The Financial Industry Regulatory Authority (FINRA) has fined WFG Investments Inc. $200,000 over alleged lapses that led to WFG missing a stock fraud scheme involving an alleged pump-and-dump scheme run in 2006 and 2007 by John Mazzuto, former CEO of Industrial Enterprises of America Inc., and James Margulies, the COO and general counsel. Industrial Enterprises fraud reportedly involved a total of $110 million in illegal stock sales.
FINRA claimed WFG failed to supervise the sales of nearly $18 million of restricted stock of Industrial Enterprises of America. Margulies sold illegal shares to buyers through accounts he had opened at WFG.
According to FINRA's settlement, "WFG failed to conduct an independent inquiry to determine whether the shares … were freely tradable."
WFG has 115 branch offices and close to 250 brokers, agreed to a censure and a review of its supervisory procedures.
Mazzuto pleaded guilty to the fraud in January, 2011, and is serving a 4½-year prison term. Margulies was convicted in July, 2011, and is serving a 7 to 21 year sentence.
If you have suffered in the WFG Investments, Industrial Enterprises of America fraud, you may have a potential claim for recovery. Call Soreide Law Group for a free consultation with an attorney: 888-760-6552, or visit our website at www.securitieslawyer.com.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.