FINRA Hearing Panel Expels John Thomas Financial and Bars CEO Tommy Belesis for Trading Ahead of Customer Orders, Providing False Testimony and Other Violations; Ordered To Pay $1,047,288 to Customers
Washington, D.C. — The Financial Industry Regulatory Authority (FINRA) announced today that a hearing panel has expelled John Thomas Financial (JTF), of New York, NY, and barred its Chief Executive Officer, Anastasios "Tommy" Belesis, from the securities industry for violations in connection with the sale of America West Resources, Inc. (AWSR) common stock, including trading ahead of customers' orders, recordkeeping violations, violating just and equitable principles of trade, and for providing false testimony. The panel also jointly and severally ordered JTF and Belesis to pay $1,047,288, plus interest, to customers. Additionally, JTF and Belesis were suspended for two years and jointly and severally fined $100,000, and JTF's Chief Compliance Officer Joseph Castellano was suspended for one year and fined $50,000, for harassing and intimidating registered representatives. The panel dismissed charges alleging fraud, best execution violations, failure to follow customer orders, making misrepresentations to customers and failure to supervise. Charges were also dismissed against Ronald Cantalupo, Regional Managing Director; Michele Misiti, Branch Office Manager; and John Ward, trader. The ruling resolves charges brought by FINRA's Department of Enforcement in April 2013.
On Feb. 23, 2012, the price of AWSR common stock spiked approximately 600 percent, opening at 28 cents per share, peaking at $1.80 per share and eventually closing the day at $1.29 per share. That same day, JTF sold 855,000 shares, the majority of its proprietary position in AWSR, reaping proceeds of more than $1 million. The panel found that JTF and Belesis traded ahead of 14 JTF customers who tried to sell their positions in AWSR, and had profited while customers who had tried to sell AWSR stock had been unable to do so. The decision noted, however, that JTF did not intentionally hold customer orders but instead, JTF brokers tried to enter the orders but were unsuccessful in their attempts. FINRA's rule requires the firm to execute those orders at the same or better price than the firm obtained for itself. In failing to cancel and rebill the proprietary trades, the panel decided JTF and Belesis violated the just and equitable principles of trade rule.
The panel also found that JTF and Belesis failed to keep and maintain records of at least 14 customer orders to sell AWSR received on Feb. 23, 2012. According to the decision, "Belesis testified that he was 'not familiar' with the recordkeeping requirements, and claimed that he was unfamiliar even with the fundamental requirement that the firm preserve order tickets for three years." The panel noted that it did not find Belesis' claims of ignorance credible given the length and breadth of his experience in the securities industry, and inferred that "JTF and Belesis either concealed or destroyed those order tickets."
The panel also concluded that JTF, Belesis and Castellano intimidated and harassed representatives who resigned by filing false Forms U5 indicating that the firm had a reasonable basis for investigating these individuals for serious misconduct, when this was not the case. A Form U5 is filed by a securities firm with FINRA when an individual is terminated. Information from the Form U5 is publicly disclosed through BrokerCheck, so providing false information undermines the integrity of the system. Moreover, the panel found that Belesis' threat to withhold a former representative's commission check unless he signed an amended employment contract and affidavit was coercive. In addition, the decision noted that Belesis provided false testimony to FINRA.
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.