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FINRA Sanctions: 'Willful' Failure to Update One's Form U4 [Case Studies]
by Howard Haykin
Here, in Part 2 of a Two-Part story, we present 8 cases reported by FINRA in its Disciplinary Reports for July 2017. Each case involves the alleged failure by a registered person to update his or her Form U4 on a timely basis – an offense that can result in Statutory Disqualification.
On Thursday, in Financialish.com’s Part One, we opened the discussion with an introduction to some of the rules and downsides associated with FINRA’s “Statutorily Disqualified” label.
Pay particular attention to the significant suspensions that FINRA metes out. They oftentimes reflected the fact that the individual missed the opportunity to disclose his or her materially financial event: (i) to the firm, on the Annual Compliance Questionnaire; and/or, (ii) to FINRA, on Form U4 when the individual changed firms.
AWC #2014038903702: Avery Byrd Sr. Byrd was assessed a $0 fine (in light of his financial status) and a 3-month suspension to settle FINRA charges that he willfully failed to disclose on his Form U4 an unsatisfied judgment (of $392,000).
AWC CRD #2011029549201: Craig Langweiler. Langweiler was assessed a $20K fine and a 2-year suspension to settle FINRA charges that he willfully failed to timely disclose on his Form U4 three unsatisfied IRS tax liens and three unsatisfied judgments against him. Also, when Langweiler joined his firm, he falsely attested on a background questionnaire that he did not have any liens or judgments when, in fact, he had at least one tax lien and one outstanding judgment against him. Langweiler similarly provided false information on a FINRA questionnaire.
AWC #2014038847602: Kevin Graetz. Graetz was assessed a $10K fine and a 6-month suspension to settle FINRA charges that he willfully failed to timely update his Form U4 to disclose that he was subject to, at various times, between 10 to 12 unsatisfied state and federal tax liens, totaling over $1 million, despite knowing that tax liens had been filed against him and knowing his obligation to disclose liens on his Form U4.
AWC #2014040546101: Glenn Searles. Searles was assessed a $5K fine and a 5-month suspension to settle FINRA charges that he failed to report an unsatisfied judgment and failed to timely report a lien on his Form U4. The findings referred to 2 separate judgments against Searles: one for $3,912.99, the other for $2,973.94. The findings also stated that Searles made a misrepresentation to his member firm when he answered that he did not have unsatisfied liens or judgements against him on an annual compliance questionnaire.
AWC #2014042059701: David Huff. Huff was assessed a $5K fine and a 3-month suspension to settle FINRA charges that he willfully failed to timely amend his Form U4 to disclose a Chapter 13 bankruptcy petition that he filed in a U.S. Bankruptcy Court. The findings also stated that Huff misled the firm by falsely attesting that he had reviewed all information on his Form U4, including all disclosure questions, and that his Form U4 on file with the firm was accurate and complete. He further lied on an HD Vest Advisor Affirmation (the firm learned of his bankruptcy petition 8 month later when it conducted a public records search.
AWC #2016051531601: Craig Lewis. Lewis was assessed a $5K fine and a 2-month suspension to settle FINRA charges that he willfully failed to timely disclose a reportable federal tax lien of approximately $566,657 on his Form U4.
AWC #2016052320401: Melinda Ariosa. Ariosa was assessed a $5K fine and a 6-month suspension to settle FINRA charges that she willfully failed to disclose an arrest or a guilty plea on her Form U4. The findings stated that Ariosa was arrested and charged with 2 felony and 2 misdemeanor drug violations. Ariosa entered a guilty plea to one felony count, and was placed on probation without entry of a judgment. In addition, Ariosa completed compliance questionnaires in which she falsely answered “no” to a question regarding whether she had, within the past 24 months, “been arrested, charged or convicted with a felony, misdemeanor, or had any statutory disqualifications, as defined by Section 3(a)(39) of the Exchange Act of 1934.”
AWC #2014043001601: Allen Holeman. Holeman was assessed a $10K fine and a 30-day suspension to settle FINRA charges that he willfully failed to timely amend his Form U4 to disclose IRS tax liens filed against him. The findings stated that Holeman made a false statement on his member firm’s compliance questionnaire. Holeman failed to disclose his outstanding tax liens on the compliance questionnaire that he submitted to his firm and he falsely stated that he had none.