Philip Jay Patlis of Boca Raton Florida a stockbroker currently registered with Shearson Financial Services LLC has been fined $5,000.00 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon consenting to findings that Patlis falsely represented that transactions executed in customer accounts were not solicited. Letter of Acceptance Waiver and Consent No. 2015043417504 (Sept. 6, 2016).

Stockbrokers often seek to aviod detection by supervisors, by mismarking solicited orders, i.e. order recommended by the broker, as “unsoliicted,” meaning that the customer purchased the securities on their own initiative, and thefore the broker has no responsibility or liability for any recommendation. FINRA Conduct Rule IM-2310 with regard to suitability provides that:

(a) In recommending to a customer the purchase, sale or exchange of any security, a member shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts, if any, disclosed by such customer as to his other security holdings and as to his financial situation and needs.

No recommendation, no violation of Rule 2310.   However, absent special circumstances, or affinity to a particular local company or industry, when all or many of a broker’s customers, who do not know each other, are all purchasing the same security, the common nexus being only that of the broker, there is a substantial chance these transactions (usually in lower priced or speculative securitgies, are really solicited and secretly recommended by the broker.  Hence, many broker-dealers have supervisory tools, including “unsolicited activity reports” to detect and prevent such conduct.

Apparently, not the case here.

According to the AWC, between December 10, 2013 and August 25, 2015, a total of seventy-two order tickets had been mismarked by Patlis in the investment accounts of twenty-two customers. Specifically, order tickets had been apparently been marked as unsolicited; however, those trades were actually solicited. FINRA found that Patlis’ mismarking of order tickets caused Shearson Financial Services to maintain records and books that were inaccurate. Consequently, FINRA found that Patlis’ conduct was violative of FINRA Rules 2010 and 4511(a).

FINRA Public Disclosure reveals that a customer initiated investment related arbitration claim involving Patlis’ conduct was settled for $37,500.00 in damages founded on accusations that between September of 2015 and November of 2016, while Patlis was associated with Shearson Financial Services LLC, Patlis over-concentrated the customer’s assets in collateralized mortgage obligations – investments that were not appropriate for the customer’s financial profile. FINRA Arbitration No. 17-01234 (Aug. 3, 2018).

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