by Robert H. Rex, Esq.
The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA's chief role is to protect investors by maintaining the fairness of the U.S. capital markets.
All stockbrokers and broker dealers (brokerage firms) are required to be licensed by and subject to the rules and regulations of FINRA. Each month FINRA publishes disciplinary actions against brokers and broker dealers. Discipline can range from monetary fines and suspensions, or in extreme cases, revocation of licensing and a bar from the securities industry.
See the FINRA website for current and historical disciplinary actions.
Eduardo Guillermo Diaz (CRD #1621873, Registered Principal, Ocean Springs, Mississippi) was named a respondent in a FINRA complaint alleging that in connection with the sale of a security, during telephone conversations and email communications, he intentionally or recklessly made untrue statements of material fact to a customer in willful violation of Section 10(b) of the Exchange Act and Rule 10b-5 regarding properties of a limited liability company he controlled and intentionally or recklessly omitted to state other relevant and related material facts to the customer. The complaint alleges that the customer's investments in the company and the loan to it, which totaled at least $365,000, were not paid directly from her account at Diaz's member firm. Rather, amounts withdrawn from her account were transferred to her checking account at a bank. At Diaz's request, she then wired the funds, comprising the investments and loan to the company, to a bank account, which was a personal bank account Diaz controlled. In reliance upon representations Diaz made, the funds the customer provided to Diaz were intended for use by the company for its general business operations. Diaz's bank account was comprised almost entirely of funds from the customer for her investments and the loan. Diaz improperly converted at
least $126,000 of these funds in his bank account to his personal use for expenditures that did not benefit the company or the customer. The complaint also alleges that Diaz executed transactions in the customer's account, without her prior knowledge, authorization or consent. The unauthorized transactions in the customer's brokerage account at Diaz's firm resulted in more than $195,000 in cash that he sent to the customer, which she believed were distributions from the company. The complaint further alleges that Diaz, acting
outside of his employment with his firm, participated in private securities transactions for compensation with the customer without providing prior written or oral notice to
the firm of his proposed role in, or the selling compensation that he might receive from the transactions. The firm did not approve Diaz's private securities transactions with the customer. In addition, the complaint alleges that Diaz engaged in business activities with his company outside the scope of his relationship with the firm, without providing prior written notice to the firm or receiving its written approval. Diaz's participation in the company was not passive. Diaz was a member and manager of the company and received approximately $126,000 in compensation as a result of his business activity with it. Moreover, the complaint alleges that Diaz solicited loans from the customer in the total amount of $87,000. The loans were directed to Diaz and his company and deposited into his personal bank account. Diaz failed to notify his firm of the loans the customer made to him contrary to firm policy that prohibited Diaz from borrowing from customers in all circumstances. (FINRA Case #2012034594402)
According to FINRA BrokerCheck Records Diaz is not currently registered. He was previously registered at the following brokerage firms:
Kovack Securities, Inc.
Next Financial Group, Inc.
AIG Financial Advisors, Inc.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.