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NEWSLETTERS & ALERTS
FINRA’s ‘Long Arm of the Law’ Nabs Chilean Brokers for Outside Business Activities
by Howard Haykin
Luis Enrique Echeverria and Pedro Rodolfo Santa Maria each agreed to $5K fines and 45 day-suspensions to settle charges that they engaged in undisclosed outside business activities without providing prior written notice to and obtaining prior approval from his member firm.
BACKGROUNDS. Echeverria and Santa Maria have similar backgrounds. They entered the securities industry in 1998, became registered in 1999 and, after stints with Prudential Securities and Wachovia Securities, they became associated with Global Investor Services (‘GIS’) in May 2015 – and they continue to be employed by that broker-dealer. While they resided and worked in NYC earlier on, at present, they both reside and work in Santiago, Chile.
At the time they were sanctioned, Echeverria was a ‘Respondent Corporate Securities Rep; Santa Maria was a Foreign Associate. Neither had any disciplinary history.
FINRA FINDINGS. From the time they joined GIS in May 2015, through May 2016, Echeverria and Santa Maria engaged in undisclosed outside business activities by referring clients to an accounting firm. Both received compensation - Echeverria got $4,600. While Santa Maria got $19,600 – even though GIS had expressly prohibited their participation in such activities. Needless to say, neither provided prior written notice to GIS, in violation of FINRA Rules 3270 and 2010.
FINANCIALISH TAKE-AWAYS. While referring clients to accountants may seem innocuous, any type of business outside the scope of one’s services as a registered person in financial services carries some risk. And that’s why a broker-dealer needs to know about such activities – because contingencies can impact the firm’s business.
A disagreement that arises from a broker’s referral or some other outside business activity can lead a client to close brokerage accounts. Worst case scenario, a firm client can hold a firm liable for financial losses that are, frankly, beyond a firm’s knowledge or control. So, in summation, these guys got their just deserves.
This case was reported in FINRA Disciplinary Actions for May 2017.
For details on the Echeverria case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2016050607001.
For details on the Santa Maria case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2016050606301.