Kenneth Hornyak of Traverse City, MI, a former financial advisor and general securities representative with Stifel Nicolaus & Company, was barred from association with any FINRA-registered firm in all capacities after failing to appear for an on-the-record interview in connection with FINRA’s investigation into potential discretionary trading, unauthorized trading and unsuitable short-term trading in Unit Investment Trusts (“UITs”) by Hornyak. FINRA Letter of Acceptance, Waiver and Consent No. 2013038511901 (July 17, 2015).
According to the Acceptance, Waiver and Consent (“AWC”), on April 30, 2015, FINRA staff requested that Hornyak appear for an on-the-record interview (“OTR”) on May 15, 2015, in connection with FINRA’s investigation into potential discretionary trading, unauthorized trading and unsuitable short-term trading in Unit Investment Trusts (“UITs”) by Hornyak. The AWC indicated that just days shy of the requested interview, Hornyak indicated that he did not intent on participating in the investigation.
Not Cooperating with FINRA’s Investigations
General securities representatives like Hornyak who do not cooperate with FINRA’s investigations often face a permanent bar from practicing in the securities industry as such lack of cooperation violates FINRA’s Rule 8210 – requiring that no member or person shall fail to provide information or testimony or permit an inspection and copying of books, records, or accounts pursuant to the rule.
Public Disclosure Records Revealed
Public disclosure records via FINRA’s BrokerCheck reveal that Hornyak has been subject to at least 3 customer disputes involving claims of misconduct in which damages were awarded to customers. On July 15, 2013, Hornyak settled a dispute with a customer for $90,000 after claims arose from inappropriate investments, excessive and unauthorized trading, excessive sales charges, concentrated positions, and misrepresentations. On January 15, 2014, Hornyak settled a dispute with a client for $10,000 after claims arose that Hornyak placed unauthorized trades on the customer’s account. On June 23, 2014, Hornyak settled a dispute with a customer for $50,000 after the claimant alleged that Hornyak engaged in unsuitable recommendations, misrepresentations and omissions.
Public disclosure records also reveal that Hornyak was employed with Stifel, Nicolas & Company, Inc. in March 2006 and discharged on January 2014 after allegations that he violated his employer’s policy regarding exercising discretion without written authorization. Hornyak was also terminated from a prior employer, Morgan Stanley, back in 2006 amid allegations that Hornyak submitted approval requests for expense reimbursement that did not comply with firm policy.
By definition, a broker is liable for making unauthorized trades without the customer’s prior authorization. Absent written discretion, it is a violation of Section 10(b) of the Exchange Act, and Rule 10b-5, as promulgated thereunder, to effect transactions in customers accounts without their prior authorization or consent.
Additionally, FINRA Conduct Rule 2111(a) provides that a member or associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through reasonable diligence of the member or associated person to ascertain the customer’s investment profile. The violation of these rules supports a claim for securities fraud. FINRA’s suitability rules, and the former suitability rules of the New York Stock Exchange and the NASD, have long been regarded as the standard to which brokers are held.
Investors suffering losses or damages caused by Kenneth Hornyak in connection with discretionary trading, unauthorized trading, or unsuitable short-term trading in Unit Investment Trusts (“UITs”) may be able to recover their investment losses.
Guiliano Law Group
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