It's a story as old as elementary school. They give a test. Most of us take the test. Some folks cheat and bring notes that they have cleverly hidden. Then there are those who claim that they couldn't show up to take the test because they were home sick with bubitotious infectosis. No, I didn't make that up. It's a real illness. You get it from eating cooked sushi. Well . . . okay, maybe I made that up but, you know, so what. It sounded real, right? I'm not saying that I ever claimed to have come down with bubitotious infectosis when a math test was scheduled but, on the other hand, I wouldn't believe anything that I say, so, who knows. Anyway, in today's BrokeAndBroker.com Blog we feature the story of a guy who didn't show up to take the same registration exam several times but figured that he could cross his fingers behind his back and pretend that he had taken the test and passed. Given that we're discussing a FINRA disciplinary settlement, you sort of figured out that all those machinations didn't work out.
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, Respondent submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of [REDACTED], Respondent (AWC 2017053807701, February 27, 2018). NOTE: In the sole discretion of the BrokeAndBroker.com Blog, the Respondent's name has been redacted from FINRA's caption and reference in this article.
On July 20, 2016, Respondent signed a Uniform Application for Securities Industry Registration or Transfer ("Form U4") to become registered with FINRA member firm EdgePoint Capital Advisors LLC, where he worked as an associated-person analyst until April 5, 2017, when EdgePoint permitted Respondent to resign. The AWC asserts that Respondent has no prior disciplinary history.
The AWC asserts that on September 9, 2016, September 14, 2016, and March 8, 2017, Respondent failed to appear for his scheduled Investment Banking Representative ("Series 79") examinations.
On March 8, 2017, an EdgePoint principal asked Respondent about taking the Series 79 examination; thereafter, as set forth in the AWC:
[REDACTED by BrokeAndBroker.com Blog] misrepresented that he had taken and passed the examination. REDACTED by BrokeAndBroker.com Blog] then found an EdgePoint colleague's test result document on a counter in the office and used the document as a template to create a document falsely reporting that he had received a passing score of 77% on the Series 79 examination that he never took.
Respondent alleged hand-delivered the fabricate test-result document to EdgePoint, which discovered the next day after reviewing the Central Registration Depository that Respondent:
had not taken the Series 79 examination on March 8, 2017, and had twice misrepresented the he had passed the Series 79 examination.
FINRA deemed Respondent's conduct to constitute a violation of FINRA Rule 2010. In accordance with the terms of the AWC, FINRA impose upon Respondent a Bar from association with any FINRA member firm in any capacity.
Bill Singer's Comment
FINRA has been fairly consistent with its imposition of a Bar for the falsification of exam result. On the other hand, I remembered a 2011 AWC -- an idiotic fact pattern, as it were -- that doesn't quite jibe with FINRA's sanction policy. You see how you would reconcile the disparity in sanctions between the older and newer FINRA AWCs.
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, Diana Y. Tao submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Diana Y. Tao, Respondent (AWC 2011027996201, August 8, 2011).
As set forth in the Tao AWC, from April 2011 to May 2011, she was an associated person with FINRA member firm Chase Investment Services Corp. and did not have any prior disciplinary history. As set forth in the Tao AWC:
On or about May 10, 2011, Respondent took the Series 6 - Investment Company Products/Variable Contracts Limited Representative Qualifications Examination - and received a failing grade. According to the report from FINRA's Proctor Delivery System (the "Proctor's Report"), Respondent had received a failing score of 51%. Subsequently, Respondent altered the Proctor's Report to reflect that she had received a failing score of 69%. She then presented the altered Proctor's Report to her manager. The altered Report, while still indicating that Respondent failed, misrepresented that Respondent had received a higher score than the one she actually received.
In accordance with the terms of the AWC, FINRA imposed upon Tao a $5,000 fine and a two-month suspension from associating with any FINRA member in any capacity.
So . . . lemme see here.
Respondent pretended to have taken the Series 79 and fabricated an exam score to show that he had passed.
Tao took an exam and failed it but fabricated an exam score to show that she failed by a higher failing grade than she actually did.
As FINRA regulates, you get fined and suspended for lying about how badly you failed an exam but you get barred for pretending to take an exam and then lying about how you passed it. If you say that all quickly, it may make sense.
I sort of understand why you might only suspend Tao but bar Respondent. On the other hand, with all due respect to Tao, do we really want someone working on Wall Street and handling folks' retirement savings when that professional lies about how much they failed an exam by but still acknowledges that they failed?
Let me try to put it another way so that you better understand how I'm wrestling with the differences between dishonesty and stupidity.
As I see it, Respondent made a set of loaded dice that always come up with a "natural" 7 or 11, and he places his bets on the Pass Line and always wins. Tao made a set of loaded dice that always come up with "craps" of 2 or 3, and she places her bets on the Pass Line and always loses. That's about as clear an example as the difference between dishonesty and stupidity as I can conjure up. If Respondent gets caught by the house, they take him out into an alley and work him over -- hence FINRA's bar. If Tao gets caught, the house can't quite figure out what to do with her. Maybe give her a dose of bubitotious infectosis?