For the purpose of settling allegations of rule violations by the Financial Industry Regulatory Authority ("FINRA") but without admitting or denying the findings, Jospeh P. Rivera submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which the self-regulatory organization accepted. In the Matter of Joseph P. Rivera, Respondent (AWC #2009017372201 / October 31, 2011).
Respondent Rivera first became registered with FINRA as a General Securities Representative in November 2000; and thereafter, was associated with about 20 NASD/FINRA member firms (some, more than once).
On July 27, 2008, Rivera received a credit line from a Las Vegas casino. Apparently, Rivera's luck wasn't too great because a few days later, he owed the casino about $10,000.
Hey, it happens. You double-up to win back your losses and, damn, you crap out or draw to 22. Generally, whatever you had riding on the line - that stack of chips - was what you were going to lose. Except in this case, unbeknowst to Rivera, he had backed up his bet with his Wall Street career.
For lots of reasons, many folks sort of think it's a smart idea to pay casino debts. Not that every casino is run by the Mob, but, hey, we've all seen the movies where the guys that owe money to the House get nabbed in a dark alley and someone works 'em over. Not that there's a Mob. Not that there's any organized crime involvement with casinos. On the other hand, you know, for whatever reasons, it just seems to make sense to timely pay your casino debts.
Several months after his losing run in Las Vegas, Rivera apparently hadn't paid his $10,000 debt, and from November 2008 through February 2009, the casino reached out to him on a number of occasions and tried to get the marker paid. On or about December 18, 2008, a $10,000 electronic check drawn from Rivera's bank account and issued to the casino. Only there was this little problem - the check was returned for insufficient funds ("NSF check").
SIDE BAR: Under Nevada law passing an NSF check can rise to the level of criminal fraud. The determining factor in such prosecutions is typically whether the individual drawing the check knew at the time of tendering the check that there were insufficient funds in the checking account. Such a consideration often eliminates situations where you write a check believing that a recently deposited (or soon to be deposited) check will cover the anticipated debit, even if that covering check itself turns out to be NSF. Similarly, a prosecutor might decline to charge you if you made a good-faith, inadvertent error believing that you had sufficient funds or that a line of credit would kick in. Consequently, prosecutors will often ask whether the potential defendant "knew or should have known" that at the time of issuing the NSF check that it would bounce.
A Classic Bill Singer Digression SIDE BAR: All of which reminds me of one of the very first cases that I handled as a lawyer. My client had overdrawn her checking account and was notified by her bank that she needed to cover the debit. She wrote out a check to cover the debit and the bank's fee; however, and this is the part that's the jaw dropper, she wrote the check against the very same checking account that had a negative balance and into which she had not deposited any additional funds. When she deposited that check into her account and it too bounced - duh - the bank was not amused. I politely declined to accept my retainer via payment by check from the wife and generously accepted a check from her husband.
A Second Classic Bill Singer Digression SIDE BAR: Which sort of reminds me of another very early client. A wife came to my office with a tantalizing problem. Seems that she and her husband had a joint vault box at a bank. When they opened the box, each was given a key. Supposedly, the husband was out of town and had lost his key but needed his wife to go to the box to withdraw something. As to what that something was, I'll leave it to everyone's imagination. When I asked the wife why she needed a lawyer, she explained that she had placed her key in the vault box for safekeeping and was wondering if there was anything that I could legally do to help her gain access because the good folks at the bank were pretty adamant about their No-Key-No-Box-Opening policy and were now insisting upon a court order or legal papers. Placed the spare key to the vault box in the vault box for safekeeping! All these years later, I wonder whether that marriage survived.
On or about February 21, 2009, the boys at the casino apparently threw up their hands in disgust with Rivera and decided to take legal action by filing a complaint against him for the unpaid debt him. Now, many of you might think that the casino creditors filed a civil Complaint in a local court. Good hunch but wrong. See, the House always wins. In Rivera's case, the casino complained to the local Clark CountyDistrict Attorney Office ("DA") in Las Vegas, Nevada, with respect to the unpaid debt.
By letter dated March 9, 2009, the DA notified Rivera that if payment of the $10,000 casino debt was not received in ten days, under Nevada law a warrant for his arrest would be issued. Like I said earlier, a lot of folks think it's a bad idea to owe money to casinos and an even worse idea to not timely repay a debt. Seems that in Las Vegas, the casinos have a friend in the DA's Office - perhaps a very motivated friend.
SIDE BAR: Nevada Revised Statutes ("NRS"):
Title 15: Crimes and Punishment
Chapter 205: Crimes Against Property / FORGERY, COUNTERFEITING AND ISSUANCE OF CHECK OR DRAFT WITH INTENT TO DEFRAUD
NRS 205.130 Issuance of check or draft without sufficient money or credit: Penalties.
1. Except as otherwise provided in this subsection and subsections 2 and 3, a person who willfully, with an intent to defraud, draws or passes a check or draft to obtain:
(b) Delivery of other valuable property;
(d) The use of property; or
(e) Credit extended by any licensed gaming establishment,
drawn upon any real or fictitious person, bank, firm, partnership, corporation or depositary, when the person has insufficient money, property or credit with the drawee of the instrument to pay it in full upon its presentation, is guilty of a misdemeanor. If that instrument, or a series of instruments passed in the State during a period of 90 days, is in the amount of $250 or more, the person is guilty of a category D felony and shall be punished as provided in NRS 193.130. In addition to any other penalty, the court shall order the person to pay restitution.
2. A person who was previously convicted three times of a misdemeanor under the provisions of this section, or of an offense of a similar nature, in this State or any other state, or in a federal jurisdiction, who violates this section is guilty of a category D felony and shall be punished as provided in NRS 193.130. In addition to any other penalty, the court shall order the person to pay restitution.
3. A person who willfully issues any check or draft for the payment of wages in excess of $250, when the person knows he or she has insufficient money or credit with the drawee of the instrument to pay the instrument in full upon presentation is guilty of a gross misdemeanor.
4. For the purposes of this section, "credit" means an arrangement or understanding with a person, firm, corporation, bank or depositary for the payment of a check or other instrument.
NRS 205.132 Issuance of check or draft without sufficient money or credit: Presumptions of intent to defraud and knowledge of insufficiency; malice in causing prosecution.
1. In a criminal action for issuing a check or draft against insufficient or no funds with intent to defraud, that intent and the knowledge that the drawer has insufficient money, property or credit with the drawee is presumed to exist if:
(a) The instrument is drawn on a purported account which does not exist.
(b) Payment of the instrument is refused by the drawee when it is presented in the usual course of business, unless within 5 days after receiving notice of this fact from the drawee or the holder, the drawer pays the holder of the instrument the full amount due plus any handling charges.
(c) Notice of refusal of payment, sent to the drawer by registered or certified mail at an address printed or written on the instrument, is returned because of nondelivery.
2. If a complainant causes a criminal action to be commenced for issuing a check or draft with intent to defraud and refuses to testify in the action, the complainant is presumed to have acted maliciously and without probable cause.
Notwithstanding the tough talk from the DA about only ten days to pay, the clock ticked off something like four months after the prosecutor's March 2009 warning letter. Still, no payment was forwarded by Rivera.
On July 2, 2009, the DA notified Rivera by mail that he was charged in a criminal Complaint with a felony involving "Drawing and passing a check without sufficient funds with intent to defraud." Subsequently, Rivera spoke to the DA, confirmed the existence of the Complaint, and received a copy of the Complaint.
Around August 5, 2010, when Rivera was going through the registration process with a new FINRA member firm employer, his background check disclosed the July 2009 felony charge involving his NSF check and the casino debt. According to Rivera, this was when he first learned that he had been charged with the felony and prompted him to contact the DA, at which time the existence of the criminal case was confirmed and a copy of the Complaint sent to him. Thereafter, on August 31, 2010, Rivera updated his answer from "no" to "yes" on Form U4 Question 14A (l)(b): "Have you ever been charged with any felony?" Rivera's August 31, 2010 "Yes" answer occurred more than a year after he had been charged with the felony.
According to online FINRA records, as of November 3, 2011, it was reported that Rivera had been charged with the felony on July 2, 2009, to which he pleaded Not Guilty. On or about August 31, 2010, it was reported that the case had been disposed of in response to an arrangement to enter into a repayment plan. FINRA's records note the following response submitted by or on behalf of Rivera in a "Summary" section:
[Rivera] never knew he was charged with any crime until his fingerprints came back during his registration with Rockwell. Mr. Rivera upon learning that has contacted the Clark County Court and has entered into a payment plan. Once the total amount is paid back, all charges will be dropped. Please be advised that Mr. Rivera was never arrested. . . . He was charged in court, but was not present when the charges were made. He never made a court appearance or was informed that there was going to be one. . .
SIDE BAR: Article V, Section 2 of the FINRA By-laws requires that a person applying for registration with FINRA disclose certain information. An applicant is required to keep his Form U4 current by timely filing amendments - "timely" is generally defined as within 30 days of learning of disclosable facts .
Now, we wind the clock back to about four months after Rivera got that $10,000 casino marker - it's November 10, 2008, and the Securities and Exchange Commission ("SEC") sent to Rivera's legal counsel a "Wells Notice," advising him that the SEC was considering recommending a civil injunction against him in connection with matters which occurred while he was associated with a broker-dealer. Rivera did not amend his Form U4, Item 14G(2), to disclose this regulatory event. On March 12, 2009, this U4 omission catches up to Rivera, who is terminated by a broker-dealer upon disclosure that he had failed to disclose the Well Notice on his Form U4.
Not to be deterred, on March 20, 2009, Rivera joined another broker-dealer and disclosed on that firm's employee questionnaire that he had received the 2008 Wells Notice. On March 23, 2009, Rivera formally disclosed the Wells Notice on his Form U4. Notwithstanding, the March 2009 disclosure, Rivera was tardy because four months had expired from when the SEC first notified him.
Based upon the above, FINRA alleged that in contravention of Article V, Section 2 of the FINRA By-laws and in violation of FINRA Rule 2010, that Rivera had:
In accordance with the terms of the AWC, FINRA imposed upon Rivera a 60-day suspension in any capacity with any FINRA member firm.
SIDE BAR: All is not as benign as it seems. Because Rivera was charged with having wilfully made a material misstatement on his Form U4, he is deemed statutorily disqualified. For more details about this issue, read these cases at RRBDlaw.com: 08002, 07002, 06001, 05008
Rivera submitted a sworn financial statement and demonstrated an inability to pay a regulatory fine, and, in light of his financial status, FINRA decline to impose a monetary sanction.
Although not universally submitted, Rivera chose to provide FINRA with a Statement of Corrective Action:
I am now much more sensitive to my reporting responsibilities and have ensured that all reportable events have been disclosed and are current.. I will continue to be aware of such reporting responsibilities and, should a disclosable event occur in the future, I intend to see that it is timely reported.
I have paid about half of the Las Vegas casino debt and intend to pay the remainder within the next six months. I also plan to take care of the other outstanding judgments and, for the future, to handle my affairs in a current and responsible manner so I no longer have issues such as the issue involved in my Letter of Acceptance, Waiver and Consent.
a personal message from Bill Singer:
It has been brought to my attention by a number of FINRA member firms that the Small Firm National Adjudicatory Council contested election has gone from the gutter, into the sewer, and now percolates in a cesspool.
As you likely know, I was among the earliest proponents of contesting elections against NASD and then FINRA, I long counseled many dissidents on how to launch their campaigns, and I provided material support to further their efforts.
Unfortunately, as more folks sought to contest the same FINRA elected offices, more elbows started to swing and any common cause in furtherance of electing the most qualified candidate gave way to childish name-calling, and worse. Having been on the receiving end of some of the most vile slander from cowardly anonymous authors, I abandoned the FINRA election scene.
In August 2011, FINRA's Nominating and Governance Committee nominated David M. Sobel for the Small Firm NAC seat. I truly wish that David had declined that nomination and chosen to run as a petition candidate because I have little faith and confidence in the integrity of FINRA's in-house nominating process, which too often yielded hand-picked cronies. Nonetheless, I reluctantly supported David's nomination because of his superb qualifications and my expectation that he will prove to be an outstanding, independent member of the NAC.
Subsequent to David's nomination, another individual chose to seek nomination as a contested candidate via the petition route. I long respected that candidate's interest in industry reform. If I had known of her interest in contesting the NAC nomination, I would not have published my August 5, 2011, support for David Sobel and would simply have opted to stay silent and on the sidelines. The FINRA Small Firm community would have been blessed with having a choice between two qualified and sincere candidates -- no one would have lost under those circumstances and this year's loser would likely have emerged as the favorite for the next open seat.
Although I have not personally met either of the candidates, I have maintained active email communications with them over the years, had numerous telephone conversations with each, and know them both to be sincere reformers who truly care about the causes that they advocate.
Sadly, I learn that Sobel has become the victim of the most puerile and vicious attacks. The anticipated robust debate of a contested election has degenerated into little more than doing whatever it takes to get elected. The rhetoric and the personal attacks against Sobel are all to reminiscent of the same language that was directed against me.
Oddly, if the intent was to harm Sobel, the effort has misfired. Not only have many voters been disgusted by the unnecessarily personal nature of the vitriol, but it has energized more support for Sobel than it's likely hope of generating support for his challenger. In my case, it has forced my hand and motivated me to regrettably choose between two folks that I admired and respected.
Unequivocally, I urge all FINRA small firm members to vote for David Sobel for the NAC. Not only will your vote elect a qualified candidate, but it will also send a much-needed and long overdue message that FINRA's Small Firm community is fed up with the counter-productive and unacceptable politics that has infected contested elections for too long.
I re-post my original endorsement of David Sobel from August 5, 2011, below:
=====================Bill Singer Supports the National Adjudicatory Committee Candidacy of David M. SobelWritten: August 5, 2011
On August 5, 2011, the Financial Industry Regulatory Authority ("FINRA") announced the upcoming election for two open seats (one each for the Large Firm and the Small Firm members) on its National Adjudicatory Council ("NAC"), which comprises 14 members: 7 industry (two Small Firm, one Mid-Size Firm, two Large Firm, and two At-Large Industry Members); and 7 non-industry (at least three are Public Members).
Service is typically for a three-year term. Those wishing to contest FINRA's Nominating and Governance Committee nominees will have 45-days to file the requisite petitions entitling them to be certified for the ballot.
The NAC is not an unimportant cog in the FINRA regulatory wheel -- to the contrary, it is among the most critical components. The NAC reviews all FINRA hearing panel decisions, statutory disqualification applications, and serves in the additional role as FINRA's appellate panel.
Small Firm Nominee David M. Sobel
FINRA's Nominating and Governance Committee nominated David M. Sobel for the Small Firm NAC seat.
I have known David Sobel for many years as someone who is unequivocally committed to regulatory reform. He is an industry veteran who's been there and done that -- he understands the pressures of your business and has the legal training to recognize the merits (or lack thereof) in the various FINRA matters that will be presented to him. Frankly, I can't think of many individuals that I have known after some three decades on the Street who are more qualified and suited for the position.
I urge you to cast your Small Firm vote for NAC candidate David M. Sobel.
David M. Sobel, Esq. is currently executive vice president, general counsel and chief compliance officer of Abel/Noser Corp., a FINRA/NYSE member broker-dealer. He was previously a partner at The Goldstein Law Group, P.C., where he concentrated in the areas of broker-dealer compliance/regulation, securities litigation, including arbitration and mediation, and disciplinary/enforcement matters at the SEC, NYSE, AMEX and FINRA. Mr. Sobel was a floor member of the New York Stock Exchange from 1982 through 1991 as a floor broker for both H.A. Brandt & Co. and First Options of Chicago, and he was president of his own NYSE member firm, Ampro Securities, Inc. After leaving the NYSE floor, he was a senior equity trader/market maker for Trimark Securities.
Mr. Sobel has a Master of Science degree from Brooklyn College and a law degree from Pace Law School, where he was an editor of the International Law Review and recipient of the Dean's Award. He has served as a FINRA arbitrator, on FINRA's District 10 Committee and on FINRA's Small Firm Advisory Board. He has also served on the Board of Directors of the National Society of Compliance Professionals and as chairman of the board of the NAIBD. August 5, 2011
Mr. Sobel has been quoted in or interviewed by: Compliance Reporter, WSJ.com, Complinet, Trader's Magazine, Wall Street Letter, BD Week, Op/Risk and Compliance Magazine, Institutional Investor News and Dow Jones Newswire, and is a frequent speaker at securities conferences for SIFMA, NSCP, NRS, NAIBD, FMW and Strategy Institute. Recent conference topics include Managing Risk at Small BD; Internal Audits; Supervisory Responsibility, Financial Responsibility, Fraud Prevention in Portfolio Management, Social Networking, Foundations of Compliance, Best Practices and Forensic Compliance.
He is admitted to practice before the Supreme Courts of New York and Connecticut, the U.S. District Courts for the Southern and Eastern Districts of New York and the Second Circuit Court of Appeals. He is a member of the New York County Lawyers Association, the New York State Bar Association and the American Bar Association.