March 21, 2016
We often admire folks who hold down more than one job. On Wall Street, however, admiration for such a hard-worker isn't always the first reaction. Your brokerage industry employer may insist that you only work for that firm, and that firm alone. If you were to ask why, the explanation might be that it's a compliance policy and a regulatory rule. Sure, you could seek permission to engage in the so-called outside business activity at another employer, but you first need to submit a prior written request to your Wall Street employer. At some firms, the answer is simply and routinely "NO;" and other industry employers may subject you to difficult limits. In light of such compliance and regulatory policies, some industry employees inadvertently run afoul of the rules,and others, well, what can I say, ya got yer bad apples in every industry. A recent FINRA regulatory settlement involving an individual who may (or may not) have been holding down two jobs leaves us scratching our heads. Maybe something wasn't done properly by the employee or maybe FINRA itself is confused. It doesn't help that the written settlement was published in a manner raising more questions than providing answers.
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, Angelo Perri submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Angelo Perri, Respondent (AWC 2015044462701, March 14, 2016).
The AWC asserts that Perri was first registered in January 2015 with FINRA member firm ADP Broker-Dealer, Inc. and that he had no prior relevant disciplinary history with the Securities and Exchange Commission, any self-regulatory organization or any state securities regulator.
Rites of Passage
The AWC asserts that on October 22, 2014, Perri received a contingent employment offer from ADP; and the contingency was that he was required to obtain Series 6: Investment Company Products/Variable Contracts Representative and Series 63: Uniform Securities Agent State Law registrations within 45 days of the designated "hire date" of November 10, 2014.
Perri purportedly passed the Series 6 examination on December 18, 2014 and the Series 63 examination on January 22, 2015.
The AWC asserts that sometime in "late January 2015," Perri began working in the securities business of ADP. The AWC then alleges that:
[U]nbeknownst to ADP, however, Perri never resigned from his previous employer, a payroll-management company, and, in fact, continued to work for, and receive compensation from, his previous employer until his termination from ADP on February 10, 2015.
By failing to disclose to ADP his contemporaneous employment at another
company, Perri violated FINRA Rules 3270 and 2010.
In addition to his alleged failure to timely resign from his prior job, the AWC further alleges that:
On January 16, 2015, Perri completed ADP's Annual Certification in which he
falsely represented that he had reported all outside business activities to the Firm.
By giving a false response regarding his outside business activity on ADP's
Annual Certification, Perri violated FINRA Rule 2010.
Outside Business Activities
Many registered persons are engaged in other professions and careers; and in most cases, you are required to provide prior, written notice to your employer of such Outside Business Activities ("OBAs"). Although FINRA Conduct Rule 3270: Outside Business Activities of Registered Persons doesn't require that the employer firm transmit an "approval' or "denial" to you of such disclosed OBA, the fact is that many member firms have in-house rules that prohibit such outside activities absent written approval or an approval imposing certain limits. Consequently, if you transmit notice of any OBA, make sure that you retain proof of the date and manner in which you transmitted that notice. Consider the full-text of FINRA's applicable rule:
FINRA Conduct Rule 3270. Outside Business Activities of Registered Persons
No registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member, in such form as specified by the member. Passive investments and activities subject to the requirements of NASD Rule 3040 shall be exempted from this requirement.
*** Supplementary Material ***
.01 Obligations of Member Receiving Notice. Upon receipt of a written notice under Rule 3270, a member shall consider whether the proposed activity will: (1) interfere with or otherwise compromise the registered person's responsibilities to the member and/or the member's customers or (2) be viewed by customers or the public as part of the member's business based upon, among other factors, the nature of the proposed activity and the manner in which it will be offered. Based on the member's review of such factors, the member must evaluate the advisability of imposing specific conditions or limitations on a registered person's outside business activity, including where circumstances warrant, prohibiting the activity. A member also must evaluate the proposed activity to determine whether the activity properly is characterized as an outside business activity or whether it should be treated as an outside securities activity subject to the requirements of NASD Rule 3040. A member must keep a record of its compliance with these obligations with respect to each written notice received and must preserve this record for the period of time and accessibility specified in SEA Rule 17a-4(e)(1).
In accordance with the terms of the AWC, FINRA imposed upon Perri a $5,000 fine and a two month suspension in all capacities.
Bill Singer's Comment
There are so many aspects of this AWC that bother and annoy me that I'm not sure where to begin. For starters, the AWC goes to the trouble of specifying the fact that Perri was given only 45 days after his "hire date" to pass two industry registration examinations in order to satisfy the "contingent" employment offer. Based upon the November 10, 2014, hire date, Perri was required to pass both examinations by December 25, 2014. Hey, the fact that the due date was Christmas Day isn't something that I made up or agree with; it's simply the 45th day after November 10th.
Having made a big deal about the 45-day deadline, the AWC glibly states that Perri passed the Series 6 on December 18, 2014, a date within the deadline; however, Perri failed to timely pass the Series 63 until January 22, 2015, which was about a month beyond the December 25th deadline. What gives? Why does the AWC painstakingly inform us of the 45-day contingency but then not explain why Perri was hired notwithstanding his failure to timely satisfy that deadline?
- Had ADP withdrawn the employment offer as of December 25, 2014, and then, at some later date, presented Perri with a new employment offer?
- Did ADP waive Perri's failure to satisfy the December 25th deadline?
- Was there some compelling reason for Perri's untimely passing of the Series 63?
Why does any of the above matter?
It might matter if the circumstances of the contingent job offer prompted Perri to believe that he had not been formally hired by December 25, 2014 -- or that the offer had expired upon his failure to timely satisfy the double-registration prerequisite. If Perri believed that the contingent offer had lapsed and/or that he was in limbo via a still "pending" offer of employment or awaiting the submission of a revised offer from ADP, such a belief might have prompted him to not resign from his former firm. Put yourself in his shoes: Would you want to quit a current job if you had not timely satisfied a contingent deadline in a pending employment offer?
Then there's the big to-do made in the AWC about Perri's January 16, 2015, completion of an online ADP compliance questionnaire in which he purportedly misrepresented his ongoing employment at the payroll management company. I mean, c'mon, let's get real here. This is supposed to be a regulatory settlement published by FINRA; not a make-it-up-as-you-go-along bit of fiction. The fact is that Perri passed the Series 63 on January 22, 2015, which is six days after he allegedly lied about having another, outside job in addition to his purported employment with ADP. Perri's ADP employment was contingent upon his passing the Series 63 by December 25th, a date that came and went some 22 days before he's answering ADP's online form. Also, given that Perri didn't pass the Series 6 examination until January 22, 2015, by the very terms of the contingent offer, he was not actually employed at ADP; consequently, Perri could not have had any "outside" employment relative to ADP because he wasn't yet employed by ADP.
As to the whole issue about Perri continuing to be employed by the payroll company after starting employment with ADP, isn't it curious that FINRA manages to specify the month, day, year of so many events in the AWC but as to the critical date on which he actually started employment with ADP, the best that the regulator can offer to us is the nebulous "late January 2015." Late as in January 31 or 30 or 29?
What are we to make of the AWC's assertion that Perri "continued to work for, and receive compensation from, his previous employer until his termination from ADP on February 10, 2015." Why does that matter? Consider these questions:
Maybe FINRA has it all right and the facts are solidly against Perri, but why are we left to guess?
- Did Perri continue to work for the prior employer up to that "late January 2015 date" but stopped appearing at the former employer's offices when he began at ADP?
- Is the issue here that he had simply received a payroll check in February 2015 for work he had performed in January 2015 (but not for any work performed at the payroll company after he formally started at ADP)?
- Was there a compelling reason that prompted Perri to not resign from his former employer until some further "contingency" was satisfied at ADP?
- What was ADP's precise explanation for terminating Perri on February 10, 2015?
One could argue, and I will, that perhaps Perri didn't want to resign from one job until he had a firm offer from the second. Maybe his continued employment at the former firm was engendered by some on-again-off-again ADP contingent employment offer. After all, exactly how long did Perri remain employed at both the payroll company and ADP if he only first started his employment with the latter in "late January 2015" and was purportedly terminated on February 10, 2015? What are we talkin' about here in terms of overlap: two weeks . . . a few business days?
According to FINRA's online BrokerCheck records as of March 21, 2016, Perri had been "UNEMPLOYED" from July 2009 to July 2010 (in the midst of the Great Recession) and was next employed from July 2010 to November 2014 by "PAYCHEX, INC." Yes . . . BrokerCheck indicates that Perri's so-called prior employment ended in November 2014, which certainly raises questions as to just what the AWC is referencing when it asserts that Perri was still employed by a prior firm (presumably "prior" to his ADP employment) during January and February 2015.
Perhaps PAYCHEX is not the other employer alluded to in the AWC, which does not actually name that other entity. Perhpas the "prior" "other" employer is "ADP LLC," which is listed under Perri's "Employment History" on BrokerCheck along with "ADP BROKER-DEALER, INC." for employment dates "11/2014 - Present." I'm not sure why BrokerCheck still lists Perri as presently employed at one or both ADP employers given the AWC's assertion that he was terminated in February 2015 -- which is all the more puzzling given that BrokerCheck shows that Perri's "Registration History" at ADP BROKER-DEALER,INC. existed from "12/2014 - 02/2015."
In a damned-if-we-do-and-damned-if-we-don't scenario, we are left to ponder the online dueling BrokerCheck disclosures that Perri was no longer employed by "prior employer" PAYCHEX, INC. as of November 2014, in contradistinction to the assertion in the AWC that Perri allegedly failed to disclose an ongoing second employment in January and Februrary 2015. If, in fact, Perri was no longer employed at some prior, other employer as of November 2014, then how could he have been charged with failing to disclose that prior employment as ongoing when he was working at ADP? In the alternative, it is possible that the unnamed "prior" employer in the AWC was not PAYCHEX bu, in fact, ADP LLC, which raises questions as to why ADP Broker-Dealer, Inc. would have been unaware of that purported nondisclosure. Given the AWC's failure to specify the name of the "other" employer, we don't actually know whether that was Paychex, ADP, or something else.
In fairness to FINRA, Perri was represented by legal counsel and he did sign off on the AWC. Given the importance of FINRA regulatory settlements, however, the fact that a Respondent accepts the terms of a settlement is insufficient to permit the self-regulatory organization to publish something as inexplicable and unsatisfactory as the Perri AWC. It's not necessary for us to always agree with FINRA's allegations and sanctions but it is critical that we at least understand what happened and the basis on which the fines/suspensions were calculated. I submit that Perri is a failure when measured against the expectations of sufficient content and context that should be inherent in any regulatory document. FINRA may well have Perri dead to rights but the presentation of the underlying facts in the AWC gives me no reason to have any confidence in such an inference. At a minimum, the AWC should have set forth Perri's explanations about his alleged double employment and online response.