Subscribe to our mailing list

* indicates required

 

 

 

 

BROWSE BY TOPIC

TRENDING TAGS

#FINRA #SEC #Financialish30Index #DeutscheBank #MorganStanley #FinancialWatchdog #GoldmanSachs #RaymondJames #FINRASanctions #LPLFinancial #PonziScheme #ElderlyCustomers #ExcessiveTrading #Churning #WellsFargo #UnauthorizedDiscretion #PrivateSecuritiesTransactions #StateStreet #Citigroup #CharlesSchwab

Stories of Interest

More Stories

ABOUT FINANCIALISH

We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.

 

Stay Informed with the latest fanancialish news.

 

SUBSCRIBE FOR
NEWSLETTERS & ALERTS

FOLLOW US

Archive

FINRA Disciplinary Highlights - Part One

July 25, 2011
Registered reps caught lying and failing to disclose were severely disciplined by FINRA during Q2 of 2011.  Their violations fell into these 8 categories (read stories 1-4 after the jump):
  1. Failure to Provide Written Notice of an Outside Brokerage Account.
  2. Private Securities Transactions and Outside Business Activities.
  3. Willful Failure to Disclose Criminal History on Form U4.
  4. Misrepresentative and Unbalanced “Tweets” and Other Misconduct.
  5. Creating and Distributing Continuing Education Answer Key.
  6. Effecting Transactions in a Personal Account With Insufficient Funds.
  7. Backdating Annuity Applications.
  8. Improper Borrowing From Customers.
1.  Failure to Provide Written Notice of an Outside Brokerage Account. An RR failed to disclose his outside brokerage accounts in writing to his employer firm.  He further lied by stating on his B/D's employment disclosure forms that he did not hold any outside brokerage accounts.  The RR also failed to inform the B/D that maintained his account that he was working for a B/D.    FINRA' rejected the RR's contentions:  (i)  that oral notice to his firm’s president and CCO should suffice;  (ii) since he previously was associated with the firm that maintained his brokerage accounts, he didn't need to tell them he was a registered person with another B/D.   For violating NASD Rule 3050(c), RR got a $25K fine, a 2-year suspension and assessed $,3200 in costs. 2.  Private Securities Transactions and Outside Business Activities. An RR participated in private securities transactions and engaged in undisclosed outside business activities. He sold membership interests in a real estate limited liability corporation for which he received commissions.  He also served as the financial officer for the LLC, for which he received annual compensation.  The NAC determined that the LLC membership interests were, in fact, securities and that the RR participated in the sales of the LLC membership interests without prior written notice to and approval from his member firm.  FINRA rejected the RR's argument that his misconduct should be excused because he relied on advice of legal counsel.  FINRA found that the RR's work as a financial officer for the LLC constituted outside business activities, which the RR did not disclose to his member firm.  For violating  NASD Rules 3030 (O/S business), 3040 (private securities), and 2110 (ethical standards), RR got a $16K fine and 1-year suspension. 3.  Willful Failure to Disclose Criminal History on Form U4. A registered person willfully failed to disclose his criminal history on a Form U4 in 2008, falsely answering "no" to a question that asked whether he had ever been charged with a felony.  In fact, he had been charged with the criminal felony of first-degree burglary 2 years earlier.  He also falsely answered “no” to questions of whether he had ever been convicted or pled guilty to a misdemeanor involving the wrongful taking of property and whether he had ever been charged with a misdemeanor.  In 2001, he had been charged with the misdemeanor offense of property theft by check, to which he pled guilty.  For violating NASD Rules 2110 (ethical standards), IM-1000-1 (filing misleading information as to registration), and Article V, Section 2(c) of FINRA By-Laws (application for registration), RR got a $5K fine and 6-month suspension.  Because the failures to disclose were willful and involved material information, RR is subject to statutory disqualification. 4.  Misrepresentative and Unbalanced “Tweets” and Other Misconduct. An RR failed to notify her member firm that she:  (i) served as president of a jewelry company;  (ii) served as a translator for a forex trading firm;  (iii) held financial interests or trading authority in multiple brokerage accounts away from the firm;  (iv) falsely represented on outside brokerage account applications that she wasn't  affiliated with a brokerage firm;  (v) created websites related to the firm without getting prior firm approval;  (vi) failed to notify the firm that she sometimes touted stocks on her Twitter account and “tweeted” unbalanced stock recommendations that failed to disclose material information. As it turned out, the RR had earned remuneration in 2007 and 2009 for the translator and jewelry positions.  She also had opened or maintained at least 13 accounts in which she held a financial interest or over which she held discretionary authority at 2 other B/D's, and that on at least 6 account applications, she falsely answered “no” to the question of whether she was affiliated with a securities firm.  The RR also failed to provide prior written notice to her employer firm of such accounts.   This conduct violated NASD Rules 2110 (ethical standards) and 3050 (outside activities). The RR also created 2 websites that included misrepresentations about her career accomplishments and employer firm without obtaining approval from a principal of the firm.  This conduct violated NASD Rules 2110 (ethical standards) and 2210 (communications with public).  During 8 months in 2009, the RR also maintained a Twitter account and had more than 1,400 followers - again, not notifying a firm .  For one particular security, the RR posted 32 “tweets”  - which were unbalanced, overly positive and often predicted an imminent price increase.  The RR didn't disclose on the tweets that she and her family held a significant number of shares of the security.  This conduct violated NASD Rules 2210 (communications with public) and IM-2210-1 (misleading communications)), and FINRA Rule 2010 (ethical standards).  RR got a $10K fine and 1-year suspension.
    For further details, go to:   [FINRA Quarterly Discplinary Review, July 2011]

      Related Stories: Archive

      © 2016 financialish.com | All Rights Reserved