May 7, 2013
Regardless of your intentions, helping out a customer may not always be the best of career moves -- particularly if you are compensated for the side work and you don't disclose your conduct to your employer. In a recent regulatory settlement, one stockbroker found himself backed into just such a regulatory corner.
A Winter of Discontent
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, Homer Daniel Winter III submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Homer Daniel Winter III, Respondent (AWC 2012031823901, May 6, 2013).
Winter first became registered with FINRA in 1987; and from 1999 through March 19, 2012, he was registered with FINRA member firm Wells Fargo Advisors, LLC. The AWC asserts that Winter had no prior formal disciplinary history with the Securities and Exchange Commission, any self-regulatory organization or any state securities regulator.
While registered with Wells Fargo,Winter provided household management services to two customers; said services included managing caregivers, assisting in payroll and bill paying, and overseeing home repairs and maintenance.
As alleged in the AWC, Winter provided household management services to Customer1 at various times from May 208 to September 2011; and to Customer2 at various times from March 2001 to March 2012, for which he was respectively paid by the customers $67,500 and $16,500.
Outside Business Activity
The AWC asserts that Winter did not inform Wells Fargo about this business activity; and on his annual attestations in 2009, 2010 and 2011, he falsely certified to the firm that he had not been engaged in any outside business activity, except for those previously disclosed (which did not include the provision of compensated household management services).
On March 19, 2012, Wells Fargo filed a Uniform Termination Notice for Securities Industry Registration ("Form U5") stating that Winter was discharged (his last date of employment was March 5, 2012) "when it was determined that he was providing payroll services for a client" without firm approval by the Firm.
By letter dated June 26, 2012 and sent pursuant to FINRA Rule 8210, FINRA staff asked Winter, among other things, if he had been compensated for any services that he had provided to Customer2. Winter's July 23, 2012, written response denied compensation from Customer2 "for anything."
In early 2013, subsequent to his September 17, 2012, FINRA on-the-record interview, Winter, through his counsel, conceded to FINRA staff that Customer2 had paid him for household management services.
The AWC asserts that Winter engaged in outside business activities without providing any disclosure to Wells Fargo; and he provided FINRA staff with false information in response to a written request. Such conduct was deemed to constitute violations of FINRA Rules 3270,
8210 and 2010 and NASD Conduct Rules 3030 and 2110.
In accordance with the terms of the AWC, FINRA imposed upon Winter a $30,000 fine and a 14-month suspension from association with any FINRA member in any and all capacities.
Bill Singer's Comment
When I read the AWC, my understanding of the facts (in part derived from some inferences I made, justifiably or otherwise) was that Winter may have been a nice guy helping out a couple of elderly clients. Let me be clear: There is absolutely no assertion in the AWC that Winter was motivated by charitable instincts or that the clients were elderly. As I have often noted, I don't think that the regulation of Wall Street should be a game of hide-and-seek because the unfortunate byproduct of glib regulatory presentations is that our minds fill in the blanks, which may result in conclusions that are not aligned with reality. The danger of unleashing our imaginations is that we fail to appreciate the seriousness of the issues at hand and inadvertently white wash situations that warrant far less sympathy.
Whether or not Winter's conduct and the nature of his clients is fairly presented in the AWC is beyond my ability to corroborate. In an effort to gain more insight, I went outside of the four corners of the AWC and located some online FINRA disclosures about Winter (as of May 10, 2013) that provide this additional information:
Allegations: SON OF DECEASED NC RESIDENT HAS QUESTIONED THE APPROPRIATENESS OF FA USING A POA ON HIS MOTHER'S CHECKING ACCOUNT TO PAY HIMSELF FOR ASSISTING HER WITH BILL PAYING, HIRING CARETAKERS, ETC. DEMAND WAS FOR REIMBURSEMENT OF $67,500 (08/01/2009 - 09/30/2011)
Additionally, the online FINRA disclosure notes that following receipt of an oral complaint on February 15, 2012, Wells Fargo settled the matter on April 17, 2012, for $67,500 with the disclosure that:
AS A BUSINESS DECISION, AND WITHOUT ADMITTING ANY LIABILITY ON THE PART OF THE FIRM, THE MATTER WAS SETTLED FOR $67,500
READ these Outside Business Activities articles: