Down-Low Download Of Contact Information Sends Stockbroker Offline

October 28, 2015

With some folks, you never quite can tell whether they're coming or going. One day they're working at firm X but the next day, firm Y. Soon they're on to firm Z. Hey, for some employees that's just how it is -- you keep moving around until you find a situation that makes you happy. In today's BrokeAndBroker.com Blog, we consider the comings-and-goings of a respondent in a FINRA regulatory settlement. This peripatetic fellow starts off at one brokerage, which he leaves after a couple of years, and winds up at another firm, which he leaves after about three months, and then returns to the firm that he was previously employed at, which apparently fires him after roughly six months. On top of all that back-and-forth, FINRA has him cool his heels with a 30-day suspension. What happened? Read on.

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, Zoran Miling submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Zoran Miling, Respondent (AWC  2014039952802, October 19, 2015).

The AWC asserts that Miling entered the securities industry in November 2010 as a General Securities Representative with FINRA member firm Longbow Securities, LLC, where he became a Registered Research Analyst in December 2012. Following his voluntary resignation from Longbow in January 2013, Miling became registered with FINRA member firm Zelman Partners, LLC, where he remained until his April 2013 resignation. Following his employment at Zelman, Miling returned to Longbow on April 2013. The AWC asserts that Miling had no prior relevant disciplinary history. 

Confidential/Proprietary Information

The AWC alleges that upon joining Zelman, Miling signed an Employment Agreement dated January 14, 2013, which included a provision entitled: "Confidential or Proprietary Information." That provision purportedly stated:

You hereby agree, during the term of your employment and thereafter, that you will not use, disclose or transfer, in whole or part, any confidential or proprietary information of Zelman, to any person, firm, association, or any other entity or third party for any reason or purpose whatsoever, except as may be necessary to perform your duties or as may otherwise be required by law. You further agree that, except as may be necessary to perform your duties, you shall not take, remove, transmit or transfer to any third party documents, records, data, models or programs of any kind or nature or make any reproductions, copies or extracts of any items, and to promptly return any such property upon your separation from Zelman.

BD Vision

During the relevant times, the AWC asserts that Zelman subscribed to BD Vision, a sales database which contained a list of vendors and/or research analyst information used for prospecting new customers. Notably, the database did NOT contain non-public confidential information of Zelman's customers and, as such, did not fall within the ambit of information protected under Regulation S-P. Notwithstanding that the data fell outside of the scope of Reg S-P, Zelman deemed the data to be "proprietary" as a result of the existence of industry contact information, and also because of the notes created and entered into the system by Zelman employees concerning conversations with those contacts.

The Down-Low Download

During his Zelman employment, Miling used the firm's Remote Desktop Gateway to gain access to the BD Vision data. The AWC asserts that before leaving Zelman and without it's knowledge, Miling downloaded BD Vision and its content onto his personal computer - which purportedly violated the "Confidential or Proprietary Information" clause of the Employment Agreement

Further, pursuant to his resignation from Zelman, Miling allegedly signed a separation agreement in which he attested that he had returned any and all "property or information of Zelman," and that he had not copied or retained any of the firm's documents, records or property. Although he had been given access to Zelman confidential information such as customer lists, fee schedules, pricing information, and revenue per client information, the AWC asserts that Zelman agreed that he would "not, for any reason, directly or indirectly, use for any purpose" any such information.

Logins

Upon his return to Longbow, Miling used his login and that of four other Zelman employees in order to access BD Vision and download the information that he had previously transferred to his PC. The AWC does not state how Miling obtained the logins of the four other employees.  Armed with the downloaded information, Miling purportedly contacted via his Longbow email account about 30 companies obtained from the BD Vision database.

Long Gone From Longbow

Online FINRA BrokerCheck records as of October 28, 2015, disclosed that on October 23, 2013, Longbow "Discharged" Miling based upon allegations that he had been:

ACQUIRING INFORMATION FROM FORMER EMPLOYER'S INTERNAL SYSTEMS

FINRA deemed both Miling's: 

  1. download onto his personal computer while he was still employed at Zelman and 
  2. logging-on to BD Vision after resigning from Zelman 
as violations of FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon Miling a $5,000 fine and a 30-business day suspension from association with any FINRA-registered firm in all capacities.


 
October 27, 2015: Not that long ago there were 6,000 broker/dealers registered with FINRA. Now there are 4,000. Is there a future for the small and mid-sized broker/dealer? Bill Singer speaks to Martin Kaplan,Esq. partner with the law firm of Gusrae Kaplan Nusbaum, on the current "draconian" regulatory environment under the Financial Industry Regulatory Authority. FINRA values "putting notches on the regulatory belt and extracting large amounts of money from firms that can least afford it," he says. Kaplan argues for a regulatory regime that assists broker/dealers in complying with the law, as opposed to the "inquisition-like" pursuit of small, unintended violations of burdensome codes. "It is a system that is troubled when you have to balance your budget by fining your members," he says. WATCH