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COMMONWEALTH FINANCIAL GROUP, INC
CASE OUTCOME: FINE $100000
• EXPELLED FROM MEMBERSHIP
NFA ID:
0238065
Complaint:
ON SEPTEMBER 16, 1994, NFA'S BUSINESS CONDUCT COMMITTEE ("COMMITTEE") ISSUED A COMPLAINT TO COMMONWEALTH FINANCIAL GROUP, INC., ("COMMONWEALTH"), CHARLES HOFFECKER ("HOFFECKER"), ALLAN ADER ("ADER"), CHRISTOPHER BROWN ("BROWN"), EVERTON BUCHANAN ("BUCHANAN"), VINCENT CAPUTO ("CAPUTO"), JAMIE CARROLL ("CARROLL"), MICHAEL CROTTY ("CROTTY"), RUDOLPH JONES ("JONES"), JOHN LUPU ("LUPU") AND LINDA WATSON ("WATSON"). THE COMPLAINT ALLEGES THAT COMMONWEALTH AND HOFFECKER USED PROMOTIONAL MATERIAL THAT OPERATED AS A FRAUD AND DECEIT, WAS LIKELY TO DECEIVE THE PUBLIC, AND CONTAINED MATERIAL MISSTATEMENTS OF FACT OR OMITTED FACTS WHICH MADE IT MATERIALLY MISLEADING IN VIOLATION OF NFA COMPLIANCE RULES 2-29(a)(1), 2-29(b)(1) and 2-29(b)(2). THE COMPLAINT ALSO ALLEGES THAT COMMONWEALTH FAILED TO FILE COPIES OF ALL PROMOTIONAL MATERIAL WITH NFA PROMPTLY AFTER ITS FIRST USE IN VIOLATION OF NFA COMPLIANCE RULE 2-29(f). IN ADDITION, THE COMPLAINT ALLEGES THAT COMMONWEALTH, ADER, BROWN, BUCHANAN, CAPUTO, CARROLL, CROTTY, JONES, LUPU AND WATSON ENGAGED IN FRAUDULENT AND DECEPTIVE SALES SOLICITATIONS IN VIOLATION OF NFA COMPLIANCE RULE 2-29(a)(1). THE COMPLAINT ALSO ALLEGES THAT COMMONWEALTH AND CARROLL VIOLATED NFA COMPLIANCE RULE 2-30 REGARDING CUSTOMER INFORMATION AND RISK DISCLOSURE. MOREOVER, THE COMPLAINT ALLEGES THAT COMMONWEALTH AND LUPU USED HIGH-PRESSURE SALES TACTICS IN VIOLATION OF NFA COMPLIANCE RULE 2-29(a)(2). FURTHERMORE, THE COMPLAINT ALLEGES THAT COMMONWEALTH AND HOFFECKER FAILED TO DILIGENTLY SUPERVISE EMPLOYEES AND AGENTS IN THE CONDUCT OF THEIR COMMODITY FUTURES ACTIVITIES ON BEHALF OF THE MEMBER IN VIOLATION OF NFA COMPLIANCE RULE 2-9. FINALLY, THE COMPLAINT ALLEGES THAT COMMONWEALTH, HOFFECKER AND CROTTY FAILED TO OBSERVE HIGH STANDARDS OF COMMERCIAL HONOR AND JUST AND EQUITABLE PRINCIPLES OF TRADE IN VIOLATION OF NFA COMPLIANCE RULE 2-4. Decision:
ON AUGUST 26, 1996, A DESIGNATED PANEL OF NFA'S HEARING COMMITTEE ISSUED A DECISION TO COMMONWEALTH, HOFFECKER, ADER, BROWN, BUCHANAN, CAPUTO, CARROLL, JONES, LUPU, AND WATSON AFTER A HEARING WAS HELD. THE ALLEGATIONS INVOLVING CROTTY WERE SEVERED FROM THIS CASE. THEREFORE, THE PANEL DID NOT CONSIDER THE ALLEGED VIOLATIONS AGAINST CROTTY WHEN RENDERING THIS DECISION. WITH REGARD TO COUNT ONE OF THE COMPLAINT, THE PANEL FOUND THAT COMMONWEALTH'S RADIO COMMERICALS OPERATED AS A FRAUD AND DECEIT AND WERE CREATED AND AIRED WITH A TOTAL DISREGARD FOR THE TRUTH, IN VIOLATION OF NFA COMPLIANCE RULE 2-29(a)(1). THE PANEL ALSO FOUND THAT COMMONWEALTH RADIO COMMERCIALS WERE LIKELY TO DECEIVE THE PUBLIC, CONTAINED MATERIAL MISSTATEMENTS OF FACT, AND OMITTED MATERIAL FACTS WHICH COMMONWEALTH AND HOFFECKER KNEW MADE THE COMMERCIALS MISLEADING, IN VIOLATION OF NFA COMPLIANCE RULES 2-29(b)(1) AND (2). WITH REGARD TO THE AFOREMENTIONED FINDINGS, THE PANEL ALSO DETERMINED THAT COMMONWEALTH AND HOFFECKER'S CONDUCT IS INCONSISTENT WITH JUST AND EQUITABLE PRINCIPLES OF TRADE. THE PANEL DISMISSED WITH PREJUDICE COUNT TWO OF THE COMPLAINT WHICH ALLEGED THAT COMMONWEALTH FAILED TO FILE COPIES OF ALL PROMOTIONAL MATERIAL WITH NFA PROMPTLY AFTER FIRST USE, IN VIOLATION OF NFA COMPLIANCE RULE 2-29(f). IN CONNECTION WITH COUNT THREE OF THE COMPLAINT, THE PANEL FOUND THAT ADER, BROWN, BUCHANAN, CAPUTO, JONES, LUPU, AND WATSON ENGAGED IN FRAUDULENT AND DECEPTIVE SALES SOLICITATIONS, IN VIOLATION OF NFA COMPLIANCE RULE 2-29(a)(1) AND THAT SUCH CONDUCT IS INCONSISTENT WITH JUST AND EQUITABLE PRINCIPLES OF TRADE. THE PANEL ALSO FOUND THAT COMMONWEALTH IS LIABLE FOR THE VIOLATIONS OF NFA REQUIREMENTS BY ADER, BROWN, BUCHANAN, CAPUTO, JONES, LUPU, AND WATSON DURING THE COURSE OF THEIR EMPLOYMENT WITH COMMONWEALTH. THEREFORE, THE PANEL FOUND THAT COMMONWEALTH VIOLATED NFA COMPLIANCE RULE 2-29(a)(1) AND THAT COMMONWEALTH'S CONDUCT IS INCONSISTENT WITH JUST AND EQUITABLE PRINCIPLES OF TRADE. FURTHER, THE PANEL FOUND THAT CARROLL'S CONDUCT AS ALLEDGED IN THE COMPLAINT DID NOT VIOLATE NFA COMPLIANCE RULES 2-29(a)(1) OR 2-30. THEREFORE, THE PANEL DISMISSED ALL CHARGES AGAINST CARROLL WITH PREJUDICE. IN CONNECTION WITH COUNT FOUR OF THE COMPLAINT, THE PANEL FOUND THAT LUPU EMPLOYED A HIGH PRESSURE SALES APPROACH, IN VIOLATION OF NFA COMPLIANCE RULE 2-29(a)(2) AND THAT SUCH CONDUCT IS INCONSISTENT WITH JUST AND EQUITABLE PRINCIPLES OF TRADE. THE PANEL ALSO FOUND THAT COMMONWEALTH IS LIABLE FOR VIOLATIONS OF NFA REQUIREMENTS BY LUPU DURING THE COURSE OF HIS EMPLOYMENT WITH COMMONWEALTH. THEREFORE, THE PANEL FOUND THAT COMMONWEALTH VIOLATED NFA COMPLIANCE RULE 2-29(a)(2) AND SUCH CONDUCT IS INCONSISTENT WITH JUST AND EQUITABLE PRINCIPLES OF TRADE. IN CONNECTION WITH COUNT FIVE OF THE COMPLAINT, THE PANEL FOUND THAT COMMONWEALTH AND HOFFECKER VIOLATED NFA COMPLIANCE RULE 2-9(a) BY FAILING TO SUPERVISE COMMONWEALTH'S EMPLOYEES IN THE CONDUCT OF COMMONWEALTH'S FUTURES BUSINESS AND THAT SUCH CONDUCT BY COMMONWEALTH AND HOFFECKER IS INCONSISTENT WITH JUST AND EQUITABLE PRINCIPLES OF TRADE. WITH REGARD TO COUNT SIX OF THE COMPLAINT, THE PANEL FOUND THAT AT HOFFECKER'S DIRECTION COMMONWEALTH ENGAGED IN A DELIBERATE COURSE OF CONDUCT TO DEFRAUD AND DECEIVE CUSTOMERS AND THIS CONDUCT BY COMMONWEALTH AND HOFFECKER IS INCONSISTENT WITH HIGH STANDARDS OF COMMERCIAL HONOR AND JUST EQUITABLE PRINCIPLES OF TRADE, IN VIOLATION OF NFA COMPLIANCE RULE 2-4. HAVING CONSIDERED THE EVIDENCE AGAINST EACH RESPONDENT, THE CONDUCT OF EACH RESPONDENT, AND THE MITIGATING AND AGGRAVATING FACTORS PRESENT IN EACH INSTANCE, THE PANEL IMPOSED THE FOLLOWING SANCTIONS. THE PANEL EXPELLED COMMONWEALTH FROM NFA MEMBERSHIP, BUT PROVIDED THAT COMMONWEALTH MAY REAPPLY FOR NFA MEMBERSHIP FIVE YEARS AFTER THE EFFECTIVE DATE OF THIS DECISION. THE PANEL FINED COMMONWEALTH IN THE AMOUNT OF $100,000. THE PANEL BARRED HOFFECKER FROM ASSOCIATION WITH ANY NFA MEMBER, BUT PROVIDED THAT HOFFECKER MAY APPLY TO BE ASSOCIATED WITH AN NFA MEMBER FIRM FIVE YEARS AFTER THE EFFECTIVE DATE OF THIS DECISION. THE PANEL FINED HOFFECKER $250,000. MOREOVER, AS A RESULT OF ITS FINDINGS, THE PANEL FINED ADER $10,000 AND ORDERED ADER TO ATTEND AN ETHICS TRAINING COURSE AND TO TAKE AND PASS THE NATIONAL COMMODITY FUTURES EXAMINATION ("SERIES 3 EXAM"). THE PANEL ALSO ORDERED THAT ADER'S FAILURE TO COMPLY WITH THESE REQUIREMENTS WILL RESULT IN AN AUTOMATIC BAR FROM ASSOCIATION WITH AND FROM ACTING AS A PRINCIPAL OF ANY NFA MEMBER. THE PANEL ALSO IMPOSED CERTAIN RESTRICTIONS AND CONDITIONS ON ADER'S ACTIVITIES FOR A PERIOD OF TWO YEARS. IN ADDITION, THE PANEL FOUND THAT BROWN WAS PROPERLY SERVED WITH THE COMPLAINT BUT DID NOT RESPOND TO THE CHARGES AGAINST HIM. AS A RESULT, THE PANEL DETERMINED THAT BROWN ADMITTED BOTH THE FACTUAL AND LEGAL CONCLUSIONS IN THE COMPLAINT. THEREFORE, THE PANEL PERMANENTLY BARRED BROWN FROM ASSOCIATION WITH AND FROM ACTING AS A PRINCIPAL OF ANY NFA MEMBER. MOREOVER, THE PANEL ORDERED THAT BUCHANAN, JONES, LUPU, AND WATSON SHALL EACH PAY A FINE IN THE AMOUNT OF $15,000. THE PANEL ALSO BARRED BUCHANAN, JONES, LUPU, AND WATSON FROM ASSOCIATION WITH AND FROM ACTING AS A PRINCIPAL OF ANY NFA MEMBER FOR A PERIOD OF SIX MONTHS. DURING THIS SUSPENSION, BUCHANAN, JONES, LUPU, AND WATSON MUST ATTEND AN ETHICS TRAINING COURSE AND TAKE AND PASS THE SERIES 3 EXAM. THE PANEL ALSO ORDERED THAT UPON COMPLETION OF THEIR SUSPENSIONS, THE ACTIVITIES OF BUCHANAN, JONES, LUPU, AND WATSON SHALL BE SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS FOR A PERIOD OF THREE YEARS. FURTHERMORE, THE PANEL FINED CAPUTO IN THE AMOUNT OF $2,000. THE PANEL ALSO ORDERED CAPUTO TO ATTEND AN ETHICS TRAINING COURSE AND TO TAKE AND PASS THE SERIES 3 EXAM. CAPUTO'S FAILURE TO COMPLY WITH THESE REQUIREMENTS WILL RESULT IN AN AN AUTOMATIC BAR FROM ASSOCIATION WITH AND FROM ACTING AS A PRINCIPAL OF ANY NFA MEMBER UNTIL CAPUTO COMPLIES WITH THE REQUIREMENTS. FURTHER, THE PANEL ORDERED THAT CAPUTO'S ACTIVITIES SHALL BE SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS FOR A PERIOD OF TWO YEARS. ALL OF THE AFOREMENTIONED FINES ARE IMPOSED INDIVIDUALLY RATHER THAN JOINT AND SEVERALLY. THIS DECISION BECOMES EFFECTIVE SEPTEMBER 10, 1996. EACH RESPONDENT HAS THE RIGHT TO APPEAL THE DECISION TO NFA'S APPEALS COMMITTEE PRIOR TO THE EFFECTIVE DATE.
Source: National Futures Association
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