After a while, it vacillates somewhere between idiotic and exasperating. I mean, geez, how many more times ya gotta tell a stockbroker that when you leave your firm, you can't simply print out all of your customers' names and confidential information and then use that data to solicit those folks at your new place of business? Today, I am not getting into the issue of whether clients should be deemed the property of the firm or its employees. I am not getting into the fairness of the Broker Protocol. Today's BrokeAndBroker.com Blog is about reiterating that you can't disregard the industry's rules and regulations concerning non-public, confidential customer information.
SIDE BAR: Regulation S-P prohibits firms from disclosing "nonpublic personal information" about a customer unless the customer receives proper notice and an opportunity to opt out. Non-public personal information generally means any information provided by customers to a broker-dealer to obtain any product or service. It includes, but is not limited to, account numbers, social security numbers, birth dates, and account balances.Client Profile Print-OutsThe AWC alleges that in anticipation of joining a new FINRA member firm, on May 12, 2016:
[U]ngar printed out client profile pages for approximately 328 HSBC customer accounts that included, among other things, date of birth, social security number, financial account number and account balances for each customer -- information that Ungar was not permitted to take from HSBC.The 328 customer account records constituted non-public personal information under Regulation S-P, because that information: (1) was provided by Firm customers to obtain financial products and services; 2) resulted from transactions involving financial products or services the Firm provided to its customers; and/or (3) was obtained in connection with providing financial products or services to Firm customers.On June 8, 2016, Ungar resigned from HSBC, commenced employment with his new firm, and continued to maintain possession of the non-public customer information he improperly took from the Firm. Thereafter, Ungar contacted approximately 90 of the 328 clients whose personal confidential information he removed from HSBC, and began soliciting their business.Internal ReviewThe AWC asserts that on July 8, 2016 (about a month after Ungar had resigned), HSBC filed a:
Form U5 indicating that Ungar was under internal review for among other things, fraud or wrongful taking of property, or violating investment related statutes.
FINRA SanctionsFINRA deemed Ungar's conduct as causing HSBC to violate Regulation S-P and, as such, he violated FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon Ungar a $10,000 fine and a 15-business-day suspension from association with any FINRA member firm in any capacity.
Of course, since I'm a curious fellow, I would have loved to have learned from the AWC how HSBC discovered that Ungar had printed out the client files. Did the firm do some hard-boiled forensics and opened the Printer folder on Ungar's computer and found that he had printed out those restricted files? Did someone who had inherited Ungar's clients at HSBC get frustrated when told by the supposedly up-for-grabs clients that Ungar had already contacted them and they were transferring out? I could pose endless numbers of questions but, in the end, we just don't know because the AWC doesn't say.