FINRA Expels Hudson Valley and its CEO Mark Gillis

The Financial Industry Regulatory Authority (FINRA) announced that it has expelled Hudson Valley Capital Management and barred its Chief Executive Officer, Mark Gillis, from associating with the securities industries. They have been accused by FINRA of defrauding their clearing firm and their customers, whereby they subsequently allegedly used a markup scheme as well as authorized trading in an effort to hide the losses.

FINRA is alleging that during 2012, Gillis, as owner of half the company, used the firm’s Average Price Accounts to circumvent the net capital and minimum account equity requirements to trade millions of dollars worth of stock, which then allowed Gillis to personally profit since he allegedly used his personal brokerage account as the counterparty to certain purchases and sales. Mr. Gillis would allegedly markup or markdown the prices of the stock when allocating them from the Average Price Account to his personal account, thus allowing him to have more favorable prices while keeping the difference which he would then proceed to withdraw from his personal brokerage account.

The alleged abuses by Mr. Gillis led to significant monetary losses to the Average Price Account according to FINRA, which then led to Mr. Gillis to allegedly defraud Hudson Valley’s customers and clearing firm by “using their funds and securities to cover the losses”. This alleged cover up resulted in Mr. Gillis engaging in unauthorized trading, during which Mr. Gillis would sell off stocks to cover short positions on the Average Price Account. Mr. Gilles would also allegedly buy thousands of shares without any orders from customers and then allocate them to a customer’s account with markups ranging from 177% to 280%. The schemes allegedly perpetrated by Mr. Gillis caused at least one customer to lose at approximately $400,000, while also causing Hudson Valley to experience net capital deficiencies in excess of $350,000, during which time the firm continued to engage in the securities business.

According to FINRA, since Mr. Gillis is the “CEO, CCO, FINOP and 50% owner of Hudson Valley, the Firm is the corporate embodiment of Gillis and is liable for his misconduct.” This forms the basis for the expulsion of Hudson Valley. FINRA is also alleging that during 2010, there was a Cautionary Action letter sent which stated that ” Gillis should have been subject to heightened supervision given that he was a producing manager” and the firm was cited for not assigning a supervisor to review Mr. Gillis activities. Hudson Valley responded by stating that they would assign someone to supervise Mr. Gillis, but according to FINRA that never occurred. Furthermore, in an effort to cover up the scheme, Mr. Gillis allegedly created tickets for unauthorized transaction which led to the firm allegedly keeping inaccurate books and records.

If you were an investor with Hudson Valley or Mark Gillis, contact Sonn Law Group to explore your legal options. Sonn Law Group is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies. For more information, call toll free 1-844-689-5754 or 954-763-4700.