May 31, 2013
At first blush, a registered representative failed to timely disclose a number of liens and bankruptcies. Upon closer inspection, the story takes on a bit more nuance. Notwithstanding, it is critical to timely update your Form U4 to disclose such financial events.
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, Dennis Joseph Snyder submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Dennis Joseph Snyder, Respondent (AWC 2011030172101, May 22, 2013).
In 1973, Snyder entered the securities industry and through March 2007, he was registered with twelve FINRA member firms. Thereafter, he was registered with Royal Alliance Associates, Inc. until that firm purportedly filed a Uniform Termination Notice for Securities Industry Registration ("Form U5") disclosing that in November 2011, Snyder had been ''permitted to resign after the Firm was made aware of several late U4 filings regarding personal liens." The AWC asserts that he had no prior disciplinary history.
The AWC asserts that between 2004 and 2013, Snyder was subject to at least eight federal and state tax liens, three of which were released in 2009. Question 14M of the Uniform Application for Securities Industry Registration or Transfer Form ("Form U4") seeks disclosure of liens, but Snyder allegedly failed to timely update his Form U4 to reflect the existence of his federal and state tax liens.
Additionally, on January 26,2009, Snyder filed a Chapter 7 Petition in the U.S. Bankruptcy Court for the District of Minnesota, which triggered an additional obligation to timely update Question 14K of Form U4, which the AWC alleged he did not do.
Article V, Section 2(c) of FINRA's By-Laws (formerly Article V, Section 2(c) of NASD's By-Laws): registered representatives must keep their Form U4 current, typically within 30 days of learning of a triggering event.
Form U4 /Question 14K: asks whether the registered representative has filed a bankruptcy petition within the past 10 years. Update required within 30 days of event.
Form U4 / Question 14M: asks whether the registered representative has any unsatisfied judgments or liens against him. Update required within 30 days of event.
FINRA Rule 1122: Associated person must ensure that Form U4 filings are accurate and complete.
FINRA Rule 1122 (formerly NASD IM-1000-1): filing incomplete or inaccurate Form U4 (or the failure to correct such filings) is deemed conduct inconsistent with just and equitable principles of trade.
FINRA Rule 2010 (formerly NASD Rule 2110): Associated persons must observe high standards of commercial honor and just and equitable principles of trade. Failure to comply with FINRA Rule 1122 and with the FINRA and NASD By-Laws constitute violations of Rules 2010 and 2110.
The AWC found that Snyder's untimely filings constituted violations of Article V, Section 2(c) of the NASD By-Laws, NASD Rule 2110, and NASD IM-1000-1. Additionally, Snyder violated Article V, Section 2(c) of FINRA's By-Laws and FINRA Rules 1122 and 2010.
In accordance with the terms of the AWC, FINRA imposed upon Snyder a $5,000 fine and a 30-day-suspension from association with any FINRA member firm in all capacities.
Bill Singer's Comment
For starter's re-read the "Financial Disclosures" section of your Form U4:
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 InvestorProtection Act?
14L. Has a bonding company ever denied, paid out on, or revoked a bond for you?
14M. Do you have any unsatisfied judgments or liens against you?
Lately, FINRA seems to be on a tear when it comes to investigating and charging for the non-disclosure of liens and judgments on the Form U4. With the the Great Recession's legacy still causing pain, it's no wonder that many registered persons experienced problems paying their bills or taxes. All of which may explain why FINRA is on top of this developing trend and why there seems to be so many cases. Clearly, the answer to this issue for registered persons is not found in untimely or failed disclosure.
After some three decades of law practice, I have spoken to many registered persons facing financial disclosure issues. And, sure, many of those folks have no one to blame but themself for living beyond their means and spending like there's no tomorrow. On the other hand, there are also many folks who simply awoke one day to find that life as they knew it had changed for the worse -- a death in the family, a tragic accident, a hurricane, a tornado. Just read the headlines and fill in the blanks. Consequently, don't be too quick to judge because there but for the grace of God could be you and your family.
Although not noted in the AWC, I found this disclosure in an online FINRA document as of May 30, 2013, which offers the following explanation attendant to a 2007 Chapter 13 bankruptcy filing by Snyder (apparently dismissed):
WIFE CONTRACTED WAGNERS DISEASE RESULTING IN LARGE MEDICAL BILLS AND ONGOING MEDICAL TREATMENT.
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