FINRA and unethical stockbrokers


A crooked stockbroker’s elaborate fraud scheme brought the production of a Broadway musical to an end in the fall of 2012. Under investigation for multiple customer complaints and under indictment for money-laundering and fraud, Long Island stockbroker Mark Hotton is now serving a significant prison time in addition to losing his license to sell securities.

In February 2012, Hotton convinced producers of the Broadway musical “Rebecca” to pay him to find investors to help finance the show’s $12 million to $14 million budget. Hotton claimed to have secured $4.5 million from four overseas investors and the producers paid him over $60,000 in fees for his work. Unfortunately, all four investors were ghosts for whom Hotton had created elaborate lives and lies. To further the scam, Hotton even faked the death of one of his imaginary investors.

In the four years before the criminal charges for his fraud relating to “Rebecca,” Hotton was under investigation for 12  customer complaints alleging fraud, forgery and illegally moving customer funds to his personal accounts. In one complaint, Hotton was accused of leading a couple to believe they were investing $5.1 million in an internationally based multi-billion dollar company when Hotton really moved the money to -a shell companies run by his wife and diverted funds to other investors and pay for his lavish lifestyle. It was Mr. Dennin who uncovered the multimillion dollar hybrid Ponzi scheme implemented by Hotton while a broker at Oppenheimer & Co. Inc. and Ladenburg Thalmann & Co. The evidence gathered by Mr. Dennin was shared with the United States Attorney’s Office in the Eastern District of New York and FINRA enforcement officials in Rockville Maryland. This evidence resulted in FINRA barring Hotton from the securities industry for life and Hotton’s federal prison sentence in 2015.

While a government agency with prosecutorial power -the U.S. Attorney’s Office in Hotton’s case – brings criminal charges, customer complaints against stockbrokers are investigated by the Financial Industry Regulatory Authority. FINRA’s stated mission is “to protect America’s investors by making sure the securities industry operates fairly and honestly.”

With 15 district officers nationwide, FINRA reviews between 3,000 and 5,000 complaints annually. If it suspects misconduct, its investigators follow up by reviewing records and interviewing customers. Disciplinary investigations can be lengthy and if professional misconduct is confirmed, either a stockbroker’s license can be suspended or they could be permanently barred from working in the securities industry.

In addition to criminal prosecution and professional discipline, stockbrokers are civilly liable for the financial harm they cause customers through fraud. For example, Mr. Dennin recouped more than $3.5 Million Dollars from Oppenheimer & Co. Inc. on behalf of former clients of Hotton. If an unscrupulous stockbroker has swindled you or a loved one, contact an experienced attorney to discuss your situation and your options.