FINRA Bars Former Toledo, Ohio Broker for Making False and Misleading Statements to Member Firm Regarding Role in Promotion of Hedge FundWednesday, June 3, 2020
In an Extended Hearing Panel Decision released on May 15, 2020, the Financial Industry Regulatory Authority (FINRA) Office of Hearing Officers found that former registered representative William Joseph Kielczewski violated several securities industry rules by making false statements to his previously associated brokerage firm and willfully causing the firm to file misleading records to FINRA.
Kielczewski has been associated with two FINRA member firms since obtaining his broker license: Fifth Third Securities, Inc. from November 1999 to December 2013 and The Huntington Investment Company (Huntington) from January 2014 to May 2017. Both firms are located in Toledo, Ohio. Kielczewski’s FINRA BrokerCheck report reveals that he was discharged from Huntington after the firm concluded that he “misrepresented activity relating to an OBA [outside business activity], and engaged in private securities transactions without firm approval.”
In May 2019, Kielczewski was named respondent in a FINRA Complaint alleging that he falsely and repeatedly misrepresented to Huntington that he was a passive investor in a hedge fund when he played an active role in promoting the fund to potential investors.
While associated with Fifth Third, Kielczewski was selling fixed income securities, to public institutions and commercial clients. After the financial crisis, when new banking regulations restricted banks’ ability to trade in non-agency mortgage-backed securities, Kielczewski and a business partner at Fifth Third created a hedge fund and its related entities to continue trading mortgage-backed securities. Just prior to this, Mariemont Capital LLC was created to be the investment manager responsible for making all investments for the hedge fund. In October 2013, Kielczewski’s business partner formed the hedge fund, Mariemont Capital Partners, L.P. and the fund’s general partner, MCP GP, LLC was formed the next day with Kielczewski identified as one of its three managers. According to the Decision, Kielczewski invested in the Mariemont Fund and held ownership interests in the related entities. The Mariemont Fund began operations in January 2014 and continued to operate at least through the time of the hearing.
The Mariemont Fund became a customer of Huntington in January 2014 after Kielczewski joined the firm as a Managing Director in Institutional Sales, and, as found in the Extended Hearing Panel Decision, Kielczewski promoted the hedge fund to investors, facilitated their investments in the fund by participating in private securities transactions totaling over $10 million, reviewed and revised the fund’s promotional materials and quarterly portfolio reports, and suggested to the fund trader certain securities to purchase for the fund, without prior notification or approval from Huntington.
The Hearing Panel also found that Kielczewski falsely stated in two compliance attestations and in email correspondence with his Huntington supervisor that he was not soliciting investments for the fund. Thus, the Hearing Panel charged Kielczewski with willfully causing the firm to file misleading Uniform Application for Securities Industry Registration of Transfer (Form U4) statements by stating that he took only a passive role in the hedge fund.
After a four-day hearing, The Extended Hearing Panel found that Kielczewski violated NASD Rule 3040 and FINRA Rules 3280, 1122 and 2010. The Panel suspended Kielczewski for 18 months from associating with any FINRA member firm in any and all capacities and fined him $50,000. Further, following his suspension, FINRA ordered that Kielczewski be placed on heightened supervision for one year.
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