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NEWSLETTERS & ALERTS
FINRA Catches Brokers with Outside Brokerage Accounts
by Howard Haykin
In October 2017, FINRA reported disciplinary actions against 2 registered reps and a complaint against a 3rd registered rep on charges they maintained and traded in undisclosed personal brokerage accounts held away from their associated broker-dealers.
Gabriel Hynes (AWC #2016051410501) agreed to a $10K fine and a 3-month suspension.
Hynes, a resident of St. Augustine, FL, has 18 years’ experience with 2 firms – 17 years with NYLife Securities, serving as a General Securities Rep. He was U5’d in June 2017 after the firm “became aware that he violated company policy by failing to disclose: (a) multiple OBAs and PSTs; (b) a brokerage account with an outside broker-dealer; (c) a federal tax lien.” Hynes is not currently associated with a FINRA member firm, and he had no prior disciplinary history.
On four (4) occasions between September 2008 and May 2014, Hynes purchased securities issued by privately-held companies costing a total of $90,000. These transactions were outside the regular course and scope of his employment with NYLife. Hynes failed to give NYLife any notice of these private securities transactions.
In January 2014, Hynes opened an account at another member firm and maintained the account throughout his association with NYLife. He deposited into the account the securities he had purchased through the private offerings conducted away from NYLife. Here, too, Hynes failed to notify the other broker-dealer that he was associated with NYLife, and also failed to notify NYLife that he had opened an account at another member firm.
Maher Saieh (AWC #2016051887401) agreed to a $5K fine and a 30-day suspension.
Saieh, a resident of North Miami, FL, had 2 years’ experience with 2 firms. He was registered as a General Securities Rep with Merrill Lynch from June 2015 through October 2016. Saieh is not currently associated with a FINRA member firm. He had no disciplinary history.
From at least April 2015 through May 2016, while associated with Merrill Lynch, Saieh maintained and executed trades in an IRA held at another FINRA member firm. He also failed to promptly notify Merrill Lynch that he held an IRA at another FINRA member firm. He further failed to disclose the IRA on Merrill Lynch's Annual Compliance Questionnaire (“ACQ”).
Robert McNamara (AWC #2016049085401) was named a respondent in a FINRA complaint that is pending resolution.
McNamara, a resident of Rye, NY, has 7 years’ experience with 1 firm, Advisors Asset Management, Inc. (“AAM”), and is currently employed by that firm. Since 2010, he has held the Series 7 and 24 licenses.
Between May 2009 and September 2012, McNamara stands accused of failing to promptly disclose to AAM six (6) outside brokerage accounts in which he held a beneficial interest - 3 opened before he became associated with AAM; 3 others that were opened after he became associated. All 6 accounts were closed by September 2012.
Throughout his association with AAM, McNamara received reminders to make all required disclosures regarding all outside securities accounts, and he acknowledged on multiple occasions that he was aware of his obligation to do so. Furthermore, McNamara completed and signed the firm’s annual disclosure forms relating to providing prompt written notice of such information to the firm, thereby acknowledging that he understood this obligation.
McNamara is also charged with having falsely represented to the other firm, Merrill Lynch, that he was eligible to purchase shares in equity IPOs. To do so, McNamara completed, signed and submitted a client affirmation form to his Merrill Lynch financial advisor falsely attesting that the account in which he was purchasing the equity IPO was not beneficially owned 10% or more by a restricted person, and that he was eligible to purchase equity IPOs.
FINANCIALISH TAKE AWAYS. FINRA prescribes to an imprecise method for ensuring that complete disclosures for outside brokerage accounts - and it all depends on the honesty of the individual. If an individual wishes to bypass his or her firm's compliance policies and FINRA regulations, they'll do so, no matter how many Annual Compliance Questionnaires (ACQs) and other disclosure forms they submit.
One thought: create a database of Names and Tax ID Numbers, to be operated by FINRA and made accessible to all member firms. Perhaps that would enable a firm to determine that the individual associated with a new brokerage account is, in fact, associated with another broker-dealer? Probably not. And the time and costs involved would be prohibitive.
It, therefore, seems that firms must continue to rely on the honesty of their associated persons and clients. Although, FINRA might possibly help firms to catch or trip up future 'offenders' - by proviing details on how they solve their cases.
These cases were reported in FINRA Disciplinary Actions for October 2017.
For details on any of these cases, go to ... FINRA Disciplinary Actions Online, and refer to the Respective AWC #.