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Regulatory Sanctions

A Broker Trips Up on His False Statements

December 14, 2017

[Image:  Walt Disney]


by Howard Haykin


A young broker agreed to a $2.5K fine and a 3-month suspension to settle FINRA charges that he lied (made false statements) to a new employer about the circumstances of his termination from his previous firm.


PROFILE.    This broker from Leonia, NJ, has 5 years’ experience with 6 firms – a questionable ratio, though 3 years with one firm. In February 2016, he was U5’d by Wells Fargo Advisors for providing incorrect information “regarding his separation from previous employer.” He had been with that previous employer, JPMorgan Securities, for over 3 years.


FINRA FINDINGS.    In October 2015, JPMorgan Securities terminated the broker’s employment after receiving customer complaints related to his sales of mutual funds. At that point in time, he had been associated with JPMorgan for 3 years – since 2012. The firm U5’d him on 11/11/15.


During the process of seeking to become associated with Wells Fargo Advisors, the broker gave false statements on 2 occasions. First, he submitted a pre-registration disclosure and consent form in which he falsely stated that he left his most recent position voluntarily and denied being subject to any sales practice customer complaints that have not been reported on FINRA’s CRD system.


Question 1:  "Will you/did you leave your most recent position voluntarily?”

Answer:  “Yes,” despite knowing that JPMorgan Securities had recently terminated his employment for cause.


Question 2:  Have you ever "been subject to any sales practice customer complaints that have not been reported on the FINRA [CRD] System?”

Answer:  “No,” despite being aware of numerous undisclosed customer complaints filed against him.


Second, on the day Wells Fargo filed Form U4 on his behalf (11/30/15), the broker told the firm’s hiring manager that he had voluntarily resigned from his previous firm - which was false.


FINANCIALISH TAKE AWAYS.    Lying during a hiring interview or application process is a huge mistake. When the truth comes out, the employee will be fired and his or her record will be forever stained. Rather than lying, perhaps the broker's best bet is to acknowledge past mistakes and ask the new firm to give him a second chance in order to prove that he’s ‘learned from his mistakes’.


It’s interesting to the wording of Question #2 on the Disclosure and Consent Form - it asks for “any sales practice customer complaints that have not been reported on the FINRA [CRD] System?”  For the record, this broker’s BrokerCheck records did not disclose any no customer complaints – open, closed or pending. Nor did it provide any ‘for cause’ termination disclosure from JPMorgan Securities.


Which raises these questions – to which FINRA might provide answers, if only to assist member firms in their hiring processes:


►   Why weren’t the customer complaints or JPMorgan’s ‘for cause’ termination listed on this broker’s CRD?  


►   How did Wells Fargo Advisors find out about these complaints and sales issues?


This case was reported in FINRA Disciplinary Actions for November 2017.

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to 2015047810201.