I EVER STATE THAT FLOATING RATE MUTUAL FUNDS WERE PRINCIPAL PROTECTED. CLIENT ACKNOWLEDGES THAT SHE WAS OFFERED A MONEY MARKET ACCOUNT. SEPTEMBER 12 DURING A CONVERSATION AT A SEMINAR, CLIENT SAID THEY WERE POSSIBLY NEEDING THE MONEY IN SIX MONTHS. IT WAS INVESTED FOR A LONGER TIME HORIZON UNTIL THE CLIENT MENTIONED THE POSSIBLE NEED FOR THE MONEY. THE LICENSED BANKER WAS PRESENT FOR THE CONVERSATION. CLIENTS WERE EXPLAINED THE NEED TO REALLOCATE THEIR PORTFOLIO AND A LOSS WOULD BE INCURRED. CLIENTS UNDERSTOOD AND AUTHORIZED THE MOVE TO AUCTION RATE PREFERRED SECURITIES. CLIENT AGREED TO THE TRADE. CLIENT WAS MAILED A CONFIRMATION OF THE TRANSACTION ON SEPTEMBER 13, 2007 DURING AN INSURANCE REVIEW ON SEPTEMBER 13, 2007 I CONFIRMED WITH CLIENT TIMEFRAMES FOR THE MONEY. I CONFIRMED THE OLD POSITION WAS NOT PROPER FOR A SHORT TERM TIME FRAME. IN THIS FACE TO FACE MEETING, CLIENT CONFIRMED THE MOVE INTO A SAFER POSITION WAS PROPER. CLIENT MADE NO MENTION OF BEING UNHAPPY UNTIL SHE LOOKED AT HER STATEMENT THE NEXT MONTH AFTER WE MOVED OUT OF THE HIGHER RISK POSITION. CLIENT WAS UPSET THAT THE HIGHER RISK POSITION HAD MOVED UP WHILE HER EXISTING POSITION HAD NOT MOVED AT ALL.

CLIENT ALLEGED MISREPRESENTATION RELATING TO A 6/13/2006 MUTUAL FUND INVESTMENT AND ALLEGED AN UNAUTHORIZED MUTUAL FUND PURCHASE ON JULY 30, 2007. THE FIRM HAS MADE A GOOD FAITH DETERMINATION THAT THE DAMAGES FROM THE ALLEGED CONDUCT WOULD NOT BE LESS THAN $5,000.

$7,500.00

CLIENT HAD POSITION IN HIS ACCOUNT FOR THIRTEEN MONTHS. CLIENT RECEIVED HIS PROSPECTUS AND RECEIVED MONTHLY STATEMENTS. CLIENT TOOK MONEY OUT OF HIS HOUSE AND INVESTED $300,000 IN A MEXICO LAND DEAL. THE DEAL TURNED INTO SCAM AND CLIENT WAS UNABLE TO RECEIVE BACK THE PROCEEDS FROM HIS INVESTMENTS. CLIENT WANTED TO FLIP THE MONEY IN HIS MEXICAN LAND DEAL AND PAY OFF HIS HOME LOAN AND INVEST THE PROCEEDS THAT WERE LEFT OVER. CLIENT WAS VERY UPSET ABOUT LOSING THE MONEY IN THE MEXICAN LAND DEAL. CLIENT CASHED OUT OF HIS INVESTMENT ACCOUNT TO PAY OFF THE HOME EQUITY LINE. THE ORIGINAL INVESTMENT WAS TO USE FOR LONG TERM INVESTMENTS FOR RETIREMENT. CLIENT NEVER SAID TO MOVE HIS MONEY INTO A PRINCIPAL PROTECTED ACCOUNT. CLIENT WANTED OUT OF THE EQUITY MARKETS BUT WANTED BETTER RETURNS THAN A MONEY MARKET. CLIENT CONTINUED TO HAVE LONG TERM HORIZON FOR THE PORTFOLIO. CLIENT WAS A TECHNICAL TRADER IN HIS DAY TRADING ACCOUNT. CLIENT HAD TRADED EQUITY AND FIXED INCOME POSITIONS IN HIS FULL SERVICE ACCOUNT. CLIENT IS VERY AWARE OF HOW THE MARKETS WORK BOTH ON THE EQUITY AND FIXED INCOME SIDE OF THE MARKETS. CLIENT SAW ON TV WHAT HE PERCEIVED AS A TOTAL MELTDOWN IN THE CREDIT MARKETS, HE ASKED TO GO INTO SHORT TERM PAPER WITH HEAVY GOVERNMENT AND HIGH QUALITY PAPER IN IT. CLIENT WAS PROVIDED A PROSPECTUS ON THE SHORT TERM BOND PORTFOLIO; HOWEVER, WITH CONTINUED VOLATILITY IN THE SHORT TERM PAPER MARKET, CLIENT WANTED TO GET OUT. CLIENT PERCEIVED THAT NOTHING WAS SAFE. THE CLIENT CLOSED OUT HIS ENTIRE ACCOUNT AND PAID OFF WHAT HE OWED ON THE EQUITY LINE HE HAD LOST IN THE MEXICAN LAND SCHEME. CLIENT IS GRASPING AT DIFFERENT WAYS TO ASSIST IN RECOVERING HIS THREE HUNDRED THOUSAND HE LOST IN THE MEXICO LAND SCHEME. CLIENT SAYS MY INSTRUCTIONS TO SELL HIS FLOATING MUTUAL FUND ACCOUNT CAME FROM THE "INVESTMENT DIVISION" OF WELLS FARGO. WE DO NOT HAVE A "INVESTMENT DIVISION" THAT PROVIDES BUY/SELL RECOMMENDATIONS.

COMPLAINT RECEIVED FROM CLIENT'S ATTORNEY STATES THAT "IT HAS COME TO OUR ATTENTION THAT SUBSTANTIAL FUNDS AND SECURITIES MAY HAVE BEEN MISAPPROPRIATED AND JOURNALLED OUT OF THE CLIENT'S ACCOUNTS INTO THE ACCOUNTS OF OTHER UNKNOWN INDIVIDUALS."

$80,000.00

I WAS NOT A PARTY TO THE SETTLEMENT AND DID NOT CONTRIBUTE TO THE SETTLEMENT IN ANY WAY. THE SETTLEMENT WAS MOTIVATED BY WELLS FARGO'S YEAR-END TAX CONSIDERATIONS AND DOES NOT, IN MY OPINION, REFLECT ANY WRONG DOING BY ME. MY POSITION REGARDING THE COMPLAINT IS AS FOLLOWS I DENY ALL ALLEGATIONS. CLIENT AUTHORIZED FUNDS TO BE JOURNALLED OUT AND SECURITIES WERE UNQUESTIONABLY DELIVERED TO ACCOUNT IN CONSIDERATION FOR FUNDS. A FEW MONTHS LATER, CLIENT COMPLAINED ABOUT THE PERFORMANCE OF HIS ACCOUNT. CLIENT DID NOT AT THIS TIME COMPLAIN ABOUT ANY UNAUTHORIZED POSITION IN HIS ACCOUNT. NO PROFIT OR COMMISSION WAS MADE FROM THIS JOURNAL. CLIENT HAD NO NEGATIVE REPERCUSSIONS FROM THESE TRANSACTIONS.