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Gary Donovan of Newark, Ohio, a stockbroker with Sagepoint Financial, Inc., was permanently barred from associating with any Financial Industry Regulatory Authority (FINRA) member after consenting to findings that engaged in stock price manipulation. Letter of Acceptance, Waiver and Consent, No. 2015045600101 (May 27, 2016).
According to the AWC, on August 28, 2014, Donovan had effected an estimated one-hundred and eighty purchase orders for Mix I Life, Inc. (MIXX), in ninety customer accounts. The AWC stated that in eighty-three of the ninety accounts, Donovan had discretionary trading authority. Apparently, Donovan placed purchase orders in an additional two accounts which he and his family owned. The AWC stated that Donovan effected MIXX purchases via a stock promoter that Donovan interacted with on almost a daily basis.
FINRA found that the trades effected by Donovan exceeded twenty percent of MIXX’s market on twenty-one days. The A2015045600101WC reported that on the twenty-one days in question, Donovan had effected one-hundred limit orders that had been matched identically, both through the price and the amount, with sell limit orders that were placed recently. The AWC stated that the limit orders that Donovan placed had been most often priced at a point higher than MIXX’s inside ask price and/or MIXX’s market.
FINRA found that Donovan’s trades effectively stabilized MIXX’s price at six dollars per share. Accordingly, FINRA argued that Donovan either had knowledge or should have had knowledge that his purchase orders were paired with the same sell orders – which amounted to MIXX’s stock being manipulated. The price of MIXX reportedly dropped to under a dollar per share after Donovan stopped interacting with the stock promoter. In turn, customers lost the majority of their investments.
On January 21, 2016, Sagepoint terminated Donovan amid allegations of his failure to follow Sagepoint’s policies concerning unlisted securities sales, as well as interactions with stock promoters. FINRA found Donovan’s conduct of causing the manipulating of stock-prices to be in violation of FINRA Rule 2010, resulting in his permanent bar.
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