instructed or advised TB that his participation in the Offering was an OBA, and not a PST subject to the requirements of NASD Rule 3040. TB heeded these instructions or advice, filled out the Firm's OBA form, and submitted the form to Furkioti for approval. In the OBA form, TB disclosed that: (1) the nature of the business was "private placements" (2) the business was investment-related, and (3) his position and duties were sales-related. In addition, Furkioti understood that TB would be compensated for the sales activity. Furkioti approved TB's request to participate in the Offering as an OBA, despite the obvious indications that TB's participation in the Offering constituted outside securities activities for compensation subject to NASD Rule 3040. Furkioti failed to adhere to the requirements of his Firm's WSPs that he evaluate TB's OBA request to determine whether the activity should more properly be considered outside securitiesactivity.Bill Singer's Comment: Let's make sure that we're all on the same page with the facts. FAS associated person CP "instructed or advised" FAS registered rep TB that the Offering was not a PST but an OBA. I'm not exactly sure what the intent of the AWC was in raising the possibility that CP had "instructed" TB that the deal was only an OBA but that was the word chosen by FINRA Staff and it must be underscored.In apparent good faith and in reliance upon what may have been an "instruction" from CP, TB then fills out the requisite FAS OBA Form, which informed CCO Furkioti that the Offering is a private placement involving an investment business and that TB would act in a compensated sales capacity. Based upon those representations, Furkioti approved the proposed OBA.It's nice that the AWC tries to load the facts against Furkioti by offering us the fairly conclusory assertion that there were "obvious indications" that the proposed OBA was a PST. Obvious to whom and why? It may have helped buttress FINRA's conclusion if the self-regulatory organization had identified the actual role of CP at FAS -- all that we are told is that he was an "associated" person. Did Furkioti speak with CP and, if so, what was the sum and substance of that conversation? Did TB convey to Furkioti the basis upon which CP had "instructed" him to characterize the deal as an OBA? Did TB indicate to FINRA during its investigation that he had reason to believe that CP was wrong or that the OBA should have been presented as a PST?Ultimately, appears that Furkioti dropped the ball and that FINRA may well have had a strong case against him. On the other hand, unless Furkioti was a lawyer, we at least need to concede that the nuance between an OBA and a PST is not always readily apparent, even to skilled industry lawyers. Similarly, we need to factor in the purported instructions of CP and the form submitted by TB. Perhaps those factors only go to the issue of mitigation but they need to be given some weight.
Potential violation of NASD rule 3040, and FINRA rules 3110 and 2010 pertaining to the United RL offering
FINRA Rule 3280. Private Securities Transactions of an Associated Person(a) ApplicabilityNo person associated with a member shall participate in any manner in a private securities transaction except in accordance with the requirements of this Rule.(b) Written NoticePrior to participating in any private securities transaction, an associated person shall provide written notice to the member with which he is associated describing in detail the proposed transaction and the person's proposed role therein and stating whether he has received or may receive selling compensation in connection with the transaction; provided however that, in the case of a series of related transactions in which no selling compensation has been or will be received, an associated person may provide a single written notice.(c) Transactions for Compensation
(1) In the case of a transaction in which an associated person has received or may receive selling compensation, a member which has received notice pursuant to paragraph (b) shall advise the associated person in writing stating whether the member:
(A) approves the person's participation in the proposed transaction; or(B) disapproves the person's participation in the proposed transaction.
(2) If the member approves a person's participation in a transaction pursuant to paragraph (c)(1), the transaction shall be recorded on the books and records of the member and the member shall supervise the person's participation in the transaction as if the transaction were executed on behalf of the member.(3) If the member disapproves a person's participation pursuant to paragraph (c)(1), the person shall not participate in the transaction in any manner, directly or indirectly.
(d) Transactions Not for CompensationIn the case of a transaction or a series of related transactions in which an associated person has not and will not receive any selling compensation, a member which has received notice pursuant to paragraph (b) shall provide the associated person prompt written acknowledgment of said notice and may, at its discretion, require the person to adhere to specified conditions in connection with his participation in the transaction.(e) DefinitionsFor purposes of this Rule, the following terms shall have the stated meanings:(1) "Private securities transaction" shall mean any securities transaction outside the regular course or scope of an associated person's employment with a member, including, though not limited to, new offerings of securities which are not registered with the Commission, provided however that transactions subject to the notification requirements of NASD Rule 3050, transactions among immediate family members (as defined in FINRA Rule 5130), for which no associated person receives any selling compensation, and personal transactions in investment company and variable annuity securities, shall be excluded.(2) "Selling compensation" shall mean any compensation paid directly or indirectly from whatever source in connection with or as a result of the purchase or sale of a security, including, though not limited to, commissions; finder's fees; securities or rights to acquire securities; rights of participation in profits, tax benefits, or dissolution proceeds, as a general partner or otherwise; or expense reimbursements.