WJB Capital Group, Inc. Expelled by FINRA
FINRA has expelled WJB Capital Group, a privately held broker-dealer, for misstating its financial records and for engaging in securities transactions while it was below its required net capital. Chief Executive Officer Craig A. Rothfeld was barred from the securities industry, and Chief Financial Officer Gregory S. Maleski was barred from acting in a principal capacity.
FINRA found that from 2009, when WJB Capital began to experience financial difficulties, through 2011, Rothfeld and Maleski misstated WJB’s financial position on the firm’s balance sheet.
In one example, Rothfeld and Maleski converted $9.8 million in compensation previously paid to 28 employees into forgivable loans. As a result, the firm also failed to provide for the appropriate payment of taxes. Had WJB appropriately recorded these loans and tax obligations, its balance sheet would have reflected substantial losses in addition to those that it was already experiencing.
In addition, Rothfeld and Maleski misclassified certain items as allowable for net capital purposes; as a result, at various times in 2011, WJB engaged in securities transactions when it was below its minimum required net capital.
For example, the firm improperly included receivables related to “non-deal road-shows” when they were not allowable assets under the net capital rule. As a result of the misclassification of these receivables, WJB misstated its FOCUS report and net capital calculations by at least $1 million on a monthly basis for approximately two years. The firm also misclassified a $1.5 million loan it received from its clearing firm as an allowable asset for net capital. Rothfeld, Maleski and WJB also failed to reasonably supervise the firm’s financial and accounting functions.
Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “Both WJB’s CEO and CFO hid the precarious financial condition of the firm, misstating the FOCUS reports and net capital calculations by as much as $4.4 million per month over a two-year period. The firm’s supervision and accounting were seriously flawed.”
In settling this matter, WJB, Rothfeld and Maleski neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
Fort Lauderdale Securities Litigation Attorney and FINRA Arbitrator
Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. In addition to being an experienced securities litigation attorney, Mr. Kahn also serves as a FINRA arbitrator for individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.