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Regulatory Sanctions

A Case for Re-Taking Registration Exams

June 21, 2019

by Howard Haykin


… and required to requalify by examination as a General Securities Representative (Series 7) prior to acting in that capacity with any FINRA member.



Other than professional students, who likes to take exams? You can probably count on one hand the number of people you know who fit that description.


Yet, before delving into why I asked that question, let me begin by saying that the broker who was required to retake the Series 7 examination [in the above boxed sub-heading] also had to pay a $5K fine and serve a full 4-month suspension. Those were the sanctions for settling FINRA charges that, on 3 occasions, he borrowed a total of $200,000 from a customer without seeking or obtaining prior approval of the loans from his member firm. He didn't repay the loan prior to declaring Chapter 11 bankruptcy (the debt was included in an approved Plan of Reorganization), and he lied on annual compliance questionnaires.



WHY I ASKED THE QUESTION.    It’s not often that FINRA requires an associated person to register - i.e., retake their registration exam – even though seems like a logical, if not viable, form punishment for violative conduct. Particularly when such conduct could be deemed to be intentional or was carried out with impunity. 


According to FINRA's June report on disciplinary action, only 2 of the 22 sanctioned persons (I excluded those barred from the industry) were required to re-register as part of their settlements: a Series 7 registered rep and a Series 27 FinOp.


The individual who executed unsuitable mutual fund investments in an elderly customer’s account wasn't required to re-register. Nor was the individual who forged a CEO’s signature on a private placement engagement agreement. Nor the individual who accepted more than $70,000 in monetary gifts from an elderly customer. Yet, it's likely that each of these individuals committed his or her violative conduct with forethought and, perhaps, with impunity. 


Which is why I'd encourage FINRA to more frequently include re-registration in disciplinary settlements. After all, since all these individuals have to sit out while serving suspensions, why not have them re-acquaint themselves with industry rules and regulations?



This case was reported in FINRA Disciplinary Actions for June 2019.

For further details, click on...  FINRA AWC #2014042876501.