Investor Protection Services

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SAMPLE WINNOW™ QUARTERLY UPDATE

Broker Name: Michael C. Rud

This Broker Currently Works For: Median Brokerage, Inc.

Since the last report, have we found out anything else about him?

Since the last report Mr. Rud has started a new business called, Financial Experts, LLC, and registered as an Investment Adviser (see glossary) with the SEC.

Yes. Mr. Rud left Average Brokers, Inc. in April 2007, and moved to Median Brokerage, Inc. NASD records indicated that he was terminated by Average. By the time we send you your next Winnow report, more details of the circumstances of the termination should be available.




Yes. Since the last report, two of Mr. Rud’s customers have filed arbitration actions against him alleging churning and unauthorized trading (see glossary). Those arbitration actions are pending. Future Winnow reports will contain details about how those claims are resolved.
In addition, since your last Winnow Report, two customers have completed IW surveys on Mr. Rud. Those surveys are reflected in Mr. Rud’s updated IW Score (see below).

In light of these developments, Investor’s Watchdog recommends that the customer review her account carefully for signs of unauthorized trading and/or churning and bring any problems to the attention of the Median compliance department whose address is 1234 Trust Avenue, New York, New York, 12345. If the customer needs legal advice, IW can recommend an attorney experienced in such matters. Call IW toll free at 866-423-WDOG (9364) for a referral.


Since the last report, has anything changed about Mr. Rud’s firm?

Mr. Rud’s new firm, Median, is an independent broker-dealer headquartered in New York. Median has been sanctioned numerous times in the past ten years, and twice since the last Winnow report.

In June 2007, the U.S. Securities and Exchange Commission issued a cease-and-desist order against Median for failure to properly supervise representatives in ten branch offices nationwide. The SEC found that Median’s representatives engaged in widespread sales practice abuses including making material misrepresentations to customers and using high pressure sales tactics. The SEC fined Median $2.0 million.

In July 2007, the NASD censured and fined Median $750,000 for failing to timely file 510 amendments to Forms U4 and U5 which, if timely filed, would have put the public on notice of 510 additional regulatory actions or criminal actions by Median representatives.

In light of the forgoing, IW has lowered Mr. Rud’s IW score to 44 on a scale of 40 to 80. This is a thirteen point drop from the initial Broker Safety Score of 57. A score of 40 indicates a broker that, in IW’s opinion, the client should avoid altogether. A score of 80 indicates a broker who has been tested by bear markets and yet has no customer complaints, no disciplinary history, no negative information in the IW database, and no areas that raise concern for a former SEC Enforcement Branch Chief.*

*IW rates brokers on a 40 to 80 scale with a higher score reflecting IW’s opinion, based on historical information, that the investor’s assets are safe from intentional or reckless misconduct by the broker or his firm. IW expresses no opinion on the value of the customer’s investments or on the broker’s investment selection ability. A single new fact can radically change the IW score and indicate a need for immediate action. For timelier notification of red flags, please consider upgrading to IW’s Winnow Plus™ service or Constant Patrol™ subscription.