by Bill Singer
Robert D. Tucker entered the securities industry in 1989, and during some 20 years since becoming a registered representative, he has associated with 23 Financial Industry Regulatory Authority (“FINRA”) member firms. Starting in 2000, he accumulated the following history:
No, No, No…
The Uniform Application For Securities Industry Registration or Transfer Forms (“Forms U4″) submitted and certified as accurate by Tucker during the relevant times asked whether he had:
Bill Singer
On each Form U4, Tucker responded “NO” to the judgments/liens and bankruptcy questions.
FINRA Investigates
In 2008, FINRA opened an investigation into Tucker’s disclosures. As for the judgments and liens, Tucker said he did not disclose them because he had contested them, and while he acknowledged that some of his employing firms “pretty much didn’t know about” some of the judgments and liens, he later asserted that some of his employing firms were partially responsible for his failed disclosures – pointedly claiming that they either knew of the events or he had spoken with compliance officers and was told to delay correcting them until his legal liabilities were resolved.
A Matter of Counsel
By November 17, 2009, the first date for the FINRA Office of Hearing Officers (“OHO”) disciplinary hearing, Tucker did not appear and alleged that he had been ill and unable to participate. The hearing officer rescheduled the hearing for November 20, 2009. On November 19, 2009, Tucker filed an emergency motion asking for a further postponement for health issues and retention of counsel.
At the final pre-hearing conference on December 1, 2009, Tucker said that he had chosen counsel whose schedule required a further delay in the hearing. He would not, however, reveal counsel’s identity when asked. The parties agreed that the hearing would begin on January 21, 2010. Notwithstanding his earlier statements, Tucker represented himself at the OHO hearing.
Getting The NAC Of It
Following the FINRA OHO hearing at which he appeared pro se and subsequent to his appeal to that self-regulatory organization’s National Adjudicatory Council (“NAC”), at which he was represented by counsel, Tucker was found to have failed to disclose on his Form U4 from 2001 through 2008 (while registered with 11 different firms):
in violation of NASD Rule 2110 and Interpretive Material (“IM”) 1000-1.
FINRA imposed the following sanctions upon Tucker:
Moreover, in finding that Tucker’s failure to disclose his two bankruptcies, federal tax lien, and three judgments were willful, and the omitted information was material, FINRA deemed Tucker to be statutorily disqualified, and, accordingly, he cannot become or remain associated with a FINRA member unless the disqualified person’s relief from the statutory disqualification. FINRA Department of Enforcement, Complainant, v. Robert D. Tucker, Respondent (National Adjudicatory Council (“NAC”) Decision, 2007009981201 October 4,2011).
Appeal To The SEC
Appearing pro se before the Securities and Exchange Commission (“SEC”), Tucker sought review of FINRA’s decision In the Matter of the Application of Robert D. Tucker For Review of Disciplinary Action Taken by FINRA(SEC Opinion, Release No. 68210; Admin. Proc. File No. 3-14613 / November 9, 2012).
In characterizing Tucker’s FINRA testimony, the SEC Decision states:
Tucker’s testimony at the hearing was varied and inconsistent. Much of his testimony was inconsistent with the documentary evidence and his earlier sworn testimony. He denied knowledge of and responsibility for the judgments, repeatedly avoided answering direct questions about the federal tax lien and his Form U4 disclosures, and said he disclosed his bankruptcies on some (though not all) of the Forms U4 he submitted. For instance, he claimed that officers from Broadband Capital, GunnAllen, and vFinance advised him not to disclose his bankruptcy filings given that he had not done so in the past. Doing so now, they ostensibly said, would only raise “red flags.” During his summation, he claimed that other unspecified firms received IRS notices, that he discussed with them the liens, and that he was advised against amending his forms (again because filing such amendments would only raise “red flags”). In alluding to these purported discussions with firm officials, Tucker did not explain how they related to his repeated and consistent pattern of false filings at each of eleven firms over a seven-year period. Tucker did concede, however, that he completed two additional Forms U4 after giving his sworn investigative testimony and after receiving FINRA’s complaint, but that he did not disclose the bankruptcies or liens on either.
In deciding to sustain FINRA’s findings and sanctions, the SEC offers us a pointed, blunt, assessment of Tucker and his defenses:
Tucker’s failures to disclose the judgments, bankruptcies, and liens were egregious. Over seven years, Tucker was responsible for eleven false and misleading Forms U4. The multiple and longstanding judgments, bankruptcies, and liens that he failed to disclose involved large dollar amounts and longstanding financial obligations to multiple creditors. They were material reflections on his business judgment and the financial pressures and distractions he continually faced while rendering investment advice. His false and misleading filings egregiously violated the standard of “candor and forthrightness” required of associated persons during the registration process. . .
[T}ucker's persistent attempts to deflect blame onto others and his pattern of hiding and mischaracterizing the underlying events to the firms and even to FINRA during its investigation suggests that he is likely to engage in similar misconduct in the future. This pattern of deflection and misdirection also discredits his claims that he believed disclosure was not required based on discussions with firm officials. Tucker had opportunities to make accurate filings each time he associated with a new member firm but repeatedly chose not to—even after he acknowledged the deficiencies in his past filings. He continued to make false filings long after he claims he submitted amended forms at Schneider and other firms, after FINRA began its investigation, after he represented he would correct his earlier filings, after he gave investigative testimony acknowledging his failures to disclose, and even after FINRA filed its complaint in this case. Like FINRA, we conclude that his explanations and testimony were evasive and contradictory and that they ultimately reveal a disconcerting failure to acknowledge his own responsibility in this matter.
[T]ucker’s attempts to shift blame for his own repeated misconduct cast doubt on his commitment to the high standards of conduct demanded of associated persons and ultimately suggests an opportunistic attitude towards disclosure and compliance. Tucker consistently failed to acknowledge the wrongfulness of his conduct—that he had a duty to respond fully and accurately on each of the Forms U4 that he completed and certified and that others were entitled to rely upon in terms of accuracy and completeness. Here, Tucker’s migration among eleven firms over seven years, and consistent certifications of inaccurate information with each, highlights the difficulty in detecting a representative’s past failures to disclose. Accordingly, we find that suspension and license requalification is an appropriate remedial response.We find these sanctions are also appropriate to encourage other representatives to provide complete and accurate Form U4 disclosures even when “detection of dishonest responses seems unlikely.” They also serve the public interest in “maintain[ing] a high level of business ethics in the securities industry” based on timely, accurate, and complete disclosure to investors. . .
Bill Singer's Comment
Frankly, not all that much for me to say: the comprehensive FINRA and SEC decisions spell it out.
Gaming Wall Street‘s disclosure system is not a new compliance problem but it remains a common one. Trying to put a spin on what you don’t have to disclose, coming up with strained rationale is an old dodge. And while this problem often arises among the fringes of the securities industry at lesser and often dubious brokerage firms, the fact is that this practice also occurs at the big boys, be they Merrill Lynch, Morgan Stanley, UBS, Wells Fargo, Goldman Sachs, or the like. If there’s something that someone would prefer to hide, you can bet that a whole batch of ifs, buts, and you could argues bubble to the surface.
Among the lessons — or warnings — of Tucker is to discern how annoyed the regulators are when a respondent persists in pointing the finger at others and lacks the grace to accept some (if not all) the blame. Although such a show of acceptance of liability may not avoid a finding of violation, expressing the requisite mea culpas can impact the length of suspension or dollars of a fine — and can often be the difference in persuading a regulator that your conduct was unintentional and not willful. Remorse, when it is interpreted by regulators as sincere, can and often does make a difference.