BROWSE BY TOPIC
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
Did Broker Not Realize He Crossed Line Between an OBA and PSTs?
by Howard Haykin
In 2012, a broker received permission from Sigma Financial Corporation to engage in an outside business activity (“OBA”) – he co-owned a company that developed a video platform to connect on-call interpreters with deaf or limited language individuals. This was a seemingly altruistic effort by an individual who had never committed a violation during his 21 years in the securities industry. However, along the way, this broker crossed the line – intentionally or not – that separates OBAs from private securities transactions (“PSTs”).
As a result, Sigma Financial terminated (U5’d) this broker in September 2017 for “failure to timely and adequately notify the Firm of an outside business activity as required by FINRA Rule 3270.” [Outside Business Activities of Registered Person]
In June 2018, FINRA hit the broker with a $10K fine and a 4-month suspension for having violated NASD Rule 3040(b) – replaced by FINRA Rule 3040(b). [Private Securities Transactions of an Associated Person]
WHAT WENT WRONG. According to FINRA, the broker engaged in 14 private securities transactions (“PSTs”) - from September 2011 through July 2014 - without providing prior written notice to his member firm or receiving the firm’s approval to participate in them. All told, he helped raise approximately $430,000 for his company from the sale of membership units to 14 investors.
The broker …
- introduced and discussed the company with 13 Sigma customers and one other individual;
- referred each to his co-owner about investing;
- discussed subscription agreements with at least 4 of the investors; and,
- received investment checks from 2 of them, which he forwarded to his co-owner.
- did not receive selling compensation for any of these investments.
FINANCIALISH TAKE AWAYS. There simply was no wiggle room in this case. As much as I would have liked to see this broker get a break, he was admittedly "in too deep” the moment he introduced the (Sigma) customers to his company. Forget his attempt to detach himself by referring the investors to his co-owner. That was subterfuge or wishful thinking.
Anyway, for his sake, I sincerely hope the business was a success.
This case was reported in FINRA Disciplinary Actions for August 2018.
For details the case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2017053702901.