James Paul Kolf, of Middleton, Wisconsin, a stockbroker with New England Securities, was barred from associating with any Financial Industry Regulatory Authority (FINRA) member firm in any capacity after consenting to findings that he made fraudulent misrepresentations to customers. Letter of Acceptance, Waiver and Consent, No. 2016050940701 (Sept. 6, 2016).
According to the AWC, from October of 2013 to July of 2014, twelve of the firm’s customers acted pursuant to Kolf’s investment recommendations by way of purchasing SFN Financial Network securities. The customers, who reportedly purchased an estimated $588,000.00 in the securities, expected a six percent interest rate pursuant to the terms.
The AWC reported that SNF Financial Network securities did not exist. FINRA found that Kolf’s material omissions and misrepresentations in this regard was conduct violative of Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5, as well as FINRA Rules 2010 and 2020.
FINRA additionally found that Kolf had converted the customer’s funds. Particularly, the AWC stated that Kolf obtained the investors’ funds after claiming that such funds would be utilized for the investment in SNF Financial Network. Kolf reportedly utilized the customers’ funds in order to pay for his personal and business expenses. FINRA found that Kolf’s conduct was violative of FINRA Rules 2010 and 2150.
Courts and securities arbitration panels, in identical circumstances, have long held brokerage firms responsible for the conduct of their registered representatives in “selling away” cases based upon the broker-dealer’s failure to supervise. See, e.g., Hunt v. Miller, 908 F.2d 1210 (4th Cir. 1990); Harrison v. Dean Witter Reynolds, Inc., 974 F.2d 873 (7th Cir. 1992)(firm liable for agent’s selling away activities); Hollinger v. Titan Capital Corp., 914 F.2d 1564 (9th Cir. 1990)(same); State Security Insurance Co. v. Burgos, 583 N.E.2d 547, 557 (Ill. 1991)(liability for firm where broker acted with apparent authority); Salmon v. New England Securities Corp., FINRA Arb. No. 01-06935 ($1.4 million award against member for associated persons “selling away” third party notes); Sleight v. Centaurus Financial, FINRA Arb. No. 10-00536; Brezden v. Associated Securities Corp., FINRA Arb. No. 07-03054 (reasoned award against member for failure to supervise agent’s selling away activties); Chandler v. FSC Corporation, NASD Arb. No. 05-0443, (reasoned award against member for failure to supervise agent’s unauthorized selling away); Battle v. Northeast Securities, Inc., NASD Arb. No. 06-04110, (same)(reasoned award); Dobison v. Jospehthal, Lyons & Ross, Inc., NASD Arbitration No. 96-00963 (arbitration award against brokerage firm for broker’s selling away of unregistered notes and warrants). Securities regulators have also taken the same approach and routinely hold broker-dealers responsible for the “failure to supervise,” when their representatives engage in this outside activity. In Re DBCC (No. 5) v. Charles E. French, Complaint No. 5940026, May 18, 1995 (sanctions against member for selling away activity of broker); Siriani v. United States Securities & Exchange Commission, 677 F.2d 1284 (9th Cir. 1982); Stoiber v. Securities & Exchange Commission, 161 F.3d 745 (D.C. Cir. 1998).
Customers purchasing fake or fraudulent investments from James Kolf ought to consult with qualified counsel to determine their legal rights.
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