The allegations read: Without admitting or denying the findings, savage consented to the sanctions and to the entry of findings that he failed to obtain finra approval of a material change in his member firm's business operations, as required by the firm's membership agreement the findings stated that savage was the firm's ceo, president, cco and principal owner. Savage sent a letter to finra staff requesting a change in the firm's membership agreement to include the sale of real estate investment trusts and alternative investments. Savage stated that he did not believe he needed to file a continuing membership application (cma) because the additional product lines did not constitute a material change in the firm's business operations. Finra's membership application program (map) staff advised savage that the proposed changes did constitute a material change in the firm's business operations, and that the firm was required to file a cma. The firm submitted a request to finra staff for a materiality consultation, in which the firm requested the staff's opinion on whether adding certain product lines would constitute a material change in the firm's business operations. The map staff informed savage of its determination that the additional product lines represented a material change in the firm's business operations, and that the firm should not engage in sales of the products until map staff had reviewed and approved the firm's request. The map staff sent a letter confirming its decision. Despite the map staff's notice and directive, the firm engaged in more than fifty transactions with customers totaling approximately $4 million, involving the additional product lines. Savage effected several of these transactions himself. Savage caused his firm to engage in sales of securities products that the firm was not approved for pursuant to its membership agreement. The findings also stated that while registered with his firm, a husband and wife filed a statement of claim with finra's office of dispute resolution against savage and others. To date, savage has willfully failed to amend his uniform application for securities industry registration or transfer (form u4) to disclose the claim, which is an investment-related, consumer-initiated claim that alleged sales practice violations against him. The findings also included that savage failed to provide the documents and information in a timely manner to finra requests for documents and information relating to the upcoming examination of the firm and the firm's net capital compliance and securities business. On august 7, 2017, finra staff sent savage's attorney a wells notice, stating that the staff had made a preliminary determination to recommend that formal disciplinary action be brought against savage and the firm. Three weeks after staff issued savage and the firm a wells notice, on or about august 30, 2017, savage finally provided staff with the documents and information requested. Finra found that staff emailed savage notification that an arbitration award in favor of a customer had been entered against the firm and advised savage by telephone and email that, as a result of the arbitration award, savage must suspend his firm's securities business operations in the event the firm's net capital level had fallen below its required minimum amount. Savage was also advised by finra staff to notify the sec and finra of any net capital deficiency. Despite staff's warnings and savage's knowledge of the aforementioned arbitration awards, the firm conducted a securities business while it was net capital deficient. The firm operated with a net capital deficiency of between $130,000 and $150,000, yet executed seven securities transactions on behalf of customers. One of the seven transactions was effected by savage, and savage was the principal responsible for reviewing the other six transactions. At no time did savage file a notification with the sec and finra that the firm had a net capital deficiency.
