We've all been there. That moment when we pondered whether to do or not to do something that we knew was wrong but, hey, not all that wrong and, c'mon, who the hell is going to find out? There were benefits to consider. There were costs to weigh. We attempted to calculate whether right outweighed wrong but, oh my, the dollar signs flashed and the thrill of ragin' against the machine got a hold of our moral compass, and, crap, everything froze and all we could do was hold down the power switch and hope the re-boot would work. For the lucky among us, after our brain temporarily shut down and we re-booted, we were safely returned to the last restore point with no harm. We swore on everything holy that we would never, ever make such a stupid mistake again. For the unlucky among us, there was no reboot other than the dreaded blue screen and a hopelessly corrupted BIOS -- and to make matters worse, we never bothered to make a back-up. In a recent FINRA regulatory settlement, we come across one associated person with a penchant for travel and an operating system that crashed and never got its owner back to a safe restore point.
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, Daniel P. Capeless submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Daniel P. Capeless, Respondent (AWC 2016050664102, July 5, 2018).
The AWC asserts that Capeless was first registered in 2011 with FINRA member firm FBR Capital Markets & Co. The AWC asserts that Capeless has no disciplinary history with the Securities and Exchange Commission, any self-regulatory organization, or any state securities regulator.
2 Legit 2 Trip
The AWC asserts that Capeless was an FBR Sales Assistant, and he is described as travelling "frequently and, therefore, submitted numerous expense reports each month." Okay, great, we got a travelin' man. Consistent with industry policies and practices, FBR reimbursed legitimate business-related expenses. In order to obtain reimbursement, an eligible FBR employee submitted an expense report detailing date, vendor, amount, and business purpose. Like I said, all pretty cut and dry. Except some folks just don't quite grasp the concept of "legitimate." It's more of a challenge for them to overcome. As set forth in the pertinent part in the AWC:
On 30 occasions between August 2012 and March 2016, Capeless lost or could not find receipts for business-related expenses that qualified for reimbursement. In these situations, Capeless did not follow FBR's policies and procedures, which required handwritten documentation for expenses below a certain threshold and the grant of an exception for expenses above that threshold in order to be reimbursed. Instead, he submitted receipts for personal expenses, such as personal taxi rides and meals, in close approximation to the time and amount of legitimate business-related expenses. He then entered a description in the Firm's reporting system for the personal receipt to match the legitimate, reimbursable business-related expense. By doing this, Capeless was reimbursed a total of $950.37 for personal charges to offset the business-related expenses for which he lost or did not obtain receipts.
$1.13 a Day
What sort of gets lost in the fast shuffle here are the dates at issue: between August 2012 and March 2016, which covers roughly 3 1/2 years. Doing the simple math, we divide $950.36 by 3.5 and that gives us about $272 a year, which if we divide by 12, gives us about $22.63 a month. If you want to take things to an even further reductio ad absurdum, let's figure 20 business days in a month and divide $22.63 by that, and we arrive at about $1.13 a day.
Online FINRA BrokerCheck records as of July 11, 2018, disclose that FBR "discharged" Capeless on Jun3 15, 2016, based upon allegations of:
Violation of firm policy related to expense reimbursement.
So . . . lemme see here, for the grand sum of $1.13 each workday for a period of 3 1/2 years, our FBR Sales Assistant incurred the wrath of his employer and FINRA. In accordance with the terms of the AWC, FINRA imposed upon Capeless a $5,000 fine and a a six-month suspension in all capacities. All that for $1.13 a day.
Bill Singer's Comment
During the 3 1/2 years at issue, Capeless lost, misplaced, or failed to obtain receipts for about $950.36 in legitimate business expenses and, rather than eat those undocumented expenses, Capeless apparently substituted $950.36 in personal expense receipts for "personal taxi rides and meals."I do not offer that explanation by way of exculpation but merely by way of mitigation. Also, I don't think that the AWC did a particularly good job clarifying the fact that the personal expenses were submitted in a misguided attempt to cover legitimately incurred business expenses -- the far worse alternative would have been if Capeless had submitted the same personal taxi and meal expenses without having incurred otherwise undocumented but bona fide business expenses. Capeless' lawyer, Gregg Breitbarthttps://www.kdvlaw.com/professional/gregg-breitbart/ did an excellent job of reducing FINRA's sanctions from a Bar down to a more manageable fine and six-month suspension.
For further guidance on the costs of playing around with expense reimbursements, consider this BrokeAndBroker.com Blog articles: