FINRA Expels EKN Financial Services for Defying SEC Order and For Numerous Compliance Violations
CEO Barred; Former President Fined and Suspended
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) today announced that it has expelled EKN Financial Services, Inc. of Melville, NY, for numerous compliance violations and for allowing its CEO, Anthony Ottimo, to act as a supervisor after being barred from acting in that capacity by the Securities and Exchange Commission (SEC) in June 2008. FINRA barred Ottimo from the securities industry and barred the firm's former President, Thomas Giugliano, from acting in a principal capacity, suspended him from the securities industry for one year and fined him $150,000. EKN, through Ottimo and Giugliano, also violated numerous NASD/FINRA and SEC rules and federal securities laws, including anti-money laundering (AML) violations, net capital deficiencies and widespread reporting failures.
FINRA found that from 2008 through 2011, Ottimo acted in a supervisory role despite an SEC order that barred him from associating with any broker or dealer in a supervisory capacity, and acted as CEO despite not being registered as a principal. During the relevant period, EKN and Giugliano repeatedly misrepresented to FINRA that Ottimo was no longer acting as EKN's CEO, as a principal or as a supervisor. In 2011, EKN lied to FINRA examiners, reporting that since 2008, it had "never filled" the CEO position when, in fact, FINRA's investigation revealed that EKN's own documents indicated that from 2008 through 2011, Ottimo was listed as EKN's CEO and was operating in that capacity. As CEO, Ottimo supervised other EKN personnel, negotiated and executed agreements, controlled its finances, retained signatory authority over its bank accounts, and represented himself as EKN's CEO to its clearing firm and other third parties.
In addition, FINRA found that EKN, Ottimo and Giugliano, who was aware of EKN and Ottimo's regulatory violations, committed numerous AML violations, including failing to establish an adequate AML compliance program to detect and report suspicious activity. For instance, EKN customers attempted to inject several hundred million dollars of bogus bonds into the U.S. financial system, but the firm failed to detect "red flags" suggesting possible suspicious activity. Moreover, EKN failed to meet minimum net capital requirements during certain periods from September 2008 to November 2010, and also prepared inaccurate net capital computations, failed to accurately report its net capital deficiencies to the SEC and FINRA, and failed to accurately record expenses and liabilities in its books and records. EKN also failed to report to FINRA, which would have made this information publicly available through FINRA BrokerCheck, that Ottimo and Giugliano each had hundreds of thousands of dollars in unsatisfied judgments and liens.
Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, "EKN, Ottimo and Giugliano's defiance of an SEC order and subsequent lies to regulators were nothing short of brazen. In addition to hiding the fact from regulators that Ottimo was acting as CEO, the firm was also fully aware they had significant AML problems and net capital deficiencies, yet completely ignored any sense of responsibility to follow securities rules and laws."
In settling this matter, EKN, Ottimo and Giugliano neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
Investors and other interested persons can obtain more information about EKN, Ottimo and Giugliano, and the disciplinary record of any other FINRA-registered broker or brokerage firm, by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2010, members of the public used this service to conduct 17.2 million reviews of broker or firm records. Investors and other interested persons can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999. Further, FINRA's Disciplinary Actions Online database contains the complaint in this action, as well as other disciplinary documents. This database is also available to the public at no charge.
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, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.