Much of life is unfair. Sometimes life can also be un-fare -- as when you stiff the cab driver. Then again, sometimes those drivers are over-charging you and figure you wouldn't see that they were taking a really, really, long detour. None of which has much if anything to do with today's BrokeAndBroker.com Blog, which is about a respondent who settled with FINRA over a batch of disputed emails. On the other hand, the cab thing does have something to do with the respondent's past, except maybe not anything to do with FINRA's case. Then again, maybe this is all nothing but a clever diversion in the form of a long-winded detour designed to suck y'all into reading today's blog. Did I mention that there are three music videos embedded in the article?
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, John Galinsky submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of John Galinsky, Respondent (AWC #2013037298901, April 17, 2018).
The AWC asserts that Galinsky was first registered in 1988, and from 2010 through December 2011 he was registered with FINRA member firm Fintegra, LLC. The AWC asserts that "Galinsky has no relevant disciplinary history."
Let the Sun Shine
The AWC asserts that from January 2011 through September 2011, Galinsky sent 26 emails to prospective and or current customers regarding a private securities offering by a solar power company. The emails purportedly forwarded positive claims about the company and its business prospects that were sent to Galinsky by the company's founder at a time when that individual was also selling his securities as part of the private offering. The AWC characterized the founder's positive claims to be "unverified information" and, as such, Galinsky should have independently verified the statements or "put the information in appropriate context so that the customers could evaluate it before forwarding the emails to customers." Finally, the AWC asserts that the emails failed to disclose the risks associated with an investment in the company or the private offering at issue.
Side Bar: FINRA Rule 2210: Communications with the Publicstates in part that:
(d) Content Standards
(1) General Standards
(A) All member communications must be based on principles of fair dealing and good faith, must be fair and balanced, and must provide a sound basis for evaluating the facts in regard to any particular security or type of security, industry, or service. No member may omit any material fact or qualification if the omission, in light of the context of the material presented, would cause the communications to be misleading.
(B) No member may make any false, exaggerated, unwarranted, promissory or misleading statement or claim in any communication. No member may publish, circulate or distribute any communication that the member knows or has reason to know contains any untrue statement of a material fact or is otherwise false or misleading. . .
In addition, the AWC alleged that on two occasions in February and April 2011, Galinsky forwarded an email about the solar power company to a customer. The AWC alleges that in forwarding the subject email, Galinsky fostered the impression that he had received and merely forwarded the entire email. In fact, the AWC alleges that Galinsky before forwarding the email to the customer, Galinsky had removed references to a patent infringement lawsuit, which had recently been filed against the solar power company. The AWC asserts that Galinsky's removal of the cited content rendered the email misleading.
FINRA deemed Galinsky's above-cited conduct to constitute the transmission of emails that were not fair and balanced and that failed to provide a sound basis for evaluation of the facts in violation of NASD Rule 2210(d)(1)(A) and FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon Galinsky a $7,500 fine and a 10-business- day- suspension from associating with any FINRA member firm in any capacity
Bill Singer's Comment
In this cut-and-paste Age, we don't always carefully read what we send on to our circle of contacts -- all of which is compounded with further difficulties when we "Forward" all sorts of digital content. If nothing else, today's featured FINRA regulatory settlement highlights an issue that may simply not have popped up on a lot of folks' radar. Whether you agree with the policy or not, Wall Street regulators are increasingly promulgating a regulatory protocol that if you forward it, you own it. Frankly, I can't say that I disagree with that to the extent it will discourage folks from pumping-and-dumping with impunity. To the extent it invites Big Brother to censor what we merely find interesting and wish to share, that's another issue -- but limiting our consideration to the facts in the Galinsky AWC, I have no problem with imposing consequences when emails are foster a false impression about a given company's prospects or condition.
Not sure if you missed one oddball aspect of FINRA case against Galinsky but did you notice that the emails at issue were apparently sent in 2011 -- as in some 7 years ago? What the hell took so long for FINRA to discover the alleged misconduct? Frankly, I would have appreciated some explanation as to how such an old matter came to FINRA's attention. Keep in mind that Galinsky's employer at time of the cited misconduct had terminated its FINRA membership on December 1, 2015, which would be just shy of about 2 1/2 years ago. Not sure why the genesis of FINRA's investigation is such a secret. I'm guessing that a disgruntled investor in the power company complained to FINRA but that's merely speculation -- could be a pissed-off former colleague or just the byproduct of some excellent regulatory work. Whatever the source, it would have been worth at least one sentence of explanation given the 2011 dates.
Online FINRA BrokerCheck records as of April 23, 2018, disclose that Galinsky has 31 years of industry experience at 11 FINRA member firms and is currently registered.
The 2018 Galinsky AWC states that "Galinsky has no relevant disciplinary history." That's a bit of an odd assertion because FINRA's online BrokerCheck records dislcose that FINRA suspended Galinsky on September 28, 2015, based upon allegations that:
Respondent Galinsky failed to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance.
As far as the the 2018 Galinsky AWC's blanket assertion that he had no prior relevant disciplinary history, BrokerCheck also discloses that in 1990, without making findings of fact or conclusions of law and with Galinsky's denial of the allegations, the Illinois Securities Department settled an investigation by entering a Consent Order prohibiting Galinsky from offering or selling securities except in compliance with the Act The settlement was predicated upon allegations about Galisky's purported:
FAILURE TO DELIVER A PROSPECTUS. MISREPRESENTATIONS, AND OMISSIONS OF MATERIAL FACTS AND UNSUITABILITY OF INVESTMENTS.
Finally, BrokerCheck discloses two final criminal matters involving what appear to be a 1998 charge and a 1999 charge both involving Misdemeanor:Theft of Services/Labor. Each charge appears to involve disputed cab fare charges. BrokerCheck asserts that during the processing of the criminal complaints, Galinsky paid the disputed charges and the criminal charges were allegedly dismissed. As such, the criminal history is more of a curio than anything else but, you know, two -- two? -- yeah, two disputed cab fares resulting in threats of criminal prosecution? Wow!