Compliance Advisor Fined and Suspended For Falsifying Data

November 2, 2015

It's sort of a reasonable expectation, I would say, that if you are hired to do a job, you have an obligation to do what you're being paid to do.  Of course, sometimes you bite off more than you can chew and you're overwhelmed; and, sometimes, you figure that if no one is looking over your shoulder, hell, I'll get to this crap when I'm in the mood. In a recent FINRA regulatory settlement, we are confronted with a respondent who didn't quite seem to be clocking in everyday and paying attention to the details. Let's just say, we got a guy who may have gone through the motions . . . if even that.

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, John Walter Ruggles submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of John Walter Ruggles, Respondent (AWC  2015045211801, October 23, 2015).

Ruggles first became registered in 1993 and was registered with six FINRA member firms during his career. From May 5, 2014 to March 16, 2015, he was associated with FINRA member firm City Securities Corporation as a General Securities Representative, Principal, and Sales Supervisor. The AWC asserts that Ruggles had no prior relevant disciplinary history.

The MCDs

The AWC alleges that City Securities hired Ruggles as a Compliance Advisor, and among his assigned tasks was to generate monthly FINRA Municipal Continuing Disclosure Reports (the "MCDs") in compliance with Municipal Securities Rulemaking Board ("MSRB") and federal securities laws disclosure requirements. Ruggles was required to populate the MCDs with customer transaction data and to email the data to the management of the City Securities's Private Client Group ("PCG"). The AWC asserts that the PCG used the information in Ruggles' emails to prepared customer satisfaction letters in which recent bond trading activity was set forth.

Takin' Care of Business?

The AWC asserts that on March 4, 2015, Ruggles' supervisor noticed that Ruggles had not yet run the February 2015 MCD  and asked for documentation evidencing the performance of necessary tasks back to June 2014. In response to that query, the AWC alleges that on March 11, 2015, Ruggles provided six printed copies of e-mails and the supporting trade details.

Fabricated Documentation

Whatever raised the supervisor's concerns, it turned out that Ruggles had fabricated the e-mails and falsified the contents of both the six e-mails referenced above and their supporting trade reports in order to give the false appearance that he had completed his required compliance reviews.  

Bad enough that he falsified the supporting compliance documents, but the clumsiness of Ruggles efforts are clearly spelled out in the AWC, which notes that:
  • although the falsified e-mails purported to date back to June 2014, the subject lines all made reference to either July or September of 2014;
  • City Securities's electronic compliance files did not contain of any of the six e-mails Ruggles provided;
  • two of the MCDs provided by Ruggles contained falsified and altered transaction data (pointedly, he had altered execution dates for certain customer bond trades); and
  • between October 31, 2014, and March 2, 2015, Ruggles had not viewed the MCDs despite having marked the compliance task completed.
Over and Out

Online FINRA BrokerCheck records as of November 2, 2015, disclose that he was "Discharged" by City Securities on March 16, 2015, based upon allegations of:


FINRA deemed Ruggles' falsification of two MCDs and six e-mails as constituting violations of FINRA Rule 2010. Moreover, by falsifying the MCD data, Ruggles was also deemed to have entered false information in his firm's books and records, causing the maintenance of inaccurate books and records in violation of Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-4 thereunder, thus violating FINRA Rules 4511 and 2010.

In accordance with the terms of the AWC, FINRA imposed upon Ruggles a $5,000 fine and 14-month suspension from association with any FINRA member in any capacity.

Bill Singer's Comment

According to the AWC, on March 4, 2015, Ruggles' supervisor was aware of the late filing/preparation of the February 2015 MCD. The absence of the February report should have troubled the supervisor but that hardly explains why that individual wanted proof from Ruggles' of the subordinate's compliance with his job duties going back to June 2014. Although we can all come up with any number of reasonable explanations as to why any supervisor would request proof that a subordinate had done his or her job in light of a failure to timely produce a required monthly report, regulatory settlements should offer meaningful content and context whenever possible. In that spirit, the AWC would have performed a helpful service by informing industry compliance professionals as to what the red flags were that motivated the supervisor to demand proof of some eight months of job performance from Ruggles.

Kudos to the supervisor who smelled smoke and moved to put out a small fire before it became a conflagration.  Job well done!