The Financial Industry Regulatory Authority suspended a broker at New York-based Aegis Capital’s Boca Raton, Florida, office for 30 days and fined him $5,000 for using Facebook’s WhatsApp Messenger communication application to conduct securities-related business with three Aegis customers, according to FINRA.
One main issue with using WhatsApp or other third-party apps is that they make it much harder to keep a record of the communication between advisor and client, provide that info to the firm one is working for, and also maintain and preserve that communication. The result, as happened in this case, is the advisor ends up violating FINRA Rule 4511, which requires that FINRA members make and preserve books and records for a period of at least six years, and do so in a format and media that complies with SEA Rule 17a-4.
Without admitting or denying FINRA’s findings, Paul Anthony Falcon signed a letter of acceptance, waiver and consent Feb. 4 in which he agreed to FINRA’s sanctions. FINRA accepted the letter Monday.
Aegis and Gregg Breitbart, a co-managing partner at law firm Kaufman Dolowich Voluck’s Fort Lauderdale, Florida office, who represented Falcon in the dispute, did not immediately respond to requests for comment Wednesday.
Between Nov. 9, 2017 and June 25, 2019, Falcon used WhatsApp Messenger to conduct securities-related business with the three clients, according to the FINRA AWC letter. “Aegis was not able to capture the communications Falcon sent and received through WhatsApp Messenger,” FINRA noted.
As a result, Falcon violated FINRA Rules 4511 and 2010 (governing standards of commercial honor and principles of trade), according to FINRA.
Aegis’ written supervisory procedures require that electronic business communications be accessed and transmitted via the firm’s sponsored systems only, so that it can review, monitor and audit the communications, FINRA pointed out. Aegis also requires that employees only use mobile devices it has issued and authorized, FINRA said.
On Nov. 6, 2017, Falcon completed the firm’s annual personal activity questionnaire in which he disclosed using the app for business purposes, according to the FINRA AWC letter. Specifically, Falcon revealed that he used WhatsApp Messenger to communicate with overseas customers several times a month on his personal cellphone.
That same day, Falcon signed an Aegis Telecommunication Policy Acknowledgement confirming he would use only communication devices the firm issued and approved, and acknowledging that the firm prohibited the use of text messaging to conduct business, according to the FINRA AWC letter.
However, Falcon continued to use WhatsApp Messenger for business-related communications with several overseas customers between Nov. 9, 2017 and June 25, 2019, FINRA said.
Falcon has been registered as a general securities representative with Aegis since July 2013 and is still with the firm, according to his profile on FINRA’s BrokerCheck website. His suspension is scheduled to start March 16 and end April 14, according to FINRA.
There is a dispute pending against Falcon, filed in late 2018, alleging negligence, breach of fiduciary duty and breach of contract, according to BrokerCheck.
— Check out Brokers’ Use of Texting, Social Media Cited in FINRA Exam Report on ThinkAdvisor.