Delayed Resignation,Twitter,and Email Get Stockbroker Fined and Suspended

October 26, 2017

Sometimes you just get caught in the middle of things. Take today's featured FINRA regulatory settlement in which a stockbroker decided to leave his then-current brokerage firm in December 2015 but, you know, one thing and then another apparently popped up and the target date of actually resigning in January 2016 slowly kept moving until March 2016. Funny thing about delays, they have a way of causing all sorts of unforeseen and unexpected problems. For example, what do you do with a customer's order that is presented to you while at your soon-to-be-former-firm? Do you enter it there or do you forward the biz to your future employer? Some would answer the question based upon loyalty to the firm that's paying you. Others would say that you feather your nest of the future. FINRA has the final say.

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, David Apted submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of David Apted, Respondent (AWC 2016049587401, October 20, 2017).

The AWC asserts that Apted entered the securities industry in 1984, was first registered in 1985, and has been dually-registered as an investment advisor since 2008. From June 19, 2013, to March 14, 2016, he was associated with FINRA member firm Smith, Moore & Co. and, thereafter, with FINRA member firm Forest Securities, Inc. The AWC asserts that he "does not have any history of relevant discipline."


The AWC asserts that in December 2015, Apted had decided to resign from Smith, Moore and join Forest Securities. Apted planned to transfer his business in mid-January 2016 but as a result of "various delays," he postponed the relocation until March 2016.

During that transitional period from December 2015 to March 2016, the AWC asserts that "two people expressed interest to Apted in investing in a certain venture-capital fund." Although he was still registered with Smith, Moore and that firm offered the venture-capital fund, Apted referred the two individuals to Forest Securities for purposes of the investment. The AWC further explains that:

[A]pted then participated in the investors' dealings with the fund, explaining its structure and costs, advising the investors about its portfolio, helping to prepare their subscription agreements, arranging and attending a meeting between one investor and funds' representatives, and handling a wire transfer for the other investor's investment.

While Apted was still registered with Smith, Moore between early January and mid-February 2016, the two individuals invested over $300,000 in the venture-capital fund. The AWC alleges that Apted did not notify Smith, More about the transactions despite his firm's prohibition against associated person participating in private securities transactions ("PST"). The AWC asserts that on three occasions (not specified in the settlement document), Apted attested his ongoing compliance with the PST policy.

FINRA deemed that Apted violated FINRA Rules 3280 and 2010 by advising and assisting the two investors without notifying Smith, Moore.

Visit the PST Cases Archive

Download a PDF copy of the Blog's FINRA PST Rule 3280 Analysis by Bill Singer, Esq.

Emailing Customer Info

Prior to his leaving Smith, Moore, the AWC alleges that Apted sent lists of his customers to Forest Securities via his personal email account, and that said lists included nonpublic information such as account numbers or balances for roughly 39 customers. The AWC asserts that Apted did not provide his customers with the requisite opt-out opportunity before transmitting their information.

FINRA deemed Apted's list transfers as involving the disclosure of nonpublic information about customers to another firm without the customers' consent and through use of a communication medium that Smith, Moore could not supervise in violation of FINRA Rule 2010.


Finally, from September to December 2016, when registered with Forest Securities, the AWC alleges that Apted used a Twitter account to send over 150 public tweets about his securities business despite his firm's alleged prohibition against using Twitter without approval. The AWC asserts that during the relevant time, Apted had about 36 followers of his Twitter account. Apted purportedly did not seek or receive his firm's approval for any of the cited tweets and he did not provide copies of the communications to his firm.

FINRA deemed Apted's tweeting without a registered princpal's approval and without providing copies to his firm as a violation of FINRA Rule 2210(b) and 2010.

FINRA Sanctions

In accordance with the terms of the AWC, FINRA imposed a $10,000 fine and a four-month suspension from associating with any FINRA member in any capacity.

Bill Singer's Comment

Online FINRA BrokerCheck records as of October 26, 2017, disclose that Smith, Moore & Co. "discharged" Apted on March 14, 2016, based upon allegations that:

While employed at Smith, Moore & Co., Mr. Apted facilitated a private plaement transaction through a firm other than Smith, Moore & Co. in violation of Company policy.

In response to his former firm's BrokerCheck comment, Apted stated:


Corrective Action Statement

Apted's AWC  includes a provision under "III. OTHER MATTERS" that states:

I may attach a Corrective Action Statement to this AWC that is a statement of demonstrable corrective steps taken to prevent future misconduct. I understand that I may not deny the charges or make any statement that is inconsistent with the AWC in this Statement This Statement does not constitute factual or legal findings by FINRA, nor does it reflect the views of FINRA or its staff.

As more fully explained in a 1998 NASD (FINRA's predecessor) document: "Regulatory Short TakesNASD Clarifies Policy On Corrective Action And Mitigation Statements"

Respondents in a settled disciplinary action may submit a Corrective Action Statement and/or a Mitigation Statement to NASD Regulation. This article clarifies the NASD policies regarding such Statements.

A Letter of Acceptance, Waiver and Consent (AWC) permits a respondent in an NASD Regulation disciplinary action to settle the matter prior to the filing of a formal complaint. A Corrective Action Statement may be attached to the AWC, which is filed with the SEC and available to the public, provided such statement is: (1) limited to demonstrable steps taken to correct a problem associated with the disciplinary action; (2) generally no longer than 2-3 pages; and (3) contains the following legend:

This Corrective Action Statement is submitted by the Respondent. It does not constitute factual or legal findings by NASD Regulation, Inc., nor does it reflect the views of NASD Regulation, Inc., or its staff.

Separately, respondents may submit a Mitigation Statement for consideration by NASD Regulation and the National Adjudicatory Council. Generally, such Statements are used to describe mitigating circumstances surrounding the violation for the decision maker to consider in its review of the terms of a settlement. Unlike Corrective Action Statements, Mitigation Statements are not attached to the AWC or public order.

Respondents may also settle a matter after the complaint is filed by submitting an Offer of Settlement. While both Corrective Action and Mitigation Statements may be submitted to NASD Regulation in connection with Offers of Settlements, these Statements are not attached to the final Order Accepting the Offer of Settlement, which is filed with the SEC and available to the public.

NASD Regulation will not accept Corrective Action or Mitigation Statements that deny the allegations or are inconsistent with the findings in the settlement. . .

FINRA AWCs permit the attachment of a Corrective Action Statement to demonstrate the steps taken by a respondent to prevent future misconduct subject to the understanding that such an attachment may not deny the charges or make any statement that is inconsistent with the AWC. Further the Corrective Action Statement does not constitute factual or legal findings by FINRA, nor does it reflect the views of FINRA or its staff.

I am no fan of Corrective Action Statements and rarely, if ever, advocate their use.  Given that the premise of an AWC is a settlement made without admitting or denying the findings, I don't understand why anyone would voluntarily submit a statement that typically make admissions of facts and findings; promises to correct situations that have not necessarily been acknowledged or admitted to; and, in the end, simply draws more undesired attention to the matter. If you feel compelled to attach a Corrective Action Statement, then ask yourself if you might not be better advised to argue your case before a Hearing Panel and, if necessary, on appeal. If you conclude that the costs and/or risks of contesting the charges aren't worth it, then just sign the damn AWC and get over it.

Some think that a Corrective Action Statement gives you a parting shot at unfair regulation or an opportunity to put your own spin on the matter. I would suggest that you simply avoid the temptation. As with any post-game analysis, it's just not going to change the score. Moreover, if during subsequent examinations, a regulator finds that you engaged in similar misconduct to that discussed in your statement, or, it is alleged that you failed to  implement the promised revised policies and procedures, your own words may prove blunt instruments used to beat you into submission.

Notwithstanding my opinion, Apted apparently determined that it was advisable to submit this Corrective Action Statement:

No. 2016049587401

TO: Department of Enforcement
Financial Industry Regulatory Authority ("FINRA")

RE: David Apted, Respondent
CRD No. 1255773

This Correction Action Statement is submitted by the Respondent, David Apted. It does not constitute factual or legal findings by FINRA, nor does it reflect the view of FINRA or its staff. 

Mr. Apted is currently participating in a heightened supervision plan ("plan") with his current employer, Forest Securities. The plan remains in effect until a review  on December 31, 2017. The plan covers a wide range of business related activities. The parts of the plan that pertain to the facts in the AWC are as follows:

1. Mr. Apted meets with management on a weekly basis to discuss all advisory clients. A review of methods of investment for each specific client is conducted.

2. All internal communications must be done using Firm's email system.

3. Any communication from 3rd party (including a client) related Firm business that is sent to Mr. Apted's personally (including personal email address) must be archived and provided to the Firm. 3rd Party must be advised to no longer communicate business related activities with Mr. Apted unless done through the Firm. 

4. Outgoing communications related to Firm business must be approved by Firm. 

5. Mr. Apted agreed to allow the Firm to place "Spy Alert" software on all devices that he uses to conduct Firm business. This software will allow the Firm to monitor all activities on the devices including email. 

6. All advertising that is conducted by Mr. Apted must first be approved by Firm's aCompliance Officer.

7. Mr. Apted is prohibited from using social media of any kind unless Firm approves and Firm has a protocol in place to archive the approved social media content for later review. 

The above comprises the extensive corrective actions taken by Mr. Apted.