Background Of Montrose Securities International (CRD No. 35603)
Montrose Securities International has been a FINRA member since April 1994. The firm
employs two registered representatives/general securities principals, including Leung,
and maintains its office in Sausalito, California. Montrose Securities conducts a general
Leung first registered with FINRA as a General Securities Representative in 1983.
Leung founded Montrose Securities in 1993. Since 1994, Leung has been registered with
FINRA through Montrose Securities in various capacities including: General Securities
Representative, General Securities Principal, and Introducing Broker-Dealer Financial
and Operations Principal. Leung is the sole owner of Montrose Securities and serves as
the firm’s Chief Executive Officer, President, Chief Compliance Officer and Finance and
Operations Principal (FINOP).
Respondents do not have any relevant disciplinary history.
Activity(s) Reported – Montrose Securities International
This matter originated from FINRA’s 2019 FINOP examination of Montrose Securities.
Leung Inaccurately Classified Personal Expenses as Business Expenses,
Causing Montrose Securities to Have Inaccurate Books and Records
FINRA Rule 2010 requires member firms and associated persons to “observe high
standards of commercial honor and just and equitable principles of trade.” Creating
inaccurate books and records is inconsistent with high standards of commercial honor and
just and equitable principles of trade and a violation of FINRA Rule 2010.
FINRA Rule 4511(a) requires FINRA member firms to “make and preserve books and
records as required under the FINRA rules, the Exchange Act and the applicable
Exchange Act rules.” Section 17(a) of the Exchange Act and Rule 17a-3 thereunder
require broker-dealers to make and maintain ledgers accurately reflecting all assets and
liabilities, as well as income and expenses. Section 17(a) of the Exchange Act and Rule
17a-5 thereunder require broker-dealers to report certain financial information, including
FOCUS reports, to FINRA. Inherent in these requirements to make and preserve books
and records is the requirement that such records be accurate. FINRA Rule 4511 is
applicable to both member firms and to associated persons of a member firm. Failing to
maintain records in compliance with FINRA rules, the Exchange Act, and Exchange Act rules constitutes conduct inconsistent with the just and equitable principles of trade, and
is, therefore, also a violation of FINRA Rule 2010.
From January 2017 through November 2018, Leung either paid for the firm’s expenses
through the firm’s checking account or charged the firm’s business expenses to his
personal credit cards. Leung made his own assessments regarding which charges to his
personal credit cards were business expenses. He then paid for those charges using the
firm’s bank account. The firm’s general ledger did not itemize the firm’s business
expenses charged to Leung’s personal credit cards and were recorded on the firm’s
general ledger as either “travel and entertainment” expenses or “office expenses.” During
the above period, Leung improperly characterized over $152,000 of personal expenses as
business expenses, resulting in the firm paying for $152,000 of personal expenses that did
not relate to the firm’s business or customers such as: gas, groceries, vacation dining and
hotel stays, and sporting events.
Therefore, Leung violated FINRA Rule 2010.
As the firm’s FINOP, Leung was responsible for the preparation and maintenance of
accurate financial book and records for Montrose Securities, including the general ledger,
under Exchange Act Rule 17a-3, and the monthly FOCUS reports, under Exchange Act
Rule 17a-5. Leung failed in these obligations by improperly recording payments for his
personal expenses on the firm’s general ledger as business expenses. As a result, Leung
overstated the firm’s business expenses by more than $152,000 on the general ledger,
causing it to be inaccurate. Leung then relied on the firm’s inaccurate general ledger to
prepare the firm’s monthly FOCUS reports. Because the general ledger was inaccurate,
the FOCUS reports were also inaccurate, understating the amount of distributions to
Leung and overstating Montrose Securities’ business expenses.
Therefore, Leung violated FINRA Rules 4511 and 2010. Leung also caused Montrose
Securities to violate Section 17(a) of the Exchange Act and Rules 17a-3 and 17a-5
thereunder, and FINRA Rules 4511 and 2010.
Montrose Securities and Leung Failed to Establish a Reasonable System
and Procedures to Supervise the Reimbursement of Firm Business Expenses
FINRA Rule 3110(a) requires that a member firm establish and maintain a system to
supervise the activities of each associated person that is reasonably designed to achieve
compliance with applicable securities laws and regulations, and with applicable FINRA
Rules. FINRA Rule 3110(b) requires that each member firm establish, maintain, and
enforce written procedures to supervise the activities of its associated persons that are
reasonably designed to achieve compliance with applicable securities laws and
regulations, and with applicable FINRA Rules. A violation of FINRA Rule 3110 also
violates FINRA Rule 2010.
From January 2017 through November 2018, Montrose and Leung failed to establish and
maintain a reasonable supervisory system, including WSPs, to supervise the
reimbursement of firm business expenses. The firm’s WSPs stated Leung was responsible
for establishing and maintaining the firm’s supervisory manual and for the firm’s overall
supervisory system. The WSPs also stated that Leung was responsible for carrying out
the firm’s WSPs, and for formally reviewing the firm’ procedures on an annual basis.
The firm’s WSPs did not address what business expenses employees could be reimbursed
for or require employees to submit any documentation describing the business purpose
for each expense. The firm also did not conduct any reviews in order to determine
whether the expenses had been improperly charged to the firm or not. Due to these
supervisory deficiencies, the firm had no way to reasonably evaluate or verify whether
the payments Leung recorded on the firm’s general ledger as “business expenses” were
accurate, as required by FINRA Rule 4511, and Exchange Act Section 17(a) and Rules
17a-3 and 17a-5 thereunder. And as a result, Leung inaccurately characterized over
$152,000 of personal expenses as business expenses; he then improperly made payments
for these personal expenses.
1 A Financial and Operational Combined Uniform Single (FOCUS) report includes a balance sheet, income statement, and net capital calculation.
Therefore, Respondents violated FINRA Rules 3110(a) and (b) and 2010.
Penalties And Sanctions
■ For Montrose Securities, a censure;
■ For Leung, a one-month suspension from associating with any FINRA member in
■ For Montrose Securities and Leung, a fine in the total amount of $30,000,
allocated as follows:
■ A $10,000 fine for Leung;
■ A $10,000 fine for Montrose Securities; and
■ A $10,000 fine, joint and several, for Montrose Securities and Leung.
Respondents agree to pay the monetary sanctions upon notice that this AWC has been
accepted and that such payments are due and payable. Respondents have submitted an
Election of Payment form showing the method by which they propose to pay the fine
Respondents specifically and voluntarily waive any right to claim an inability to pay, now
or at any time after the execution of this AWC, the monetary sanctions imposed in this
Leung understands that if he is barred or suspended from associating with any FINRA
member, he becomes subject to a statutory disqualification as that term is defined in
Article III, Section 4 of FINRA’s By-Laws, incorporating Section 3(a)(39) of the
Securities Exchange Act of 1934. Accordingly, he may not be associated with any
FINRA member in any capacity, including clerical or ministerial functions, during the
period of the bar or suspension. See FINRA Rules 8310 and 8311.
The sanctions imposed in this AWC shall be effective on a date set by FINRA staff.
Recent Activity(s)Of The Individual/Firm
From January 2017 through November 2018, Leung inaccurately classified certain of his
personal expenses as business expenses on Montrose Securities’ general ledger, in
violation of FINRA Rule 2010. Leung then used the inaccurate general ledger to prepare
monthly FOCUS reports1 which were also inaccurate, understating the amount paid to
Leung and overstating the firm’s business expenses. Because Leung’s conduct caused the
firm’s books and records to be inaccurate, Leung further violated FINRA Rules 4511 and
2010; his conduct also caused Montrose Securities to have inaccurate books and records,
in violation of Section 17(a) of the Securities Exchange Act of 1934 and Rules 17a-3 and
17a-5 thereunder, and FINRA Rules 4511 and 2010.
In addition, from January 2017 through November 2018, Montrose Securities and Leung
failed to establish and maintain a supervisory system, including written supervisory
procedures (WSPs), regarding business expense reimbursement reasonably designed to
ensure compliance with FINRA Rule 4511 and Section 17(a) of the Exchange Act and
Rules 17a-3 and 17a-5 thereunder. Based on the foregoing, Montrose and Leung violated
FINRA Rules 3110(a) and (b), and 2010.
How To Spot A Fraud Finance Advisor (Infographic)
Help For Victims Of Montrose Securities International
If you have lost funds because of misrepresentation, unsuitable investment, or unsuitable investment strategy from Montrose Securities International. Then you can take legal action and get justice. Fraud, Malpractice & dereliction of duty should not be taken lightly, especially in this industry. We highly suggest that you notify authorities or seek legal action if your financial advisor or brokerage firm fails to abide by FINRA’s rules are regulations.
Financial advisors are regulatory & legally obligated to suggest (recommend) the most suitable investments/investment strategies to their clients. Their suggestions should have their client’s best interests and should be appropriate for their client’s goals and needs. Similarly, the brokerage firm which hires financial advisors also has a regulatory & legal obligation to keep a close watch and supervise their Financial Advisors’ practices & behavior. They need to make sure that the financial advisor is not being manipulative or having an unreasonable bias towards certain investments. If the financial advisor and/or the brokerage firm breaches these duties, then the client/customer may be entitled to a full or partial recovery of their losses.
Financial advisors need to have the interest of their clients when giving suggestions related to investments and investment strategies. Reasonable basis suitability requires the advisor to do their best to analyze & identify the risks and rewards associated with their suggested investment and/or investment strategy.
Montrose Securities International has been involved in fraudulent activities and is an unsafe professional entity. We strongly recommend you avoid any association with such a shady figure.
- Shady Activity
- Swindling Activity Reported By Clients
- Under Govt. Organization's Radar
- High Risk of Fraud