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January 03, 2017 at 09:41 AM
Each quarter, the Financial Industry Regulatory Authority shares details on recent disciplinary actions involving misconduct by registered representatives.
In the quarter ended Dec. 31, several advisors were fined $5,000 or more in cases involving outside activities, personal email, and bad behavior that involved everything from using fake names for credit cards to lying under oath.
The sampling of cases includes settled matters and decisions in litigated cases handled by the National Adjudicatory Council and the Securities and Exchange Commission, and the details highlight specific conduct that violates FINRA and SEC rules.
Read on to learn more about the five brokers who received the worst regulatory penalties from these organizations over the past three months, listed in descending order.
5. Using an Outside Email Account
In the final quarter of 2016, FINRA resolved issues related to an advisor who used his personal email account to interact with a client about firm-related business and to settle a client complaint without letting his firm know about the matter.
The advisor conducted these email activities in 2014. In addition, the registered rep failed to keep copies of the emails.
By using personal email, the advisor prevented the broker-dealer “from discharging its supervisory and recordkeeping obligations,” FINRA says.
Furthermore, by using a personal email account for securities business, the advisor violated FINRA Rule 2010 (ethical standards).
Two years ago, the rep became aware that “a customer was unhappy with commissions charged in the customer’s account … and to appease the customer and to reimburse the customer for commissions … the representative paid the customer $1,000 by check … without the firm’s knowledge or consent.”
For this misconduct, FINRA suspended the rep for two months and fined him $7,500.
4. Failing to Update Registration Info
FINRA settled a matter involving a registered representative who failed “to timely disclose a compromise with a creditor” on the rep’s Uniform Application for Securities Industry Registration or Transfer Form — also knows at the U4 form.
In January 2014, the rep reached a compromise with a creditor and agreed to pay $175,000 in connection with a FINRA arbitration award.
“The compromise with the creditor required disclosure on the representative’s Form U4 beginning 30 days after learning of the facts and circumstances giving rise to the amendment; however, he did not make the required disclosure on his Form U4 until more than two years later, in May 2016,” according to FINRA.
This behavior specifically violated Article V, Section 2(c) of FINRA’s by-laws (application for registration) and FINRA Rules 1122 (filing of misleading information as to membership or registration) and 2010 (ethical standards).
For this misconduct, FINRA suspended the advisor for three months and fined him $10,000.
3. Engaging in Outside Business Activities
FINRA says it has resolved the case of a registered rep who conducted undisclosed outside business activities and intentionally provided his firm’s business credit card company with false information in order to get 25 business credit cards.
In March and April 2015, the rep obtained a business credit card account under a fake business name. He opened the account by using false information including a fake company name and fictitious revenues, profits and employees.
Later, the rep was able to obtain 24 credit cards, which were sent to the advisor at his broker-dealer. “The firm intercepted the cards before the cards were activated,” according to FINRA.
The rep obtained the cards for a friend who worked in the ticket resale business.
“Specifically, the representative’s friend purchased and resold concert and sporting event tickets and intended to use the cards to bypass event ticket purchase limits,” the regulatory group explained.
