Bond Parking For Net Capital Benefit Disqualifies Brokerage Executive

July 30, 2015

Wall Street is the financial capital of legerdemain, which is a fancy term for "sleight of hand." I mean, c'mon, what lawyer isn't going to use a fancy-schmanzy ten-dollar word instead of a penny-ante one? Whether it's high-stakes trading or cooking the books, many brokerage firms are master prestidigitators (okay, I'm tossing in that expensive word for free!).  When it comes to moving assets, hiding trades, and otherwise altering books and records, many industry firms seem to feel that they're hustling on a street corner. Every so often, however, the marks in the crowd turn out to be savvy regulators who spot the Ace of Spades or figure out where the pea is actually hidden. Here is one such bit of detective work by FINRA.

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, Carol Susan Bunevich submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Carol Susan Bunevich, Respondent (AWC  20100226030-01, July 24, 2015

During the times relevant to this matter, Respondent Bunevich was registered wih FINRA member firm Fieldstone Services Corp. The AWC asserts that Bunevich had no prior relevant disciplinary history.

SIDE BAR: Online FINRA BrokerCheck records as of July 30, 2015, disclose that Bunevich was first registered in 1987.

FINRA Net Capital Investigation

The AWC asserts that the Fixed Income Investigations Team of FINRA's Department of Market Regulation had conducted a review of Fieldstone Services and certain of the firm's registered representatives concerning the firm's Net Capital requirements for July 1, 2009, through December 31, 2009.  In connection with that New Capital investigation, the AWC asserts that Bunevich was one of three Fieldstone executives (the "Executives") who were responsible for the Net Capital requirements of the trading activity of the Executives and their employees."

CIT Position

During the review period, FINRA's Staff apparently determined that Fieldstone had established a substantial position in CIT high-risk internote bonds but the firm failed to maintain sufficient Net Capital for the purchase and attendant haircut for the position. As a consequence, the AWC asserts that the firm carried an overnight position on August 3, 2009, of $3,002,468.32 in the CIT bonds.

Spreading the Risk

The AWC asserts that around August 5, 2009, the Executives agreed to move the CIT bond position into their personal accounts as a means of avoiding further Net Capital deficiencies; and, on August 7, 2009, 2,676 CIT bonds were transferred to the three personal accounts of the Executives through 56 transactions that evenly allocated the position.

Not Bona Fide Pricing

The AWC asserts that the execution prices for the 56 trades were not bona fide because the prices for the transfers were the same at which the firm had originally purchased the bonds and did not reflect the current market price. The transfer of the CIT position from Fieldstone to the personal accounts of the Executives purportedly eliminated the firm's Net Capital deficiency. The AWC asserts that each of the three Executives had agreed to hold their allocation of the transferred bonds for "a period of time before re-selling the securities back" to the firm.

Notably, the AWC concedes that Respondent Bunevich was not the executing Executive, was not informed by that individual of the prices used to post the trades, and was not informed of "other trade details," at the time of the transactions.


The AWC alleges that the transfers constituted a violation of SEC Rule 15c3-1 because it constituted "Parking" rather than a bona fide transaction; and, therefore, constituted further violation of FINRA Rule 2010.  Pointedly, the AWC alleged that Bunevich "willfully caused a violation of SEC Rule 15c3-1."


In accordance with the terms of the AWC, FINRA imposed upon Bunevich a $47,500 fine and a six-month suspension in all capacities. Further set forth in the AWC is this provision:   

Respondent understands that this settlement includes a finding that Respondent willfully violated SEC Rule 15c3-1 of the Securities Exchange Act of 1934 and that under Article III, Section 4 of FINRA's By-Laws, this makes Respondent subject to a statutory disqualification with respect to association with a member.

Bill Singer's Comment

Compliments to FINRA on a strong AWC replete with substantive facts and a sound rationale.

If I have one quibble, it would be to more fully explain why Bunevich became statutorily disqualified based upon the allegation that she had willfully caused a violation of Rule 15c3-1.

Yes -- I know that's what is asserted in the AWC but it comes off as a bit conclusory and somewhat contradictory.  Clearly, parking the CIT position was a serious violation. What I am struggling with is the AWC's concession as to Bunevich's somewhat limited role in the execution, pricing, and mechanics of the transfer of the position from the firm to the Executives' personal accounts.  If, in fact, she was unaware of the mechanics of the transfers, then that might have resulted in exculpation or mitigation. My guess is that FINRA was troubled by Bunevich complicity in the overall undertaking to park the bonds, even if she was unaware of the actual steps along that path. To that extent, I concur with the self-regulatory organization but would suggest that a bit more explanation would have better supported the disqualifying characterization of "willfulness." Notwithstanding that one reservation, this was an excellent AWC.