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Regulatory Sanctions

Broker’s Unauthorized PSTs, Emails, Tweets, Privacy Violations – All Add Up to 4-Month Suspension

March 15, 2018

by Howard Haykin


This case involves a broker who sported 33 years’ experience with 8 firms and had no prior regulatory sanctions. It didn’t take long for him to ‘make up for lost time’.


A St. Louis, MO-based broker agreed to pay a $10K fine and serve a 4-month suspension to settle FINRA charges that, among other things, he participated in Private Securities Transactions (“PSTs”) in a certain venture-capital fund through another broker-dealer without notifying his then-member firm about those transactions or his role in them.


FINRA FINDINGS.    In December 2015, the broker (“RR”) decided to switch firms in January 2016 – from Smith, Moore to Forest Securities. Due to various delays, the RR eventually joined Forest Securities 2 months later than originally anticipated.


     ►   Participation in Undisclosed Private Securities Transactions.   After RR decided to change firms but before he moved, 2 people expressed interest in investing in a particular venture capital fund. Although the RR’s current B/D (Smith, Moore) offered that fund, RR referred the investors to Forest Securities for the purpose of investing in the fund. He then assisted the investors throughout the investment process, and by mid-February they collectively invested more than $300,000 in the fund. RR he never disclosed the transactions to Smith, Moore, which prohibited its brokers from participating in PSTs. [Also, the RR claims he never received compensation for the referrals.]


     ►   Use of Personal Email and Privacy Act Violations.   Before changing firms, RR used a personal email account to transfer customers' nonpublic information – e.g., account numbers or balances - to the new firm. In doing so, RR never informed Smith, Moore of his business-related emails, and he never asked his customers for their consent to share the nonpublic information with Forest Securities. Obviously, Smith, Moore never had the chance to review his business-related correspondence, while the affected customers never had the opportunity to opt out of the disclosure.


    ►   Use of Tweets.    From September to December 2016, after joining Forest Securities, RR used a Twitter account to send more than 150 public tweets about his securities business. During that period, his account had around 3 dozen followers. RR never sought or received approval for any of those tweets from his new firm, which prohibited its brokers from using Twitter without approval. Nor did the RR provide copies of those tweets to Forest Securities for its retention.


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

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to Case # #2016049587401.