In confronting a temptation, the analysis doesn't always start with determining whether something is wrong and, if so, that's the end of it. No, the thing about we humans is how we ponder the moral and ethical pros and cons and then weigh them against whether we may get caught and what the consequences might be. The old cost-benefits analysis. Take the whole deal with reimbursable employee expenses. Do you add in that extra meal for your friend who isn't a customer? Is there a way you can charge off some of that personal vacation to the firm? If it's holiday time and you could use a few extra bucks, what's the big deal if you add a zero or toss in some fictitious charges? Consider a recent Wall Street regulatory settlement in which a career was seemingly blown apart over travel expenses.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, Henry Porter submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Henry Porter, Respondent (AWC 2015046816601, March 29, 2016).In 2013, Porter was registered as a Series 79: Investment Banking Representative with FINRA member firm Goldman, Sachs & Co, where he remained until his 2013 termination. Personal Travel The AWC asserts that on September 1, 2013, Goldman Sachs filed a Uniform Termination Notice for Securities Industry Registration indicating that "Porter was terminated from the firm for allegedly submitting personal travel expenses as business expenses." Based upon that disclosure, FINRA investigated Porter's conduct. Silence Is Golden? Following a February 2016 FINRA request for information and request to appear on April 15, 2016, for on the record testimony ("OTR"), Porter's attorney informed FINRA on March 2, 2016, that his client would not respond or appear for the OTR. FINRA deemed Porter's refusal to provide information and appear for the OTR as a violation of FINRA Rules 8210 and 2010.
According to the AWC So, play along with me and answer a few questions by solely resorting to the above fact pattern in the Porter AWC. For what specific reason was Porter terminated according to the AWC? Your answer should be for "allegedly submitting personal travel expenses as business expenses." What was the specific nature of the travel expenses? We are not told in the AWC. What was the dollar amount of the allegedly personal travel expenses that Goldman paid to Porter? We are not told in the AWC. Did Porter repay any of the reimbursed expenses at issue? We are not told in the AWC. According to BrokerCheck Now consider some additional information uncovered by the BrokeAndBroker.com Blog.According to online FINRA BrokerCheck records as of April 4, 2016, on August 3, 2015, Goldman Sachs "Discharged" Porter based upon allegations that he had:
FACTS AND VIOLATIVE CONDUCTOn September 1, 2015, Goldman filed a Form U5 reporting that Porter was terminated from the firm for allegedly submitting personal travel expenses as business expenses. FINRA thereafter began an investigation into the purported misconduct reported in the Form U5. On February 25, 2016, FINRA staff sent Porter a written request for information and a written request to appear on April 15, 2016 for on-the-record testimony. Both requests were made pursuant to FINRA Rule 8210. On March 2, 2016, Porter's counsel confirmed receipt of the written requests and informed FINRA staff that Porter would not respond to the staff' s request for information and would not appear to provide sworn testimony. As stated to FINRA staff, and by this agreement, Porter acknowledges that he received FINRA's requests to provide information and to appear for testimony and that he will not provide the requested information or appear for on-the-record testimony at any time. By refusing to provide information and appear for on-the-record testimony as requested pursuant to FINRA Rule 8210, Porter violated FINRA Rules 8210 and 2010. .
SUBMITTED PERSONAL CAR TRAVEL EXPENSES FOR PAYMENT BY THE FIRM AS IF THEY WERE BUSINESS EXPENSES. THE REPRESENTATIVE SUBSEQUENTLY PAID THE COSTS OF THE PERSONAL TRAVEL.
You got a fast carWe go cruising to entertain ourselvesYou still ain't got a job
SIDE BAR: If you are negotiating an AWC with FINRA, give careful consideration as to how you are presented in the document and how the underlying issues are framed. It may not matter to you today as to what was put in or left out of the regulatory settlement, but years from now, you may wish you had fought over the language.