FINRA Sanctions Brokers and Supervisor in Manipulative Trading Scheme

FINRA barred a broker from the securities industry for engaging in a manipulative trading scheme to artificially inflate the market price and trading volume of the common stock of a technology company. FINRA suspended the supervisor of the brokerage firm for two years, barred him from acting in a principal capacity and fined him $25,000. In a separate action, FINRA sanctioned a second broker for falsifying firm records.

Specifically, FINRA found that one or all of the defendants:

• manipulated the market for the company by recommending that certain customers buy at increasingly higher and artificially inflated prices while also recommending other customers sell their shares, frequently matching trades between the customers;

• "coordinated a campaign with a stock promoter to attempt to increase the stock's share price to a level that would allow for the exercise of certain warrants";

• sent customers company "sales materials that omitted information concerning material conflicts of interest and material risks concerning the [company's] business, and contained misleading, exaggerated and unwarranted information";

• "disclosed confidential information to potential purchasers concerning another offering";

• "committed fraud by recommending that certain . . . customers purchase shares of another penny stock without disclosing to them that [the first broker] was liquidating his own personal positions of the security from his own brokerage accounts"; and

• "cover[ed] up violations of state securities registration requirements" and entered "false information on more than 100 order memoranda."