UNITED STATES SECURITIES AND EXCHANGE COMMISSION

SEC Admin Release 34-81743, September 28, 2017: The Securities and Exchange Commission (Commission) deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act) against Demitrios Hallas (Hallas). On September 27, 2017, a final judgment was entered by default against Hallas, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in the civil action entitled Securities and Exchange Commission v. Demitrios Hallas, Civil Action Number 17-CV-02999, in the United States District Court for the Southern District of New York. The Commission's complaint alleged that, from March 2014 to May 2016, Hallas violated the antifraud provisions of the federal securities laws in several different ways. First, the complaint alleged that Hallas purchased and sold daily leveraged Exchange-Traded Funds and Notes (ETFs and ETNs) in his customers' accounts, knowingly or recklessly disregarding that these products were unsuitable for such customers. The complaint alleged that despite his customers' lack of sophistication and knowledge concerning daily leveraged ETFs and ETNs and their risks, Hallas purchased and sold approximately 179 daily leveraged ETF and ETN positions in their accounts. Second, the complaint alleged that Hallas had no reasonable basis for recommending daily leveraged ETFs and ETNs. The complaint alleged that Hallas did not conduct adequate due diligence on the products; did not adequately understand how the products worked or the risks involved in purchasing and selling them (including the risks inherent in holding daily leveraged ETF and ETN positions open for periods greater than one day); and, had no basis to believe that the products were suitable for his customers. Third, the complaint alleged that Hallas misappropriated $170,750 from one of his customers, a truck driver with no trading or finance experience and no retirement resources outside of the funds that he provided to Hallas. The complaint alleged that the customer transferred funds to Hallas with the understanding that Hallas would make investments on his behalf, but that instead, Hallas spent the customer's funds on personal expenditures and concealed that fact from the customer.

Order

Bar (Permanent)

any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or NRSRO

Indefinite

5/17/2018

participating in an offering of penny stock.

Indefinite

5/17/2018

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

SEC Press Release 2017-85, April 25, 2017: The Securities and Exchange Commission charged a former broker with knowingly or recklessly trading unsuitable investment products in the accounts of five customers and misappropriating more than $170,000 from one of those customers. The SEC's complaint alleges that Demitrios Hallas repeatedly traded unsuitable investments in his customers' accounts, exposing customers who were unsophisticated with limited or no investing experience and modest incomes, net worth levels, and assets to a significant degree of volatility and risk. In a little more than a year, Hallas allegedly traded 179 daily leveraged exchange traded funds (ETFs) and exchange traded notes (ETNs) - products that the SEC alleges are inherently risky, complex and volatile, and only appropriate for sophisticated investors - in the customers' accounts, generating commissions and fees of approximately $128,000. The net loss across all 179 positions was approximately $150,000. The SEC's complaint further alleges that Hallas misappropriated more than $170,000 in funds from one customer. Instead of investing the funds on the customer's behalf, Hallas allegedly deposited the funds into his own personal bank accounts and spent them on personal expenses, including significant bar and restaurant bills, credit card and student loan payments, and rent. As alleged in the complaint, Hallas enriched himself by systematically disregarding his customers' investment profiles and repeatedly trading in risky, volatile products that were unsuitable for them. The SEC's complaint charges Hallas with violating Sections 17(a)(1), 17(a)(2), and 17(a)(3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

Judgment Rendered

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

Disgorgement

$260,193.39

Monetary Penalty other than Fines

Injunction

FINRA

Hallas was named a respondent in a FINRA complaint alleging that he failed to appear and provide testimony requested by FINRA relating to a customer complaint that alleged that he recommended an unsuitable transaction in a variable annuity and to certain events that he was required to disclose on his Form U4. The complaint alleges that FINRA was investigating the customer complaint and other potential sales practice allegations.

Decision

Bar (Permanent)

all capacities

indefinite

11/30/2017

Default Decision rendered November 2, 2017. The sanction was based on findings that Hallas failed to comply with requests from FINRA for testimony. The findings stated that Hallas' member firm filed an amended Form U5 reporting that one of his former customers had alleged unethical practices with the exchange of a variable annuity which resulted in a taxable event and that the customer was seeking $14,000 in damages. FINRA commenced its investigation after the filing of this amended Form U5. The decision became final November 30, 2017.

FINRA

Respondent Hallas failed to respond to FINRA request for information.

Letter

Suspension

any capacity

n/a

4/18/2016

6/29/2016

Pursuant to FINRA Rule 9552 and in accordance with FINRA's Notice of Suspension letter dated March 25, 2016, Hallas is suspended on April 18, 2016 from associating with any FINRA member firm in any capacity. If Hallas fails to request termination of the suspension within three months of the date of the Notice of Suspension, he will automatically be barred on June 28, 2016 from association with any FINRA member in any capacity pursuant to FINRA Rule 9552(h). Suspension lifted on June 29, 2016.

FINRA

HALLAS WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGING THAT HE RECOMMENDED THAT A CUSTOMER SURRENDER HER FIXED ANNUITY AND INVEST THE PROCEEDS IN THE BOND FUND. THE COMPLAINT ALLEGES THAT HALLAS FAILED TO ASCERTAIN WHETHER THE CUSTOMER WOULD INCUR A SURRENDER CHARGE FOR LIQUIDATING THE FIXED ANNUITY AND PREPARED AN INVESTMENT SWITCH LETTER STATING THAT THERE WOULD BE NO SURRENDER CHARGE. HALLAS HAD NO REASON TO BELIEVE THAT THE BOND FUND WOULD PROVIDE GREATER FINANCIAL BENEFIT TO THE CUSTOMER THAN THE FIXED ANNUITY DESPITE KNOWING THAT IT EXPOSED THE CUSTOMER TO GREATER RISK THAN THE FIXED ANNUITY. THE CUSTOMER EXECUTED THE RECOMMENDED INVESTMENT SWITCH. SHE INCURRED SURRENDER AND SALES CHARGES AND SUFFERED ADVERSE TAX CONSEQUENCES FROM SWITCHING INVESTMENTS. THE INVESTMENT SWITCH WAS NOT SUITABLE FOR THE CUSTOMER'S FINANCIAL SITUATION AND NEEDS BECAUSE IT EXPOSED HER TO UNNECESSARY CHARGES AND ADVERSE TAX CONSEQUENCES. THE COMPLAINT ALSO ALLEGES THAT HALLAS RECOMMENDED THAT ANOTHER CUSTOMER PARTIALLY LIQUIDATE A UNIT INVESTMENT TRUSTS (UIT) AND INVEST THE PROCEEDS IN A BOND FUND. THE BOND FUND GAVE THE CUSTOMER EXPOSURE TO THE SAME UNDERLYING TYPES OF SECURITIES - MUNICIPAL BONDS - AS HER PRE-EXISTING INVESTMENT IN THE UIT, WITH THE SAME PURPOSE OF PRODUCING TAX-FREE INCOME. THE CUSTOMER EXECUTED THE RECOMMENDED SWITCH AND INCURRED A SALES CHARGE AS A RESULT. HALLAS HAD NO REASON TO BELIEVE THAT THE BOND FUND WOULD PROVIDE GREATER FINANCIAL BENEFIT TO THE CUSTOMER THAN THE UIT OR THAT IT WAS BETTER SUITED TO THE CUSTOMER'S INVESTMENT OBJECTIVES OR RISK TOLERANCE. IN LIGHT OF THE SALES CHARGE, THE SWITCH WAS NOT SUITABLE FOR THE CUSTOMER'S FINANCIAL SITUATION AND NEEDS.

Decision & Order of Offer of Settlement

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

$5,000.00

Restitution

$6,110.00

Suspension

ANY CAPACITY

30 DAYS

7/7/2014

8/5/2014

WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, HALLAS CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT HE RECOMMENDED A CUSTOMER SURRENDER HER FIXED ANNUITY AND INVEST THE PROCEEDS IN A BOND FUND. THE FINDINGS STATED HALLAS HAD NO REASON TO BELIEVE THAT THE BOND FUND WOULD PROVIDE GREATER FINANCIAL BENEFIT TO THE CUSTOMER THAN THE FIXED ANNUITY DESPITE KNOWING THAT IT EXPOSED THE CUSTOMER TO GREATER RISK THAN THE FIXED ANNUITY. THE CUSTOMER INCURRED SURRENDER AND SALES CHARGES AND SUFFERED ADVERSE TAX CONSEQUENCES FROM SWITCHING INVESTMENTS. HALLAS FAILED TO ASCERTAIN THE BASIC COSTS ASSOCIATED WITH THE CUSTOMER'S INVESTMENT SWITCH, AND WHETHER SUCH COSTS WOULD BE OUTWEIGHED BY ANY FINANCIAL BENEFIT TO THE CUSTOMER. HALLAS HAD NO REASONABLE BASIS FOR RECOMMENDING THE CUSTOMER'S INVESTMENT SWITCH. THE INVESTMENT SWITCH WAS NOT SUITABLE FOR THE CUSTOMER'S FINANCIAL SITUATION AND NEEDS. THE FINDINGS ALSO STATED THAT HALLAS RECOMMENDED THAT A CLIENT PARTIALLY LIQUIDATE A UNIT INVESTMENT TRUST (UIT) AND INVEST THE PROCEEDS IN A BOND FUND. THE BOND FUND GAVE THE CLIENT EXPOSURE TO THE SAME UNDERLYING TYPES OF SECURITIES AS THE PRE-EXISTING INVESTMENT IN THE UIT, WITH THE SAME PURPOSE OF PRODUCING TAX FREE INCOME. THE CLIENT EXECUTED THE RECOMMENDED SWITCH AND INCURRED A SALES CHARGE AS A RESULT. HALLAS HAD NO REASON TO BELIEVE THAT THE BOND FUND WOULD PROVIDE GREATER FINANCIAL BENEFIT TO THE CLIENT THAN THE UIT OR THAT IT WAS BETTER SUITED TO THE CLIENT'S INVESTMENT OBJECTIVES OR RISK TOLERANCE. IN LIGHT OF THE SALES CHARGE, THE SWITCH WAS NOT SUITABLE FOR THE CLIENT'S FINANCIAL SITUATION AND NEEDS.