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Investment Broker Barred for Selling Securities While on FINRA Suspension

July 9, 2018 Blog

In order to sell stocks to individual investors, securities brokers must register with the Financial Industry Regulatory Authority (FINRA). This registration requirement is designed as a protection for individual investors, as registered brokers are subject to numerous rules and regulations pertaining to fraud and other sales practice violations.

When a registered broker violates one (or more) of these rules and regulations, it is subject to discipline by FINRA, and investors who suffer losses as a result can seek to recoup their losses through FINRA arbitration. Forms of discipline can include reprimand, fines, suspension and permanent loss of registration. In one recent case, FINRA suspended a broker for improper conduct, and then expelled both the broker and his brokerage firm after he violated the terms of his suspension.

Broker Suspended for Disclosure Violation, Barred for Violating Terms of Suspension

In many cases, FINRA disciplinary actions are resolved via settlement. Typically, when a broker agrees to a settlement, he or she will adhere to the terms of the settlement agreement – which frequently involves paying a fine and serving a short-term suspension. Once the suspension is over, the settlement agreement will remain on the broker’s record, but he or she will be permitted to resume selling securities to individual investors.

But, when a broker violates the terms of a settlement, then FINRA can – and often will – take aggressive disciplinary action. This is what happened in the case referenced above. The broker, Bruce Zipper of Miami, Florida, agreed to a three-month suspension for failing to disclose three outstanding judgments. However, “after his suspension started . . . Zipper never stopped his association with Dakota as Zipper continued soliciting Dakota customers, doing business with the firm’s clearing broker, and generally operating the firm.”

As a result, FINRA permanently barred Zipper from operating as a securities broker, and it also permanently expelled his firm, Dakota Securities. It expelled Dakota Securities for, “not adequately supervising Zipper, allowing him to associate while suspended (and later while statutorily disqualified) and for falsifying books and records.”

Thinking about Working with a Stock Broker? Use FINRA’s BrokerCheck®

Cases like this one underscore the importance of performing thorough due diligence before hiring a securities broker or investment advisor. Just because a broker or brokerage firm is offering its services does not mean that it is licensed to do so. FINRA and the Securities and Exchange Commission (SEC) routinely pursue enforcement actions against unregistered and unlicensed brokers and advisors; and, far too often, individual investors are forced to take legal action against to recover fraudulent investment losses.

If you are thinking about working with a securities broker, a good place to start your due diligence is FINRA’s BrokerCheck®. With BrokerCheck®, you can review a broker’s current registration status as well as his or her entire disciplinary history with FINRA. For more tips, we encourage you to read: Checklist and Questions to Ask When Choosing an Investment Broker or Advisor.

Speak with a FINRA Attorney at Zamansky, LLC

If you bought stocks or other investments through a securities broker and have concerns about fraud, we strongly encourage you to contact us for a free, no-obligation consultation about your legal rights. To find out if you are entitled to recover your losses through FINRA arbitration, please call (212) 742-1414 or request an appointment online today.