October 27, 2017
It can't be that easy, we think. It can't be that simple, we believe. In the end we're wrong on both counts. Apparently, it doesn't require much ingenuity or stealth for the employee of a FINRA member firm's affiliated bank to generate an ATM card without a customer's authorization. The one thing that is apparently quite easy and simple for FINRA, however, is to protect the name of the affiliated banks of its member firms. Sure, there are times when such an affiliate should not have its name published in a FINRA document, however, I don't think that this is such a time. You read today's settlement and see how you feel.
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, Rafael Enrique Febus Jr., submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Rafael Enrique Febus Jr., Respondent (AWC 2017053900701, October 23, 2017).
The Affiliated Bank
The AWC asserts that Febus was first registered in 2015 and was associated with FINRA member firm J.P. Morgan Securities LLC (the "Firm") and also employed by what is only referred to in the AWC as "a bank affiliated with the Firm (the "Bank")." The AWC asserts that Febus "has no disciplinary history in the securities industry."
The Affiliated Bank's ATM Card
The AWC asserts that in February 2017, without the request or authorization of an unnamed Bank customer, Febus issued an ATM card for that customer's bank account, and, thereafter, he allegedly took personal possession of the card. The AWC alleges that Febus used the unauthorized ATM card to withdraw approximately $1,000 from the customer's bank account without her knowledge or consent. Febus purportedly used these funds to pay for his own personal expenses.
Conversion of the Affiliated Bank's Customer's Funds
FINRA deemed Febus's conduct to constitute the conversion of the Bank customer's funds without the knowledge or consent of the customer, in violation of FINRA Rule 2010.
Discharged by the Affiliated Bank
According to online FINRA BrokerCheck records as of October 27, 2017, "J.P. Morgan Chase Bank, N.A." had "discharged" Febus on March 17, 2017. In the disclosure filed by FINRA member firm J.P. Morgan Securities LLC, Rebus was discharged based upon the following allegations:
TERMINATED BY AFFILIATE BANK - NON SECURITIES RELATED. REGISTERED REP., IN THE CAPACITY OF AN AFFILIATE BANK EMPLOYEE, ALLEGEDLY ISSUED AN ATM CARD FOR AN AFFILIATE BANK CUSTOMER'S BANK ACCOUNT AND WITHDREW FUNDS WITHOUT THE AFFILIATE BANK CUSTOMER'S KNOWLEDGE OR CONSENT.
In accordance with the terms of the AWC, FINRA imposed upon Febus a Bar from association with any FINRA member in any capacity.
Bill Singer's Comment
The Unnamed Affilated Bank
This FINRA AWC is meticulous in not identifying, by name, the "affiliated bank" of FINRA member firm J.P. Morgan Securities LLC. That's very thoughtful of FINRA not to disclose the name of the bank where Febus issued an unauthorized bank card. It's also wonderful that the very bank that fired Febus and is an affiliate of a FINRA member firm is so carefully protected -- but for the fact that there doesn't seem to be a sensible reason as to why such confidentiality is afforded under the circumstances. After all, the bank's name is fully disclosed on Febus's BrokerCheck file.
To be consistent, I reiterate my practice of calling out FINRA's idiocy of not identifying a member firm's affiliated bank in the self-regulatory organization's published regulatory decisions. See, for example:
In today's regulatory settlement, the lengths to which FINRA goes to hide the name of J.P. Morgan Securities LLC's "affiliated bank" comes off as particularly lame and strained. Pointedly, not a single act cited in the AWC took place at the FINRA member firm broker-dealer. Every bit of misconduct victimized the affiliated bank's customer and that bank's operations. The ATM card was wrongfully issued from the affiliated bank. The funds were stolen in Febus's "role as a banker," as set forth in those exact words on FINRA's BrokerCheck.
Under Febus's BrokerCheck heading of "Employment History" for the dates "01/15 - Present" are two indicated employers: "JP MORGAN SECURITIES LLC" and "JPMORGAN CHASE BANK" So . . . FINRA discloses the name of the affiliated bank on its public BrokerCheck website but the self-regulator won't name the bank by name in the AWC. That makes no sense given the specific facts in Febus's settlement.
Sr and Jr
Not exactly sure what, if anything, the following means and, as such, I'm not going to draw any inference and will let my readers shift for themselves.
FINRA BrokerCheck records disclose that a "Rafael Enricque Febus Sr" was registered for 15 years with 13 FINRA member firms from 1987 to 2002. As stated in "NASD Disciplinary Actions / August 2004" under the heading "Individuals Barred or Suspended" http://www.finra.org/sites/default/files/DisciplinaryAction/p007429.pdf:
Note: There is a difference in the spelling of the middle name for each Rafael Febus: "Enrique" versus "Enricque," so, you know, maybe they're not father and son. Then again, maybe there's no relationship between JP Morgan Securities and JPMorgan Chase Bank.
Rafael Enricque Febus, Sr. (CRD #1256860, Registered Principal, Flushing, New York) submitted a Letter of Acceptance, Waiver, and Consent in which he was barred from association with any NASD member in any capacity. Without admitting or denying the allegations, Febus consented to the described sanction and to the entry of findings that he engaged in private securities transactions and failed to provide written notification to his member firm prior to effecting these private securities transactions. The findings also stated that Febus intentionally and/or recklessly misrepresented and omitted material facts concerning securities, including guaranteed monthly interest payments and overall value of the securities as a good investment when soliciting sales of securities to public customers. The findings further stated that Febus failed to respond to NASD requests for information. (NASD Case #C10040069)