Wall Street's rules and regulations generally take the form of prohibitions. For some industry members, however, prohibitions are viewed as challenges. The ideas and schemes that folks come up with to get around the various regulatory and compliance barriers are quite often breathtaking and ingenious. For those miscreants who are unsuccessful in circumventing the thou-shall-nots of the biz, their failures are often jaw-dropping and comical. Consider the efforts of an HSBC registered representative in a recent FINRA regulatory settlement.
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, Daniel Liang submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Daniel Liang, Respondent (AWC 2014043578901, March 31, 2016).
In 1999, Liang was first registered and by 2005, he was registered with FINRA member firm HSBC Securities, Inc. The AWC asserts that during the times relevant to this matter, Liang was dually registered with HSBC Securities affiliate HSBC Bank USA N.A.
The Bank Shot
The AWC asserts that between June 2010 and October 2014, Liang cut and pasted the names and addresses of three HSBC Bank customers over his nephew's and his names on a utility bill and two bank statements. The alterations gave the appearance that the subject statements and bill belonged to the customers. The AWC asserts that Liang altered the documents to help the customers satisfy an HSBC Bank requirement that customers have residential addresses. Each of the three customers had been utilizing Post Office Box numbers "in order to make it appear as though the customers had bills mailed to U.S. residential addresses."
Lemme see if I get any of this. Frankly, the AWC might have made a bit more of an effort to clarify this apparent scheme but let's see if we can sort of make our way through all of it.
Liang had three customers who were using PO Boxes. HSBC Bank didn't like POBs and apparently required its customers to have real, honest-to-goodness residential addresses. In order to circumvent that POB requirement, Liang whited-out the names of his nephew and himself on a utility bill and two bank statements and then replaced the deletions with the three customers. Maybe I got that right? Assuming I've sort of pieced the thing together, Liang then used the falsified bill and statements to present as proof to HSBC Bank that the customers had US residences, as documented by the utility bill and bank statements to their purported US residences.
A Sticker-ler for Detail
We're not quite done. Also, Liang changed the title of four accounts on HSBC Bank Deposit Account Agreements by
placing stickers over errors he made while originally completing the documents. He made these changes after the customer had signed the mislabeled documents, as an accommodation to the customer who did not wish to return to sign new copies.
Oh boy, lemme take a crack at this too.
Liang placed "stickers" over errors he made on four account documents. Those stickers somehow changed the title of four HSBC Bank agreements. Ummm . . . stickers? Like what the hell are we talking about? What kind of stickers? What was on the stickers? The AWC probably meant "blank labels" or "blank stickers" . . . or so I think. What exactly were the errors that required stickering over? And all this nonsense was engendered because Liang didn't want to further inconvenience "the customer who did not with to return to sign new copies." So, to make a further inference, we're not talking about four customers but, rather, one customer with four accounts, right? Okay, that puts things in a slightly better perspective for Liang.
Finally, we make our way from falsified bills to stickered documents to something new. The AWC asserts that between May 2014 and August 2014, Liang permitted at least three HSBC Securities customers to sign blank or incomplete Mutual Fund Disclosure and Investment Acknowledgement Forms. Following the customers' signing, Liang kept the forms in his files. Unfortunately for Liang, HSBC Securities prohibited registered representatives from requesting that a customer sign a blank, incomplete, or backdated document. To make matters worse, the firm also prohibited registered reps from accepting blank, incomplete, or backdated documents from a customer.
According to online FINRA BrokerCheck records as of April 15, 2016, HSBC Securities "Discharged" him on November 18, 2014, based upon allegations that:
BANK AFFILIATE ALLEGED THAT RR VIOLATED THE STATEMENT OF BUSINESS PRINCIPLES AND CODE OF ETHICS. THE RR SUBMITTED ALTERED DOCUMENTS TO THE AFFILIATE BANK AS KYC ADDRESS VERIFICATION FOR CUSTOMERS WHO DID NOT MAINTAIN A PHYSICAL ADDRESS BUT ONLY MAINTAINED A P.O. BOX ADDRESS. THE RR WAS SUBSEQUENTLY TERMINATED
FINRA deemed Liang creative approach to account documentation as constituting violations of FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon Liang a $5,000 fine and a 7-month suspension in all capacities from association with any FINRA member firm.