Hallmark Investments, Inc., a broker-dealer headquartered in New York, New York, along with the firm’s chief executive officer, Steven G. Dash, president, Stephen P. Zipkin, and sales supervisor, William H. Coons, were charged by Financial Industry Regulatory Authority (FINRA) Department of Enforcement in a Complaint containing allegations of excessive mark-ups and unregistered securities sales. Department of Enforcement v. Hallmark Investments, Inc., et al., No. 2014039352302 (Dec. 20, 2016).
According to the Complaint, fourteen customers were sold 39,000 shares of Avalanche International Corp by Hallmark, Zipkin and Dash, in which the shares were unregistered and contained prices which were fraudulently inflated. Apparently, misrepresentations and omissions were made by Dash and Zipkin in order to effect the sales. Consequently, FINRA alleged that Zipkin, Dash and Hallmark violated Securities Exchange of 1934 Section 10(b), Rule 10b-5, Securities Act of 1933 Sections 17(a)(2) and 17(a)(3), as well as FINRA Rule 2010 and 2010.
The Complaint further alleged that trade confirmations had been provided to customers pursuant to the unregistered securities sales, wherein the confirmations omitted information concerning the difference between Hallmark’s acquisition cost of Avalanche International Corp shares and the price which customers were charged for the shares. Additionally, the confirmations purportedly omitted that
Hallmark was the principal for the account in which securities were sold to the customers. Consequently, FINRA alleged that Hallmark’s conduct was violative of Securities Exchange Act of 1934 Section 10b-10, in addition to FINRA Rules 2010 and 2232.
Moreover, the Complaint alleged that the fourteen customers had been excessively charged mark-ups in connection with their purchase of shares. FINRA alleged that Dash’s and Hallmark’s conduct was violative of FINRA Rule 2010 and 2121 in this regard.
Further, the Complaint stated that from March of 2014 to July of 2014, 195,000 Microphase Corporation shares had been sold to the firm’s customers. Yet, the shares were neither registered with the Securities and Exchange Commission (SEC) nor exempt from SEC registration. Apparently, 67,500 of the Microphase shares were sold to three firm customers by Zipkin, and an estimated 127,500 shares were sold to four firm customers via Coon. The Complaint alleged that Coons, Zipkin and Hallmark’s conduct was violative of FINRA Rule 2010 for contravening Securities Act of 1933 Section 5.
The Complaint also alleged that from March of 2014 to March of 2015, the firm failed to create and implement written supervision systems and procedures designed to ensure that the firm complied with Securities Act of 1933 Section 5. Hallmark’s conduct in this regard was alleged by FINRA Department of Enforcement to be violative of FINRA Rules 2010 and 3110.
FINRA Public Disclosure reveals that Dash has been identified in five customer initiated investment related disputes containing allegations of his misconduct while employed with Hallmark Investments and Prudential Securities Incorporated. Particularly, on July 15, 2010, a customer initiated investment related arbitration claim involving Dash’s conduct was settled for $100,000.00 in damages based upon allegations that Dash breached a contractual agreement with the customer.
Additionally, on September 12, 2011, a customer initiated investment related arbitration claim regarding Dash’s and Zipkin’s activities was resolved for $65,000.00 in damages based upon allegations that Dash and Zipkin effected unsuitable and excessive equity transactions in the customer’s account. On January 28, 2013, another customer initiated investment related arbitration claim involving Dash’s conduct was settled for $2,500.00 in damages based upon allegations that Dash charged the customer with excessive commissions in reference to equity transactions.
FINRA Public Disclosure further reveals that on September 3, 2003, a customer initiated investment related written complaint regarding Coons’ activities was resolved for $15,000.00 in damages based upon allegations that Coons, while associated with Investec Ernst & Company, effected over-the-counter equity transactions in the customer’s account which were not suitable for the customer, and that Investec Ernst & Company failed to supervise Coons’ activities.
Subsequently, on June 1, 2009, a customer initiated investment related arbitration claim involving Coons’ conduct was settled for $925,000.00 in damages based upon allegations that Coons, while associated with Maxim Group LLC, effected excessive and unsuitable transactions in the customer’s account, and made misrepresentations to the customer concerning over-the-counter equities.
Moreover, Coons was previously has fined $10,000.00 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon consenting to findings that Coons, while associated with Westbrook Advisors, Inc., made misrepresentations and omissions to twenty customers in reference to $2,000,000.00 worth of promissory notes sales. Letter of Acceptance, Waiver and Consent, No. 2011026346205 (Jan. 31, 2013). FINRA found that Coons’ conduct was violative of FINRA Rule 2010.
Guiliano Law Group
Our practice is limited to the representation of investors. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you. There is never any charge for a consultation or an evaluation of your claim. For more information, contact us at (877) SEC-ATTY.
To learn more about FINRA Securities Arbitration, and the legal process, please visit us at securitiesarbitrations.com
