Initiated By
FINRA
Allegations
NASD RULES 2110, 2310(A), 2330: A CUSTOMER INSTRUCTED CALLEJA TO OPEN ACCOUNTS AT HIS MEMBER FIRM THAT CORRESPONDED TO THE ACCOUNTS THAT THE CUSTOMER BELIEVED HE HELD AT ANOTHER MEMBER FIRM. CALLEJA AGREED TO DO SO AND REPRESENTED TO THE CUSTOMER THAT HE HAD TRANSFERRED THE ACCOUNTS TO HIS FIRM IN ACCORDANCE WITH THE CUSTOMER'S INSTRUCTIONS. HOWEVER, CALLEJA HAD ALREADY CLOSED SOME OF THE ACCOUNTS AT THE PRIOR FIRM AND DID NOT OPEN SIMILAR ACCOUNTS AT HIS FIRM. FROM 2004 TO APPROXIMATELY MARCH 2007, CALLEJA CONTINUED TO MAKE FALSE REPRESENTATIONS TO THE CUSTOMER THAT ALL THE ACCOUNTS EXISTED AND THAT CERTAIN TRADES AND TRANSFER OF FUNDS AND SECURITIES WERE EFFECTED IN THE ACCOUNTS THAT NO LONGER EXISTED. CALLEJA RECOMMENDED AND EFFECTED HUNDREDS OF SECURITIES TRANSACTIONS BETWEEN 2004 AND 2007 THAT WERE INCONSISTENT WITH THE CUSTOMER'S OBJECTIVES FOR HIS ACCOUNTS AND RISK TOLERANCE. ADDITIONALLY, IN APRIL 2007, CALLEJA RECOMMENDED THAT THE CUSTOMER OPEN A LOAN MANAGEMENT ACCOUNT (LMA) WITH THE BANK AFFILIATED WITH HIS FIRM. WITHOUT THE CUSTOMER'S KNOWLEDGE OR CONSENT, CALLEJA TRANSFERRED FUNDS FROM THE LMA TO THE CUSTOMER'S VARIOUS SECURITIES ACCOUNTS, INCLUDING ACCOUNTS WHICH CALLEJA OPENED TWO WEEKS PRIOR TO THE LMA APPLICATION AND FUNDED WITH NOMINAL AMOUNTS OF MONEY. BY JULY 2007, THE CUSTOMER'S LMA BALANCE WAS $531,863.11, ALL OF WHICH HAD BEEN TRANSFERRED TO THE ACCOUNTS THE CUSTOMER PLEDGED AS COLLATERAL. WITH THE PROCEEDS FROM THE LMA DEPOSITED INTO THE VARIOUS SECURITIES ACCOUNTS, CALLEJA RECOMMENDED AND EFFECTED NUMEROUS UNSUITABLE TRANSACTIONS IN THE CUSTOMER'S SECURITIES ACCOUNTS AT HIS FIRM. AT THE TIME THAT THE CUSTOMER TRANSFERRED HIS ACCOUNTS TO CALLEJA'S FIRM IN FEBRUARY 2004, THE CUSTOMER'S SECURITIES ACCOUNTS WERE OPENED AS FEE-BASED ACCOUNTS RATHER THAN COMMISSION-BASED ACCOUNTS AND CALLEJA RECEIVED A PERCENTAGE OF THE FEES CHARGED TO THE CUSTOMER'S ACCOUNTS. CALLEJA FALSELY TOLD THE CUSTOMER THAT HE WAS NO LONGER RECEIVING ANY COMPENSATION RELATED TO SERVICING THE CUSTOMER'S SECURITIES ACCOUNTS. THE CUSTOMER TOLD CALLEJA THAT HE WANTED HIM TO RECEIVE COMPENSATION SO THAT CALLEJA WOULD CLOSELY MONITOR HIS ACCOUNTS AND PROVIDE QUALITY CUSTOMER SERVICE. THE CUSTOMER AGREED TO ALLOW CALLEJA TO WITHDRAW FUNDS EACH WEEK FROM ONE OF THE CUSTOMER'S ACCOUNTS USING AN ATM CARD LINKED TO THAT ACCOUNT, BASED ON THE FALSE PREMISE THAT THE FUNDS WOULD COMPENSATE CALLEJA FOR HIS SERVICES. CALLEJA USED THE ATM ON 115 OCCASIONS AND WITHDREW $67,300 FOR HIS PERSONAL USE. WITHOUT THE KNOWLEDGE OR CONSENT OF THE CUSTOMER, CALLEJA FUNDED THE ACCOUNT TO MAKE THESE WITHDRAWALS BY TRANSFERRING MONEY FROM THE CUSTOMER'S OTHER SECURITIES ACCOUNTS AND FROM THE LMA, THEREBY INCURRING INTEREST EXPENSES FOR THE CUSTOMER IN ADDITION TO THE MONEY BEING WITHDRAWN. ALTHOUGH THE CUSTOMER TOLD CALLEJA TO STOP MAKING WITHDRAWALS FROM HIS ACCOUNTS, CALLEJA CONTINUED TO MAKE SUCH WITHDRAWALS UNTIL APRIL 2007, WHEN THE CUSTOMER TOLD HIM THAT HE WOULD CONTACT CALLEJA'S SUPERVISOR ABOUT THE WITHDRAWALS. CALLEJA BEGAN TO REPAY THE CUSTOMER THE MONEY HE HAD WITHDRAWN FROM THE ACCOUNT. SO THAT HIS FIRM WOULD NOT BECOME AWARE OF ANY SUCH PAYMENTS TO THE CUSTOMER, CALLEJA INSTRUCTED THE CUSTOMER TO OPEN A BANK ACCOUNT AT ANOTHER BANK WHERE CALLEJA WOULD DEPOSIT THE REPAYMENT. IN ADDITION, CALLEJA WIRED $45,000 TO ONE OF THE CUSTOMER'S ACCOUNTS FROM AN ACCOUNT HE CONTROLLED, WHICH DID NOT LIST CALLEJA'S NAME BECAUSE HE DID NOT WANT HIS FIRM TO LEARN THAT HE WAS WIRING MONEY TO A FIRM CUSTOMER. ALTHOUGH CALLEJA REPAID THE FUNDS TO THE CUSTOMER, AT THE TIME HE TOOK THE MONEY, HE HAD NO INTENTION OF REPAYING THE CUSTOMER AND FALSELY REPRESENTED TO HIM THAT THE MONEY WAS FOR SERVICES RENDERED. IN ADDITION, CALLEJA EFFECTED SECURITIES TRANSACTIONS IN THE CUSTOMER'S ACCOUNT WITHOUT THE KNOWLEDGE OR AUTHORIZATION OF THE CUSTOMER.
Resolution
Acceptance, Waiver & Consent(AWC)
Bar
Bar (Permanent)
Registration Capacities Affected
All Capacities
Duration
Indefinite
Start Date
9/5/2012
Sanctions
Censure
Regulator Statement
WITHOUT ADMITTING OR DENYING THE FINDINGS, CALLEJA CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE HE IS CENSURED AND BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY.
