The Financial Industry Regulatory Authority (FINRA) filed a temporary cease-and-desist order against Wall Street brokerage firm John Carris Investments and its CEO George Carris for allegedly fraudulently selling stock to customers earlier this year. [via NYPost]
FINRA, the self regulatory organization for the financial services community, also accused the CEO of improperly spending the broker-dealer's money on tattoos, pet care, motorcycle expenses and firearms.
FINRA alleges that John Carris Investments paid over $590,000 for personal expenses of the CEO. The expenses were classified as business expenses, the complaint said.
According to FINRA's complaint [.PDF], come of the expenses included $10,554 at a tattoo parlor, $5,987 for pet care and $5,317 for motorcycle expenses. The complaint also alleges that $6,790 was spent on "firearms related expenses."
Here's the full release (emphasis ours):
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has filed for a Temporary Cease-and-Desist Order against John Carris Investments, LLC (JCI) and its CEO, George Carris, to immediately halt solicitations of its customers to purchase Fibrocell Science, Inc. stock without making proper disclosures. FINRA alleges that during May 2013, JCI fraudulently solicited its customers to buy Fibrocell stock, without disclosing that during the same time period, Carris and another firm principal were selling their shares.
FINRA also issued an amended complaint against JCI, Carris, and five other firm principals alleging additional fraudulent activity and securities violations. In the complaint, FINRA alleges that while JCI acted as a placement agent for Fibrocell, Carris and the firm artificially inflated the price of Fibrocell stock by engaging in pre-arranged trading and by making unauthorized purchases of Fibrocell stock in customers' accounts.
FINRA also alleges that Carris and JCI fraudulently sold stock and notes in its parent company, Invictus Capital, Inc., by not disclosing its poor financial condition. In the complaint, FINRA states that JCI and Carris misled Invictus investors by paying dividends to Invictus' early investors with funds that were, in fact, generated by new sales of Invictus securities. JCI and Carris did not have any reasonable grounds to expect economic gains for Invictus investors. As of March 2013, Invictus Capital had defaulted on $2 million of Invictus notes sold to earlier John Carris Investments customers, did not have funds to repay them, and has stated that it may be required to use proceeds from its ongoing offering to make repayments. JCI continues to solicit new investments in Invictus – an investment that FINRA alleges is wholly unsuitable.
In addition, FINRA alleges that JCI issued false documentation that failed to reflect the firm's payments for Carris' personal expenses (such as tattoos, pet care and a motorcycle), and failed to remit hundreds of thousands of dollars in employee payroll taxes to the United States Treasury.
Under FINRA rules, the individuals and firms named in a complaint can file a response and request a hearing before a FINRA disciplinary panel. Possible sanctions include a fine, an order to pay restitution, censure, suspension or bar from the securities industry. The issuance of a disciplinary complaint represents FINRA's initiation of a formal proceeding, in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2012, members of the public used this service to conduct about 14.6 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA's Disciplinary Actions Online database.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complimentary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.
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