An irreverent Wall Street Blog
by Bill Singer
 
Join BrokeAndBroker blog on Facebook  Follow the BrokeAndBroker blog on Twitter  Connect with BrokeAndBroker on LinkedIn  Join Bill Singer on Google+  Subscribe to RSS Feed

Bankrupt Stockbroker Fined And Suspended By FINRA
Written: August 15, 2012

For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority (“FINRA”), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Frank Leonard Patti Jr., submitted a Letter of Acceptance, Waiver and Consent (“AWC”), which FINRA accepted. In the Matter of Frank Leonard Patti Jr., Respondent (AWC 2011029677401, August 10, 2012).

Patti first became registered in 1995 as General Securities Representative; and during the relevant period from March 31, 2009, through August 13, 2009, he was registered with Merrill Lynch, Pierce, Fenner, & Smith, Inc. The AWC asserts that Patti had no prior FINRA disciplinary history. 

The AWC alleges that around February 4, 2009, Patti filed a personal bankruptcy petition, which was granted on May 12, 2009. Following the filing and grant, Patti failed to disclose those events on his Uniform Application For Securities Industry Registration Or Transfer (“Form U4”) until August 13, 2009.  Accordingly, FINRA deemed the faiure to timely disclose the bankruptcy petition on the Form U4 as a violation of FINRA Rule 2010 and NASD IM-1000-1; and imposed upon Patti a $2,500 fine and a 30-business day suspension from association with any FINRA member in any capacity.

Bill Singer’s Comment

This is neither a particularly interesting nor unusual case — I merely reported it because it offers an often rare opportunity to look at a pristine violation — one that does not have any extenuating issues or additional violations.  Consequently, Patti is useful because it sort of answers that oft-asked question: “What am I facing if I don’t timely disclose a bankruptcy?”  Apparently, in 2012, FINRA’s gamebook will slap you with a $2,500 fine and a 30-business-day suspension. There’s the proverbial baseline.

SIDE BAR: The one part of this case that still puzzles me is why it took until August 2012 for FINRA to resolve this case.  According to the AWC, the bankruptcy occurred in February/May 2009 and the violation was (or should have been detected) in August 2009 when Patti made his belated Form U4 filing.  What the hell was going on for the intervening three years?  It may be that FINRA only recently detected the violation but since there is no explanation provided in the AWC, I feel it appropriate to raise this issue.

There are hundreds of  thousands men and women presently registered on Wall Street — many of whom wrestled with the economic devastation of the Great Recession and found themselves left with no final option other than bankruptcy.  That circumstance found its way into the professional and personal lives of folks at small broker-dealers, at indie/regionals, and even at the big boys such as Merrill Lynch,Morgan Stanley, Wachovia, Lehman Brothers, Goldman Sachs, Bear Stearns, JP Morgan, etc.  The swath of financial devastation cut during the past several years has shaken many families.  As such, if you work on Wall Street and find yourself contemplating bankruptcy, make sure to familiarize yourself with the applicable disclosure rules.

Finally, note that FINRA did not charge Patti with having “willfully” failed to disclose the bankruptcy — if he had settled such a charge, on top of the fine and suspension, he would have been deemed statutorily disqualified.  For some guidance on this issue, see, for example:

the broker must have understood that he was violating a particular rule in order to be found to have willfully violated that rule. In doing so, we explained that “[i]t has been uniformly held  that ‘willfully’ in this context means intentionally committing the act which constitutes the violation. There is no requirement that the actor also be aware that he is violating one of the Rules or Acts. . .

If you anticipate seeking a discharge in bankruptcy, make sure to review the applicable Form U4 questions (preferably with your bankruptcy attorney):

Financial Disclosure

14K.

Within the past 10 years:

(1) have you made a compromise with creditors, filed a bankruptcy petition or been the subject of an involuntary bankruptcy petition?

(2) based upon events that occurred while you exercised control over it, has an organization made a compromise with creditors, filed a bankruptcy petition or been the subject of an involuntary bankruptcy petition?

(3) based upon events that occurred while you exercised control over it, has a broker or dealer been the subject of an involuntary bankruptcy petition, or had a trustee appointed, or had a direct payment procedure initiated under the Securities Investor Protection Act?


Topics: Patti  Bankruptcy  U4  FINRA  Bill Singer  BrokeAndBroker  
 
[^top^]

Previous Entries
October 20, 2014
Once upon a time, Wall Street's regulators seemed to view so-called "Failure To Supervise" matters as a last resort -- the final arrow in a quiver. &n... Read On
October 18, 2014
Athena No Goddess Says SEC in HFT SettlementOctober 17, 2014In an effort to cultivate an orderly daily closing, ten minutes before the close at 3:50:0... Read On
October 17, 2014
In an effort to cultivate an orderly daily closing, ten minutes before the close at 3:50:00 p.m., NASDAQ releases a Net Order Imbalance Indicator, whi... Read On
October 17, 2014
Securities and Exchange Commission ("SEC") Commissioner Michael S. Piwowar and his often like-minded colleague, Commissioner Daniel Gallagher, are the... Read On
October 16, 2014
On October 15, 2014, the Securities and Exchange Commission (“SEC”) filed an Order Instituting an Administrative Proceeding (“OIP”) against “Complianc... Read On
October 15, 2014
You should be thrilled to learn that the venerable Lloyds & Associates Management Ltd. is involved in this deal that I’m going to pitch to you. Yo... Read On
October 14, 2014
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page BrokeAndBroker.com Jobs#wallstreetjobs @brokeandbrokerNOTICE TO EMPLOYERS... Read On
BrokeAndBroker.com Job Search
Related Topics
Tag Cloud
Internet FINRA Bear Stearns Bloomberg SEC NASD NYSE Money Laundering Due Diligence Waiver Forbes China Chepucavage Broy Woody Allen Madoff NAC NPR Marketplace Stanford UBS Ketchum Antitrust NASDAQ RRBDLAW Schapiro Bill Singer BrokerAndBroker USERRA Brokeandbroker.com Morgan Keegan Arbitration Counterclaim BrokeAndBroker.com Khuzami BrokeAndBroker Aleynikov Goldman Sachs brokeandbroker Promissory Note U4 Bill SInger EFL CFTC Huffington Post Flash Crash arbitration RBC RRBDLAW.com Ponzi Affinity Fraud Wachovia Raymond James BrokeandBroker.com Expungement Fraud Securities Fraud Outside Business Activity Registered Rep Magazine FOREX BrokerAndBroker.com FBI Banc of America Pro Se Supreme Court Morgan Stanley Smith Barney E*Trade Margin email Galleon Penson U5 Defamation Protocol Wells Fargo Punitive Damages Citigroup Merrill Lynch ARS Employee Forgivable Loan Street Legal Morgan Stanley AWC Fidelity Bankruptcy Broke And Broker HFT David Sobel Day Trading Ameriprise Commissions Spouse Schwab Commission CRD Kenneth Starr IRS CNBC Complaint ATM Skimming Hacking Phishing Malware Naskovets Poteroba Koval Lincoln Financial Selling Away Outside Business Activities Rakoff 2nd Circuit Second Circuit IRA 401k Forgery Tax RRBDlaw.com Email Netschi Moore Whistleblower Street Sweeper Tran Bharara Facebook Online Severance Bonus Eligibility Rule TD Ameritrade Hedge Fund SAC 1099 Smith Barney Lehman Brothers SIPC IC3 Scottrade Lehman JPMorgan Chase Hertz Insider Trading Bank of America Department of Justice Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Walter Bid Rigging Real Estate Discrimination Wall Street Statutory Disqualification Form U4 Form U5 Indictment Boyland DOJ Corruption bill singer FTC Do Not Call FINRA Arbitration Costa Rica Settlement LIBOR Varney Plea Rule 8210 Eligibility RRBDlaw Appeal Fowler LPL Johnson US Airways Reg D MSSB Vault Loan SunTrust Discovery Employment Rosenthal Recruiting Lawyer Trading Platform JP Morgan Employment Tuesday Wrongful Termination Bank Guarantee WaMu Solicitation REIT Martin Credit Cards Away Account Credit Repair PN Advisor Placement Group Forex Mortgage Private Placement Moon Merrill Anderson Exam Lee Borrowing Tax Lien Conversion Oppenheimer Wedbush Felony Misdemeanor Expenses ING Lien OTR Estate Jobs Florida Credit Card Elderly Flash Drive Annuity Expense Reimbursement FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker RIA Prison Disclosure NASAA Aguilar FCPA Subway Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank Hospital God HSBC Private Placements Eric Stein Wire Fraud CCO Joshua Brown Backstage Wall Street Obstruction of Justice Reuters Retaliation Variable Annuity Arbitraiton Outside Account Options Telephone Wine Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud Retirement OBA Equity Indexed Annuities EIA MetLife Continuing Education OIP Tax Liens Willful CE Unregistered Impersonation Annuities BBVA Business Expenses ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Impersonator Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks RMBS AML PST Solicited Unsolicited Congress SRO Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement Money Market employment jobs Great Recession Chase Investment Services Arrest Barclays Liens Failure To Supervise Apple Time And Price T&P Willfully Husband Letter of Authorization LOA Sexism Debit Card Knight Test Practice Sale Unfair Competition Signature Judgments Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Charge Sexist NML Argentina Embezzlement Silver Judgment Bank Fraud Deceased TSSB Mary Jo White Trustee Motion To Dismiss Frumento Conspiracy 6th Circuit Proctor Rule 3040 Class Action Beneficiary NYAG Schneiderman Gallagher White Self Regulation Short Sale Compromise Website TRO Supervision Vacatur SDNY BrokeAndBroker Bill Singer Piwowar Rule 1122 Article V signature Inside Information VA Regulation SP Customer Rule 3270 OWB Stockbrokers
 
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+