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NEWSLETTERS & ALERTS
Branch Manager, Who Let Unregistered Son Help with Business, is Fined, Suspended
by Howard Haykin
Jose Enrique Jimenez, a registered principal and a branch manager, agreed to a $10K fine and a 3-month suspension to settle FINRA charges that he allowed his son, an unregistered person, to participate in various securities activities that supported Jimenez’s securities business. Son Diego Jimenez, agreed to a $5K fine and a 2-month suspension to settle related FINRA charges. Throughout their respective careers on ‘Wall Street’, their only employer was PFS Investments.
BACKGROUND. Jose Enrique Jimenez, who resides in Inglewood, CA, entered the securities industry in 1992. From May 1993 to 3/17/15, Jimenez was registered as an Investment Company and Variable Contracts Products Representative and an Investment Company Principal. Jimenez was also the registered principal and branch manager for branch office of PFS Investments, which had been his only employer through his securities career.
Diego Jimenez, entered the securities industry in 2002. Throughout his time in the business, Diego Jimenez also was associated with PFS Investment – though he was registered as an Investment Company and Variable Products Representative from June 2004 until he voluntarily terminated his registration on 12/31/10. Nearly 3 years later, he re-registered to reinstate that registration, though registration did not become effective until January 2015.
On 3/17/15, both Jose Jimenez and son Diego Jimenez were U5’d by PFSI. Neither is currently associated with any FINRA member firm. And, neither had had any disciplinary history
FINRA FINDINGS. From January 2011 through December 2014, Jose Jimenez allowed his non-registered son, Diego Jimenez, to engage in various securities activities supporting his business.
Jimenez was the registered principal and branch manager for a PFSI branch office and was responsible for ensuring associated persons were registered before engaging in any securities activities. Over that 4-year period, son Diego Jimenez was allowed to participate in various securities activities that supported Jimenez's securities business. In particular, son Diego Jimenez:
- solicited prospective customers;
- made more than 100 mutual fund presentations;
- discussed mutual fund investments with prospective customers; and,
- recommended the purchase of mutual funds resulting in total sales of more than $800,000 in approximately 35 mutual fund accounts.
- assisted customers with the completion of documents necessary to purchase mutual funds;
- entered client and trade information electronically into the firm's computer system using his credentials.
As a result, both father and son – Jose and Diego Jimenez – were in violation NASD Rule 1031:
“Permitting Unregistered Person to Engage in Securities Activities” (NASD Rule 1031) ... requires all persons engaged or to be engaged in the securities business of a member to be registered in the "category of registration to the function to be performed." Activities that require registration include soliciting prospective customers, providing investment advice, recommending the purchase or sale of securities and accepting or executing trades for the purchase of securities. Permitting an unregistered person to engage in securities activities requiring registration is a violation of NASD Rule 1031. A violation of NASD Rule 1031 also constitutes a violation of FINRA Rule 2010.
Jose Jimenez further violated FINRA Rule 2010 by falsely stating on 3 firm compliance questionnaires that he did not allow "persons who are not securities licensed to participate in any of[his] securities sales and presentations."
FINANCIALISH TAKE-AWAYS. There are a couple of unanswered questions in these cases: (i) why were Diego’s registrations terminated? (ii) why did Jose, a registered principal and branch manager, permit his son to engage in activities that required registration?
Once again, FINRA comes up short in providing explanations that might answer these questions and provide some guidance on firms and associated persons on how they might can avoid similar violations in the future. One supposition goes something like this:
Diego was unsuccessful as a broker for PFS Investments. Upon voluntarily terminating his registration, his father brought Diego on to assist with his book of business. It “only took about 3 years” for father Jose to realize that his son should be registered. How PFSI and FINRA discovered the apparent violations is anyone’s guess.
But the bottom line is that both individuals got what they deserved. It’s a matter of time before we now if either can hook up with another broker-dealer.
Both cases were reported in FINRA Disciplinary Actions for May 2017.
For details on the Jose Jimenez case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2015044792801.
For details on the Diego Jimenez case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2015044792802.