Timothy David Cochrane has been permanently barred from the financial industry as part of a settlement of an action against him for misappropriating $600,000 in customer funds.
On March 30, the Financial Industry Regulatory Authority (FINRA) accepted a Letter of Acceptance, Waiver and Consent (AWC) submitted by Cochrane to resolve alleged rule violations. Cochrane neither admitted nor denied the findings included in the AWC. The action was brought by FINRA’s Office of Fraud Detection and Market Intelligence as a result of misconduct by Cochrane in 2008.
Cochrane first registered with a FINRA member firm in October 2000. At the time of his misappropriations he was registered with Summit Brokerage Services in Eureka, Calif., according to FINRA public disclosure records. Summit filed a Form U-5 terminating Cochrane’s registration on March 18, the AWC said.
Cochrane’s Victims
While registered with Summit, Cochrane did business as Cochrane & Associates Wealth Management Services. He was registered as a general securities principal and also sold various insurance products, the AWC said.
The first customer victimized by Cochrane is identified only as TM. In February 2008, TM wrote a $150,000 personal check to Cochrane & Associates after Cochrane told TM that he would use the funds to purchase a variable annuity, the AWC said. Cochrane’s statement was false when it was made.
Cochrane deposited TM’s check into a bank account under his control and proceeded to use the funds improperly, including to pay his personal expenses. He never purchased a variable annuity for TM, the AWC said.
In July 2008, Cochrane misappropriated funds from a customer the AWC identified as HB, who wrote a check for $450,000 out of his brokerage account and gave it to Cochrane. HB endorsed the check with no restrictions after Cochrane told him that he would use the money to invest in a money market fund. The statement was false when it was made.
As he had with TM, Cochrane accepted HB’s funds, deposited the check into a bank account under his control, and improperly used of the money, including for payment of personal expenses. Cochrane never invested in a money market fund for HB, the AWC said.
Cochrane’s Violations
Through the conduct described above, Cochrane willfully violated of Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5 that implements the law, the AWC said. The law and rule prohibit the use of instrumentalities of interstate commerce, the mails or a national securities exchange to knowingly or recklessly employ a device, scheme or artifice to defraud someone in connection with the purchase or sale of a security, whether directly or indirectly.
Cochrane also violated federal law when he made untrue statements of material fact and engaged in course of business which operated as a fraud or deceit upon a person, the AWC said,
In addition, Cochrane’s fraud violated National Association of Securities Dealers (NASD) Rules 2110 and 2120 concerning equitable principles of trade and material misrepresentations, and his improper use and conversion of TM’s and HB’s funds violated NASD Rule 2330(a) and 2110.
In March 2010, Cochrane gave HB a customer planning document with an entry that showed that HB had a roughly $453,000 balance in a money market fund. This document was materially false. Cochrane never opened a money market fund for HB, the AWC said.
Cochrane’s creation of this fake document violated FINRA Rule 2010, which states that registered persons must observe high standards of commercial honor and just and equitable principles of trade.
As a result, Cochrane has been permanently barred associating with any FINRA member in any and all capacities, the AWC said.
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