Darnell A. Deans, a Stockbroker with Garden State Securities, was suspended from association with any Financial Industry Regulatory Authority (FINRA) member in any and all capacities for eight months and fined $10,000 per an Office of Hearing Officers Settlement containing findings that Deans had borrowed funds in violation of his firm’s policies. Department of Enforcement v. Deans, No. 2012030677101 (Oct. 12, 2015).
According to the Order Accepting Offer of Settlement, in October, 2010, customer PP had opened an account with Garden State Securities and Deans had served as PP’s Stockbroker. The Order indicated that from April, 2011 through August, 2011, PP had loaned Deans roughly $241,000.00. Additionally, in 2010, customer JP had opened an account with Garden State Securities and Deans had served as JP’s Stockbroker. The Order stated that while a customer of the firm, JP loaned Deans $25,000.
According to the Order, around December, 2011, Garden State Securities had discovered the loan payments from firm customer PP to Deans while the firm was engaged in a branch inspection. The Order indicated that on January 23, 2012, Deans was issued a compliance memorandum stating that he was subject to an internal action for violating his firm’s policies due to borrowing from the customer. Dean’s firm indicated that Deans had not sought prior approval for the loan.
FINRA Rule 3240 prohibits persons from borrowing money from or lending money to a customer, unless the representative’s employing member firm has written procedures allowing borrowing or lending to customers, the borrowing or lending meets criteria specified in Rule 3240(a)(2), and the Stockbroker notifies the firm of the borrowing or lending arrangements prior to entering into the arrangements and obtains pre-approval in writing.
The Order additionally indicated that despite Deans signing the memorandum which stated that he violated his firm’s policies, Deans did not disclose to the firm that he had previously borrowed funds from PP or received a loan from customer JP (all without the firm’s approval). Deans reportedly never requested or received approval to solicit or receive such loans from customers. FINRA found Deans’ conduct to be in violation of Rules 3240 and 2010 in this regard.
Further, Deans was found to have violated NASD Rule 2110, as well as FINRA Rules 3240 and 2010, by providing false information on his firm’s annual attestation and failing to disclose the extent of funds borrowed. Specifically, Deans had completed a 2011 annual attestation, in which he answered “no” to a question asking him if he had engaged in any activity construed as borrowing from a customer. FINRA found Deans to have falsely answered the annual attestation considering Deans knew of his aforementioned borrowing and had even admitted to his firm that had had been provided with personal loans upon the firm questioning him in this regard.
Public disclosure records reveal that Deans has been subject to six disclosure incidents. On March 20, 2003, Deans settled a customer dispute for $30,000.00 after a customer alleged claims regarding suitability, misrepresentation, fraud, unauthorized trading, breach of fiduciary duty, and breach of contract. On December 6, 2012, the New Jersey Bureau of Securities fined Deans $37,500.00 and suspended him for 2.5 years for his aforementioned borrowing conduct. On January 14, Michigan’s Securities Administrator revoked Deans securities agent registration and assessed civil and administrative fines of $7,500.00.
On January 16, 2014, Deans became subject to a regulatory action (pending) from Indiana’s Securities Division, who is seeking a permanent bar for Deans having his registration revoked by a state securities regulator.
Firms and individuals, not surprisingly, are prohibited from unauthorized use of customer funds, borrowing of a customer’s securities or funds, forgery, non-disclosures or misstatements of material facts, and various deceptions and manipulations. Such conduct can also be found to violate criminal and other civil laws, and be subject to sanction from the federal and state government bodies.
Guiliano Law Group
If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esquire, and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.
