WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that a FINRA hearing panel has expelled John Carris Investments, LLC (JCI) and barred CEO George Carris from the securities industry for fraud and suitability violations. The panel found that JCI and George Carris recklessly sold shares of stock and promissory notes issued by JCI's parent company using misleading statements and by omitting material facts. Andrey Tkatchenko, a registered representative, was suspended for two years and fined $10,000 for recommending the stock and promissory notes without a reasonable basis. JCI and Carris were also expelled and barred for manipulating the price of Fibrocell stock. The panel found that JCI and Carris manipulated the price of Fibrocell stock through unfunded purchases of large blocks of the stock and pre-arranged trading accomplished through reported matched limit orders. Head Trader Jason Barter was suspended for 18 months, fined $5,000 and must re-qualify to enter the securities industry for his role in the manipulation of the Fibrocell stock. The ruling resolves charges brought by FINRA's Department of Enforcement in September 2013.
The panel found that JCI and Carris fraudulently sold stock and notes in its parent company by not disclosing its poor financial condition. According to the decision, the firm and Carris omitted material facts in the Offering documents, including omissions in the Bridge Offering documents that JCI was out of net capital compliance. JCI should have ceased operating when it was out of net capital compliance, but instead it continued to sell Bridge Offering notes to investors and used the proceeds from sales of the Offerings to cure its net cap deficiency. Carris failed to inform investors that proceeds would be used to cure JCI's net cap deficiencies. He also omitted other material information from the Offering documents regarding how proceeds would be used. For instance, Carris used proceeds from the sales of the Offerings to pay for personal expenses such as purchases at liquor stores, clothing stores and dry cleaning. Carris also failed to remit hundreds of thousands of dollars in employee payroll taxes to the United States Treasury; although during the same time period, he paid dividends to investors in the Offerings.
The panel noted in its decision that it did not find Carris credible. For example, when confronted about emails pertaining to employee payroll taxes, Carris asserted he never received or read his emails, claiming that a friend set up a personal email account for him so that Carris could "get on the PlayStation and also some other games that I was playing at the time," when in fact Carris used an iPhone to send emails.
In addition to the violations stated above, the panel found that JCI and George Carris kept inaccurate books and records, failed to remit payroll taxes for employees, maintained insufficient net capital, failed to implement its anti-money laundering policies and procedures, and failed establish and enforce a reasonable supervisory system. The panel dismissed charges against Randy Hechler, the firm's Chief Compliance Officer, related to supervisory violations that occurred during a time period unrelated to the above violations.
Unless the hearing panel's decision is appealed to FINRA's National Adjudicatory Council (NAC), or is called for review by the NAC, the hearing panel's decision becomes final after 45 days.
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.