If you work on Wall Street, you know -- or you should know -- that you're not supposed to conduct business activities via your personal email account. Sure, I know, the office email account is crap and it often crashes and then there's that whole thing about how your compliance department randomly reviews your communications and, sure, there was that time, only once mind you, but, you know, it was a mistake, you didn't really mean to attach that pornographic image of Santa Claus and that one elf to your Christmas message to your clients that you sent from your personal email account, but, hey, it was the night after the office party and you had a bit too much egg nog and, gee, no one has a sense of humor anymore, and, anyways, you didn't send the porn via your office email account, right? In any event, by way of spoiler alert, there's no pornography involved in today's column but we do have the disputed use of a personal email account and that got FINRA involved, which ended with a fine and suspension.
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, Clinton Brian Galyean, submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Clinton Brian Galyean, Respondent (AWC 2017052960801, November 5, 2018.
The AWC asserts that Galyean was first registered in 2001 and by November 2005, he was registered with FINRA member firm ProEquities, Inc.
The AWC asserts that during the relevant period between 2013 and 2016, Galyean sometimes used his personal email account to conduct his securities business, including to communicate with customers and prospective customers. As an example of such communications, the AWC cites a blank account form that was apparently attached to an email to a prospective customer with instructions to fill it out and return.
The AWC alleges that on three annual compliance questionnaires ("ACQs"), Galyean certified to ProEquities that he did not use a personal email account to conduct his securities business; however, in December 2016, ProEquities allegedly discovered that Galyean had been using his personal email account to conduct some of his securities business.
In furtherance of its internal investigation into Galyean's personal email usage, ProEquities requested that Galyean provide his personal email account password in order to allow a review of the nature and extent of the securities business that had been conducted via the personal account. In response, Galyean provided his password, but, thereafter, he allegedly began deleting emails from his personal account, and then changed his password, in a purported attempt to prevent his firm's further access. The AWC asserts that in response to Galyean's apparent email deletions and password change, ProEquities terminated him.
FINRA deemed Galyean's cited conduct as constituting violation of FINRA Rules 4511(a) and 2010.
In accordance with the terms of the AWC, FINRA imposed upon Galyean a $10,000 fine and a 60-day suspension from associating with any FINRA member in any capacity.
Bill Singer's Comment
Online FINRA BrokerCheck records as of November 9, 2018, disclose under the heading "Employment Separation After Allegations" that ProEquities, Inc. permitted Galyean to resign on January 19, 2017, based upon allegations that:
On the firm's 2016 Annual Compliance Questionnaire, Representative answered "TRUE" to the following questions: (1) I have not shared or paid securities compensation directly to any other person, including other representatives of ProEquities; (2) I do not conduct any securities activities using any unapproved or persona email accounts. This includes, for example, email domains hosted by Yahoo, Gmail, Comcast, or AOL; and (3) I do not share office space with any person who is not an Associated Person of ProEquities.
Representative's answers to these three questions were incorrect as the firm documented that representative: (1) paid in excess of $200,00 of securities commission to two other representatives in his office from 2014 - 2016; (2) utilized a Yahoo email address to conduct firm securities activities; and (3) shared office space with an individual who was not affiliated with ProEquities in any capacity.
I dunno. Seems to me that Galyean got off very, very light in terms of FINRA's $10,000 fine and 60-day suspension -- on the other hand, the AWC may have over-stated the facts or assumed motives that were not proven. Be that as it may, I fully expected that the suspension would be far greater than a lousy two months given that Galyean not only allegedly lied to ProEquities on three ACQs (which means a repetitive lie extended over three years) but he also deleted his email account's password for reasons that the AWC ascribes to his intention to deceive his employer by blocking its further access to his account during a time when he was deleting archived messages. Frankly, if FINRA had imposed a Bar, I would not have been surprised.