FINRA Bars Broker for Market Manipulation
Supervisor Barred from Supervising, Suspended and Fined; Additional Broker Sanctioned
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has barred broker George Johnson from the securities industry for engaging in a manipulative trading scheme to artificially inflate the market price and trading volume for the common stock of IceWEB, Inc. (OTCBB: IWEB). FINRA also sanctioned Christopher Wynne, Johnson's supervisor, suspending him for two years in all capacities, barring him in a principal capacity, and fining him $25,000. Joseph Mahalick, another broker who worked with Johnson and Wynne, was suspended for six months and fined $20,000 for falsifying firm records and has been barred from the securities industry in a separate action. Johnson, Wynne and Mahalick all worked for Meyers Associates L.P. in that firm's Chicago branch office during the time period of the misconduct.
FINRA found that over an eight-day period, Johnson manipulated the market for IWEB by recommending that certain of his customers buy at increasingly higher and artificially inflated prices while also recommending his other customers sell their shares, frequently matching trades between the customers. FINRA found that among Johnson's motives for manipulating the stock was the fact that he wanted to obtain business from the issuer for which he would anticipate receiving compensation in connection with a future private offering. Johnson 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.
Brad Bennett, FINRA's Executive Vice President and Chief of Enforcement, said, "Any broker engaging in manipulative activity poses a threat to market integrity and has no place in the securities industry. The branch office manager, who was the first line of defense in supervising George Johnson's activities, completely failed to supervise his transactions to ensure compliance with securities laws and FINRA rules."
FINRA also found that Johnson and Wynne sent customers IWEB sales materials that omitted information concerning material conflicts of interest and material risks concerning IWEB's business, and contained misleading, exaggerated and unwarranted information. Moreover, Johnson disclosed confidential information to potential purchasers concerning another offering.
In addition to the IWEB scheme, FINRA found that Johnson committed fraud by recommending that certain of his customers purchase shares of another penny stock without disclosing to them that he was liquidating his own personal positions of the security from his own brokerage accounts.
In addition, FINRA's investigation found that to cover up Johnson's violations of state securities registration requirements, Johnson, Mahalick and Wynne agreed to the practice of entering false information on more than 100 order memoranda, indicating that Wynne or Mahalick was responsible for the account or transactions, instead of Johnson.
In settling this matter, Johnson, Wynne and Mahalick 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 2015, members of the public used this service to conduct 71 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. Investors can also call FINRA's Securities Helpline for Seniors at (844) 57-HELPS for assistance or to raise concerns about issues they have with their brokerage accounts and investments.
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 complementary 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, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.