Finra sank his job chances, attorney says

Kevin Carreno's hope of being Florida's top regulator is dashed by a Wells notice

Jun 21, 2009 @ 12:01 am

By Dan Jamieson

A Florida attorney claims that the Financial Industry Regulatory Authority Inc. derailed his bid to become the state's top financial watchdog in retaliation for a previous legal dispute he had with the regulator.

Kevin Carreno maintains that he was well on his way to being appointed commissioner of Florida's Office of Financial Regulation in March when Finra sent his former employer, Empire Financial Group Inc., a Wells notice alerting it that he faced potential enforcement actions.

The possible charges stemmed from Mr. Carreno's year-long stint as chief operating officer of Empire, which went out of business last year.

Finra spokesman Herb Perone declined to comment, citing the agency's policy against commenting on ongoing investigations.

Mr. Carreno filed a 30-page rebuttal to the Wells notice.

Finra offered to drop one of three proposed charges and settle the case for $25,000, a deal that Mr. Carreno said he has refused.

Finra alleged in the notice that he didn't have the proper supervisory and financial-operations principal licenses while at Empire. It also alleged that last October, as Empire was about to be shuttered, Mr. Carreno improperly sent negative-consent letters to the firm's clients, informing them that their accounts would be transferred to Empire's parent company, Jesup & Lamont Inc. of New York.

In addition, he this month wrote a letter to Sen. Charles Grassley, R-Iowa, urging him to increase the federal government's oversight of Finra. Mr. Grassley, the ranking Republican on the Finance Committee, recently raised doubts about Finra's handling of allegations of improprieties made by a former employee of Lehman Brothers Holdings Inc. of New York.

According to Mr. Carreno, Finra instructed a lawyer at Empire to see that he updated his disciplinary record immediately to reflect the Wells notice. The lawyer was also instructed to inform the Florida governor's office that the notice had been issued, he said.

“I was absolutely staggered,” said Mr. Carreno, who is now president of Experts Counsel Inc., a compliance consulting firm in Tampa, Fla.

His hope of being Florida's top watchdog was immediately dashed and the Florida Financial Services Commission, which is responsible for appointing a financial regulation commissioner, continues to look for someone to fill that role. The position was formerly held by Don Saxon, who resigned last summer after local news reports blamed him for turning a blind eye to abusive mortgage lending.

Sterling Ivey, a spokesman for Florida Gov. Charlie Crist, confirmed that Mr. Carreno had applied for the position and been interviewed. Mr. Crist is one of four officials who make up the state cabinet that votes on the appointment.

In an e-mail, Mr. Ivey declined to comment on whether Mr. Carreno was the final candidate and the impact of the Wells Notice. “There has not been a final decision made for the vacancy, and we continue to review all applications and interview applicants,” he wrote.


Sources say the bad blood between Mr. Carreno and Finra stems from a case last year in which Finra challenged Empire's net capital computation.

For his part, Mr. Carreno maintains Finra made the accusation in an attempt to force Empire out of business in April 2008.

He acknowledged that the firm suffered from an “accumulation of [regulatory] history,” including an investigation into mutual fund market-timing and a practice of hiring brokers from lower-tier firms that had gone out of business.

Regulators may have thought the firm was a bucket shop, but “if that's the case, it was the [most inept] bucket shop I've ever seen,” Mr. Carreno said.

The firm's 80 independent contractors produced about $4 million in revenue, which is hardly the production truly bad brokers typically do, he said.

Mr. Carreno said he had been hired specifically to fix the firm.

But Finra officials had no intention of giving him a chance to turn things around, he said.

Early last year, Finra of New York and Washington told Empire's clearing firm to cease processing trades. And an unknown Finra lawyer contacted the American Stock Exchange, where Empire's parent company, Jesup Lamont, trades, and told the Amex that the agency had issued a cease-business letter for Empire, Mr. Carreno said. No letter had been sent, he said.

“That's the point where I said something is really rotten here in Denmark” about how Finra operates, Mr. Carreno said.


He then filed an un-usual legal action called a bill of discovery in state court in an attempt to get internal Finra documents relating to the case.

A federal judge later dismissed the action, based in part on the governmental immunity Finra enjoys.

“Kevin pushed back very hard against Finra” in the net-capital case, said Don Wojnowski, the Melbourne, Fla.-based president and chief executive of Jesup & Lamont. “I won't say [Mr. Carreno is] not combative, but he's an attorney with an unblemished record [and] probably the highest-quality candidate I've ever hired.”

Mr. Carreno said his reputation has been tarnished.

“With the type of [compliance consulting] practice I have, having this open issue is hurting my business,” he said.

Mr. Carreno's lawyers have taken the unusual position of challenging Finra to file formal charges.

The Wells notice contains nothing but “flimsy” charges, said David Gehn, an attorney at Gusrae Kaplan Bruno & Nusbaum PLLC in New York who represents him.

“We're begging them to file a substantive complaint,” Mr. Gehn said. “So far we've heard nothing.”

E-mail Dan Jamieson at


What do you think?

View comments

Recommended for you

Sponsored financial news

B-D Data Center

Use InvestmentNews' B-D Data Center to find exclusive information and intelligence about the independent broker-dealer industry.

Rank Broker-dealers by

Upcoming Event

Aug 01


An Adviser's Guide to Developing NextGen Talent

As the registered investment advisory business matures, it's clear we need to focus on a new generation of talent.Research from InvestmentNews shows that firms of seven or more full-time individuals employing at least one NextGen... Learn more

Featured video


Amy Florian: Issues with elder abuse and diminished capacity

As clients age, they become increasingly susceptible to diminished capacity and/or elder abuse. Amy Florian of Corgenius explains the nature and causes of diminished capacity and the signs to watch for.

Latest news & opinion

Retirement planning for women

Longer lifespans and lower savings require creative income strategies.

Sean Spicer resigns as press secretary after Anthony Scaramucci is appointed communications director

Scaramucci is known as an ardent foe of the DOL fiduciary rule, having said during the campaign that Trump would repeal it .

Redoing the math on a 4% retirement withdrawal rate

Given the current interest-rate environment and other factors, advisers disagree about whether the number is too conservative or not conservative enough.

House panel passes bill to replace DOL fiduciary rule with one requiring disclosure of conflicts

Measure likely to continue in partisan advance in House, but could stall in Senate.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print