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Regulatory Sanctions

Broker Sanctioned for Outside Businesses, Outside Account

April 30, 2019

by Howard Haykin


Fool me once, shame on you.
Fool me twice, shame on me.
Fool me thrice, you’re out of here with a 4-month suspension.
Would any firm be willing to risk being made the fool a 4th time?



WHAT WENT WRONG.    Between June 2012 and July 2017, a broker engaged in 2 outside business activities. In both instances, he was the sole officer and owner, The first business was formed in May 2005 and dissolved in September 2016; the second was formed in September 2016 and apparently is still in operation. Needless to say, the broker never provided prior written notice to his FINRA member firms – Forefront Capital Markets (2012 to 2015) and Wilmington Capital Securities (2015 to 2017).


Adding insult to injury, in September 2016 the broker opened and then maintained a brokerage account away from Wilmington without first notifying Wilmington in writing that he was opening the account or placing an order away from Wilmington.


For having conducted undisclosed outside business activities, the broker violated FINRA Rule 3270Outside Business Activities of Registered Persons.
For opening and placing an order in an “outside brokerage account” without notifying his employer member or the executing member firm, the broker violated NASD Rule 3050 (replaced by FINRA Rule 3210), Accounts at Other Broker-Dealers and Financial Institutions.



FINANCIALISH TAKE AWAYS.    This broker opted to do 'his own thing' for much of his 19 years in the business - knowing full well that he was violating 2 basic tenets of securities regulation. And for these actions he rightfully received a $7,500 fine and a 4-month suspension.


Yet, given the duration and multiple number of the broker's violations, I'd go so far as to suggest that the broker’s actions may have approached (if not met) the definition of “willful” intent - which would mean he'd become subject to statutory disqualification. [My call is harsh and 'has no teeth', but that's how I view the broker's intent. Click here for FINRA's take on 'Disqualification'.]


That said, FINRA offered no such indicatation of willful misbehavior, so it’s likely that, at the end of his 4-month hiatus, this broker will hook up with another broker-dealer – of course, it largely depends on his past production history.



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

For further details, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2017054989701.