FINRA Expels Meeting Street Brokerage, Bars Broker, Sanctions Firm's Owner for Market Manipulation, Other Violations
All Three Schemed to Create Artificial Price and Trading Volume for Relay Capital Corporation
Washington, D.C. — The Financial Industry Regulatory Authority (FINRA) announced today that it has expelled Meeting Street Brokerage, LLC of Palm City, FL from the securities industry for market manipulation of Relay Capital Corporation stock — as well as for violations of Regulation T, Anti-Money Laundering (AML) rules, instant message retention requirements, registration requirements and net capital requirements.
FINRA barred Meeting Street broker Lisa A. Esposito for participating in the manipulation and for violating Regulation T. FINRA sanctioned her husband, Vincent A. Esposito, the firm's owner, principal and AML Compliance Officer, for those same violations and for violations of his AML obligations. Vincent Esposito was suspended from associating with a securities firm in any capacity for 90 days, suspended from associating with a securities firm in a principal capacity for two years and fined $15,000.
"Market manipulation constitutes a grave abuse of the integrity of our markets," said Susan Merrill, FINRA Executive Vice President and Chief of Enforcement. "Firms that conduct or facilitate a manipulation have no place in the securities industry."
FINRA found that in 2005, Meeting Street and the Espositos participated in a manipulative scheme designed to increase and/or maintain artificially the price and volume of a Pink Sheet-traded stock issued by Relay Capital. Relay Capital was first incorporated in Canada in 2002 as First Canadian American Credit Services, later relocating to Nevada and changing its name to Galloway Oil and Gas, Inc. Relay Capital currently reports that it is in the business of marketing pre-paid financial services.
In its investigation, FINRA found that Meeting Street and the Espositos participated in the manipulation of Relay Capital stock by:
- placing approximately 100 matched orders for the firm's customers — i.e., prearranged orders for the purchase and/or sale of the stock for the purpose of creating the false appearance of high trading volume and inflating or maintaining the stock's price.
- transferring free shares of the stock to customers who had purchased or agreed to purchase additional shares of the stock;
- continually allowing customers to purchase the stock without sufficient funds to do so and without a good faith belief that they would pay for their purchases before selling the stock; and
- effecting nearly 100 purchases for customers in which the cost to buy the stock was met by the sale of the same stock.
FINRA also found that Meeting Street and the Espositos effected certain agency cross trades between customers at prices in excess of the price at which Relay Capital stock traded on the date of the transactions. FINRA further found that a consulting company owned and controlled by Lisa Esposito received over 1.2 million shares of Relay Capital stock as payment for consulting services and that Meeting Street generated $289,000 in commissions in 2005 for placing Relay Capital stock trades.
FINRA also found that Meeting Street and the Espositos committed numerous violations of Regulation T, many of which were in furtherance of the manipulation, and that Meeting Street and Vincent Esposito, the firm's AML Compliance Officer, violated their AML obligations by failing, in several instances between 2005 and 2007, to investigate and report suspicious activity.
In concluding this settlement, Meeting Street and the Espositos neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
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 2008, members of the public used this service to conduct 11.6 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999.
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 comprehensive regulation. FINRA touches virtually every aspect of the securities business - from registering and educating all industry participants to examining securities firms; writing and enforcing 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.
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