The allegations read: Without admitting or denying the findings, desiderio consented to the sanction and to the entry of findings that she willfully violated section 10(b) of the securities exchange act of 1934 and sec rule 10b-5 promulgated thereunder, and violated finra rules 2020. The findings stated that desiderio participated in a scheme to defraud customers in order to generate commissions and markups. Instead of supervising brokers in a branch of her member firm, desiderio allowed them to churn customer accounts. They churned customer accounts and they made material misrepresentations and omissions in connection with the sale of securities. As a branch manager, supervisor, and ultimately the firm's president, desiderio was responsible for supervising the employees of the branch. Due to the high commissions charged, this excessive trading activity caused significant customer losses. Desiderio was aware that an individual with a significant financial interest in the branch, who functioned as its de facto owner, directed the brokers to engage in the foregoing sales practice abuses, distributed materially misleading sales scripts, and encouraged brokers at the branch to churn customer accounts. Finra has barred this individual from associating with any finra member for willfully violating section 10(b) of the securities exchange act of 1934 and rule 10b-5 thereunder. To allow the fraudulent scheme to continue, desiderio made misstatements to customers and failed to provide documents and facts to finra examination staff. Desiderio knowingly sent materially misleading "activity letters" to customers whose accounts were excessively traded. When responding to customer complaints, desiderio made statements to customers about the activities of the registered representatives she supervised that she knew or reasonably should have known were false. The findings also stated that desiderio provided instructions to inexperienced supervisors that caused the alerts generated by the firm's electronic compliance systems - which were purportedly designed to detect and prevent excessive trading - to be ignored and automatically approved. Desiderio also hired, registered, and caused junior brokers - many of them recent college graduates - to work under the direction of the firm's senior brokers. Desiderio knew that the senior brokers were directing the junior brokers to cold call potential customers from lead sheets and to solicit purchases of junk bonds using sales presentations that contained materially misleading statements and omissions of material fact. Desiderio took no steps to supervise the activities of the junior brokers. As a result of desiderio's actions and inactions, the junior brokers made materially misleading statements and omitted material facts when selling the junk bonds to customers. The findings also included that desiderio also made and permitted to be made false statements in response to finra's requests for documents and information. Desiderio failed and refused to appear for testimony requested by finra.
