April 27, 2019
In today's blog we consider a former Ameriprise stockbroker who attacked Wall Street's compliance rulebook with abandon. He got two loans from customers but didn't provide his firm with the necessary prior notices. Next, he engaged in a private securities transaction without providing prior notice. Then, our subject engages in an outside business activity without -- you guessed it -- the prior notices. Undaunted, the broker submits false answers to three years of annual compliance questionnaires. So many rivers to cross but he just can't seem to find his way past FINRA.
What is different about today's cranks is how technology -- especially social media -- lets them find each other so easily. It wasn't all that long ago that Woody Allen could turn the idea of a village idiots' convention into a sight gag. But today, Lenny Pozner, an IT consultant whose son, 6-year-old Noah, was killed at Sandy Hook, has to battle a global network of village idiots, who claim he never even had a son.
As best I remember, a "syllogism" consists of a major premise and a minor premise. Somehow you apply deductive reasoning to the premises and it leads you to a conclusion. All these years later, I still remember the example of All men are mortal. Socrates is a man. Socrates is mortal. I also remember the line about Socrates was a guy who went around giving everyone free advice, so the killed him. Not sure that the latter is an example of a syllogism but I may have cut that class. In today's blog, we have a Wall Street regulatory syllogism in search of a premise. We know that a 2015 FINRA AWC involving Voya Financial was deemed a "relevant disciplinary history" in a 2016 FINRA AWC involving Voya. We know that the same 2015 FINRA AWC was deemed a "relevant disciplinary history" in a 2019 FINRA AWC involving Voya. What we struggle with via deduction is why the 2016 FINRA AWC wasn't disclosed as a "relevant disciplinary history" in the 2019 FINRA AWC involving Voya.
Allen Stanford may be doing his 110-year prison sentence but the pain from his Ponzi scheme persists. The recent fall-out manifests itself in the form of alleged multi-million damages sustained from victims who purchased Stanford International Bank, Ltd 's Certificates of Deposit. Adding insult to injury, a FINRA Arbitration Panel hears the claims and dismisses them -- but, perhaps arising from Wall Street's collective pang of conscience, the arbitrators raise a lament about ineffective compliance practices. There's the wound. There's the salt. Rub the latter generously and vigorously into the former.
Consider the tragicomedy of Nikesh Patel, who wound up running a company with the somewhat reassuring name of First Farmers Financial LLC. Things didn't end well for Patel or the farmers. We got about $179 million in bad loans. Patel gets indicted. He pleads guilty. All seems to be following the pathway from charge to plea to sentence to incarceration. Then we run into a variation on the whole remorse and acceptance of guilt thing. Three days before his sentencing in federal court, we find Patel at a Florida airport, attempting to board a flight for Ecuador. Should there be any consequence for his attempted flight? He doesn't think so. The courts didn't agree.