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Regulatory Sanctions

Registered Rep Made a Mountain Out of a Molehill

June 19, 2017

by Howard Haykin


Rather than ‘fess up’ to a human error – one that should have been easy to correct - the broker in this case tried to resolve the matter on his own. In doing so, he enabled a common, relatively small error to morph into multiple FINRA violations and a Form U5 termination.


Johnny Burris, a registered rep, agreed to a $5K fine and a 5-day suspension to settle a multitude of FINRA charges, beginning with his failure to execute a trade for his customers according to their instructions.


BACKGROUND.    Burris, who resides in Surprise, AZ, entered the industry in 1997. From that time until 2015 (with a 5-year gap), he was registered with 6 firms. During the time of his infractions, Burris worked for Chase Investment Services Corp. Burris is not currently associated with any broker-dealer.


FINRA FINDINGS.    In January 2012, customers instructed Burris to liquidate one of their securities holdings – approximately $26,500 - to fund a tax payment to the IRS. Burris failed to execute the trade and the customers’ payment of nearly $24,000 bounced for ‘insufficient funds’. When alerted to the problem, Burris acknowledged his error and told the customers he’d take care of the issue.


  • He got Chase bank to reverse the NSF fee.
  • He executed a new trade to raise the needed funds.
  • He assisted the customers by getting a cashier’s check issued, and he mailed that check to the IRS “via overnight mail.”
  • He wrote a letter to the customers stating:  ''I want to apologize for the error that has caused your tax payment to be rejected. That has since been remedied with the copy of the enclosed cashier's check dated April 27th, 2012. ... You can be assured, if there are any tax penalties and/or interest, please bring them to my attention. I will have those remedied."
  • On 5/4/12, he sent a letter to the IRS, on what appeared to be official Chase letterhead, claiming that the insufficient funds issue was a result of "an error on the part of the bank" and requested that the IRS forgive the fees and interest as "a professional courtesy."


At no time did Burris ever ... inform anyone at Chase of his errors or of his independent efforts to resolve their issue. Nor did he mention his correspondence on company letterhead that was sent to the IRS. He never received supervisory approval for his actions and he never filed copies of any of the letters in the firm’s correspondence or customers’ files.


Burris got caught in September 2012 … when the customers came to the Chase branch to advise Burris of the final amount the tax penalties and interest charges assessed by the IRS, which was about $50 less than it originally invoiced. But of course Burris was out of the office on vacation, and the customers addressed the matter with an office assistant who brought it to the attention of the branch manager.


Chase compensated the customers $623.56 for their tax penalties and interest. A couple of months later, the firm U5’d Burris.


FINANCIALISH TAKE AWAY.    Burris committed a negligent, yet simple-to-correct, error. And yes, he should have elevated the matter to his branch manager while accepting full responsibility for any customer costs. Why he didn’t is not explained in FINRA's AWC. Here are 2 key take-aways worth noting:


  • Murphy’s Law.  “Anything that can go wrong will go wrong.” And of course, it did. Had Burris been in the office on the day his customers visited, the matter would have remained a "secret" and he would have compensated the customers to their satisfaction. But that's not the way life works out for many of us.
  • ‘Complaint’ v. Customer Inquiry.    Anytime FINRA has the opportunity, it will put a ‘worst case scenario’ label on a matter. In this case, the “customer inquiry” became a “customer complaint,” which had gone unreported, which led to books and records violations, and so forth and so on….


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

For details on the case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2015044921601.