Gordon Douglas Dihle, of Centennial, Colorado, president and chief compliance officer with Spencer Edwards, Inc., has been fined $25,000.00 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any principal capacity according to an Office of Hearing Officers Order Accepting Offer of Settlement containing findings that the firm and Dihle, inter alia, effected the unregistered securities transactions. Department of Enforcement v. Spencer Edwards, Inc. et al., No. 2013035865303(Dec. 23, 2015).
According to the Order, from January of 2011 to December of 2012, the firm and Dihle effected the liquidation of four billion unregistered penny stock shares in the accounts of seven customers, even though the shares were neither exempt from registration with the Securities and Exchange Commission (SEC) nor registered with the SEC.
Apparently, customers went through the same process of obtaining their shares through a debt conversion arrangement, where they deposited shares in the accounts held with Spencer Edwards, Inc. Subsequently, the shares were liquidated, with checks having been issued from the firm to the customers accordingly. The Order stated that three of the seven customers worked together to alternate the liquidations. Apparently, the sales failed to qualify for an exemption according to Securities Act of 1933 Section 4(1) or a Rule 144 safe harbor treatment based upon the sales having been designed for evasion of Securities Act of 1933 Section 5 registration requirements.
The Order stated that Dihle neglected to create and implement a supervisory system and written supervisory procedures to make sure that the firm complied with Securities Act of 1933 Section 5 in reference to the sale of penny stocks. Dihle was cited as failing to make sure that registered representatives adequately investigated the nature of the transactions effected in the seven customer accounts. FINRA further noted that despite clear signs that the sales of securities could run afoul of securities registration requirements, registered representatives failed to perform a reasonable inquiry to prevent the transactions from being consummated. FINRA found that the firm’s and Dihle’s failure to supervise in that regard was violative of FINRA Rule 2010 and NASD Rule 3010(a) and (b).
FINRA Public Disclosure reveals that Dihle has been subject of two customer initiated investment related disputes pertaining to allegations of his wrongdoing while he was associated with Spencer Edwards. Particularly, on July 7, 2011, a customer initiated investment related arbitration claim involving his conduct was settled for $100,000.00 in damages supported by allegations of misrepresentation and suitability concerning corporate debt investments. Further, on October 15, 2012, a customer filed an investment related written complaint regarding Dihle’s activities, based upon allegations that Dihle failed to supervise penny stock sales effected in the customer’s account.
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