FINRA’s Department of Enforcement investigated Craton and alleged he knowingly circumvented UBS’s supervisory system and procedures regarding penny stock transactions. According to FINRA, on April 2, 2012, one of Craton’s customers instructed him to purchase 100 shares of Coil Tubing Technology, Inc. (“CTBG”), a penny stock, in the customer’s UBS brokerage account. A penny stock is a stock that trades for less than $5.00 per share.
At the time, UBS’ supervisory procedures required principal review and approval for all penny stock transactions. FINRA alleged Craton changed the order terms to a $5.00 limit order to bypass principal review and approval, since the UBS’ order system no longer flagged the transaction as involving a penny stock. As a result, the customer’s purchase of CTBG was not subject to principal review and approval.
Based upon the foregoing misconduct, FINRA alleges Craton violated FINRA Rile 2010, which requires all members to “observe high standards of commercial honor and just and equitable principles of trade.” Here, Craton’s intentional circumvention of UBS’ supervisory system was not just and equitable principles of trade because it deprived UBS of the ability to supervise the transaction adequately.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you lost money investing with Craton and UBS, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please contact one of our attorneys at (800) 627-2179 to schedule a free consultation.