August 18, 2014
Registered persons who are looking to get involved with a venture frequently contact me but then, inexplicably, have trouble describing just what it is that they are looking at. Frankly, that's among the first tip-offs to me that there could well be a regulatory or compliance problem at the end of what typically takes on the characteristics of a shaggy dog story. During many of these calls, it seems that the proposed business has something to do with writing about investment opportunities for a website or newsletter, or, well, not exactly advice but more like general commentary but, you know, not for free but for a subscription, and I may get a piece of the annual fees unless I buy into the business or they give me a piece and . . . Well, you got the gist. Before you plunge into such a deal, you better consider whether it's what FINRA deems an Outside Business Opportunity ("OBA").
Case In Point
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, Barry T. Larkin submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Barry T. Larkin, Respondent (AWC . 2013037033501, August 6, 2014).
In 1987, Larkin entered the securities industry as a specialist clerk and worked in the securities industry in both registered and non-registered capacities for approximately 27 years with ten different broker-dealers. From the relevant time of February 23, 2011 to February 15, 2012, Larkin was associated with BGC Financial, L.P. The AWC asserts that Larking had no prior formal disciplinary history in the securities industry.
Storm On The Horizon
The AWC alleges that in May 2011, Larkin entered into an oral agreement with Global Financial News Network ("GFNN" at the time known as "Newsgrade"), a company which purportedly provided general market commentary, securities information, and analytics software. Pursuant to the agreement, Larkin was to market the company's Storm Algorithm Suite to securities industry participants.
In furtherance of his role, Larkin received access to GFNN's proprietary software and presented demonstrations of the Storm Algorithm Suite to BGC's registered representatives, as well as other industry participants. Moreover, he hosted several dinners and meetings as part of his marketing efforts.
On at least two occasions, Larkin traveled to Florida for meetings with GFNN's Chief Executive Officer, Chief Operating Officer, the firm's founder, the firm's product development specialist, and several investors. In December 2011, Larkin was offered the opportunity to become Head of Sales. A few months later, however, around February 14, 2012, Lakin was informed that GFNN's management team was resigning and he had no further contact with the firm or access to its products.
During the period from May 2011 through February 2012, GFNN paid Larkin a total of $25,500 via compensation and expense reimbursement.
A Hard Rain's Gonna Fall
The AWC asserts that Larkin never provided BGC with written notice about his OBA with GFNN and/or Storm Algorithm Suite, or about any compensation that he had derived from those activities, in alleged violation of BGC's policies and procedures and of FINRA Rules 3270 and 2010.
In accordance with the terms of the AWC, FINRA imposed upon Larkin a deferred fine of $5,000 (due and payable either immediately upon reassociation with a member firm following suspension or prior to any application or request for relief, whichever is earlier) and a 45-day suspension from associating with any FINRA-regulated broker-dealer in any capacity.