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, Joseph L. Fuller submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Joseph L. Fuller, Respondent (AWC 2012031108201, January 22, 2013).
Fuller first became registered with FINRA in 1968 and from 2009 through January 23, 2012, he was registered with NIA Securities, L.L.C. The AWC asserts that Fuller had no prior FINRA disciplinary history.
The AWC alleges that during the relevant time from February 2011 through September 2011, Fuller performed 401(k) consulting services for a limited liability company without giving NIA prior written notice of the contemplated activities or nature of his compensation. Among the consulting services that Fuller provided and for which he allegedly earned at least $11,889, were meetings, travel, phone calls, document review, and asset allocations. The AWC asserted that Fuller engaged in undisclosed outside business activities in violation of FINRA Rules 3270 and 2010.
SIDE BAR: FINRA Rule 3270: Outside Business Activities of Registered Persons
No registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member, in such form as specified by the member. Passive investments and activities subject to the requirements of NASD Rule 3040 shall be exempted from this requirement.
.01 Obligations of Member Receiving Notice. Upon receipt of a written notice under Rule 3270, a member shall consider whether the proposed activity will: (1) interfere with or otherwise compromise the registered person's responsibilities to the member and/or the member's customers or (2) be viewed by customers or the public as part of the member's business based upon, among other factors, the nature of the proposed activity and the manner in which it will be offered. Based on the member's review of such factors, the member must evaluate the advisability of imposing specific conditions or limitations on a registered person's outside business activity, including where circumstances warrant, prohibiting the activity. A member also must evaluate the proposed activity to determine whether the activity properly is characterized as an outside business activity or whether it should be treated as an outside securities activity subject to the requirements of NASD Rule 3040. A member must keep a record of its compliance with these obligations with respect to each written notice received and must preserve this record for the period of time and accessibility specified in SEA Rule 17a-4(e)(1).
In accordance with the terms of the AWC, FINRA imposed upon Fuller a $5,00 fine and a one-month suspension from association with any FINRA member in any capacity.
Few things ever so hermetically sealed as to result in a single, isolated regulatory violation; which may well explain the reluctance of many brokerage firms to permit outside business activities ("OBAs"). When a firm approves a registered person's proposed OBA, the unexpected and the unanticipated can come home to roost with a vengeance; and, accordingly, those uncertainties also explain why FINRA and other regulators focus on OBA violations.
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