March 18, 2020
What do you think falls under the term "writing instruments." A pen? A pencil? Is there something else -- something electronic that's a writing instrument. Our publisher Bill Singer is frequently fascinated but such word puzzles. That being said, today's blog considers the case of someone who FINRA fined and suspended for using a writing instrument at a test center.
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, Andre Derricotte submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted.In the Matter of Andre Derricotte, Respondent (FINRA AWC 2019064384101)https://www.finra.org/sites/default/files/fda_documents/2019063885101
The AWC asserts that Derricotte was first registered in April 2013, and by July 2019, he was registered with FINRA member firm Merrill Lynch, Pierce, Fenner & Smith Incorporated, where he remained until February 12, 2020. The AWC asserts that Derricotte "does not have any disciplinary history with the Securities and Exchange Commission, any state securities regulators, FINRA, or any other self-regulatory organization."
As alleged in part in the AWC:
During his Series 66 examination in August 2019, Derricotte possessed paper and writing
instruments in violation of the Rules of Conduct. He used those materials to take
personal notes and referenced those notes throughout the examination. A test center staff
member discovered and confiscated his writing instrument during the examination, but
did not discover the notes he bad taken, Derrieotte then took a second unauthorized
writing instrument from the desk of a test center staff member, which he used to continue
taking personal notes, Derricotte also accessed his locker and his cellular phone during
unscheduled breaks, which is prohibited by the Rules of Conduct.
During his Series 65 examination in September 2019, Derricotte again possessed paper
and a writing instrument, which he referenced and used to take personal notes during the examination in violation of the Rules of Conduct, A test center staff member observed
Derricotte's use of the prohibited items during the examination and questioned
Derricone, Derricotte did not cooperate with the test center staff, however, and instead
concealed the prohibited pieces of paper he had used to take notes in further violation of
the Rules of Conduct.
The Rules of Examination
FINRA posts online the following:
The purpose of this notice is to make sure you understand and acknowledge the FINRA Rules of Conduct. You are required to agree to the following rules before starting your examination or Continuing Education (CE) session.
Test center personnel are NOT authorized to grant exceptions to any of these rules.
1. For the duration of my examination or CE session, I will not use or attempt to use any personal items, such as:
- Mobile Devices or Cameras
- Cellular Phones
- Handheld Computers
- Any Communication or Recording Devices
- Personal Notes
- Study Materials
2. I will store all personal items in the locker provided by the test vendor prior to entering the test room.
3. I acknowledge that if I bring a personal item into the test room, I will cooperate with the Test Center Staff in the inspection of the item(s). I further acknowledge that these items may not be returned to me.
4. I will not engage in any conduct that is disruptive, disrespectful or threatening. Further, I will not engage in any conduct that creates a disturbance or interferes with Test Center operations.
5. I understand and acknowledge that unscheduled breaks are permitted only for restroom use. If I take an unscheduled break during my session, I will not access my locker or leave the building, and I will not receive additional time to complete the examination or CE session. Repeated or lengthy departures from the test room for unscheduled breaks will be reported to FINRA for investigation.
6. I will not receive or attempt to receive assistance related to examination or CE content from any person for the duration of my session.
7. I will not provide or attempt to provide assistance related to examination or CE content to any other person for the duration of my session.
8. I acknowledge that examination and CE materials are the property of FINRA and/or the organization(s) that developed the materials. I will maintain the confidentiality of these materials, including the questions and my answers to the questions.
9. I will not remove or attempt to remove, whether through physical means, a recording device or otherwise, any written, printed, electronic or recorded materials from the Test Center ("Test Center Material") other than the score report provided by the Test Center Staff.
10. I will not electronically capture or attempt to capture any examination or CE content from my computer screen.
11. I will not reproduce or attempt to reproduce examination or CE materials through memorization or any other means. This prohibition includes but is not limited to discussing, posting or disclosing such content via email, social media or other Internet presence, or otherwise. I understand that this disclosure prohibition applies before, during and after my session.
12. I will not disclose or discuss with anyone, including training instructors, information about the items or answers in my examination or CE session.
- I am the person I represent to be for this session.
- If I do not follow these rules or I am suspected of cheating or tampering with the score report, the incident will be reported to FINRA and will subject me to possible disciplinary action by FINRA, another self-regulatory organization, the Securities and Exchange Commission, or any other regulator (government or private) that has jurisdiction over my activities and could result in my being barred from employment/association within the financial services industry and forfeiture of my session results.
- I understand I will be monitored at all times during the session to ensure that strict adherence to security measures is maintained by all persons. Monitoring may include audio and video recording.
In accordance with the terms of the AWC, FINRA found that Derricotte had violated FINRA Rule 2010, and imposed upon him a $5,000 fine and a two-year-suspension from associating in any and all capacities with any FINRA member firm.
Bill Singer's Comment
What I can't quite figure out is exactly what Derricotte did to warrant a $5,000 fine and two-year-suspension. I am NOT saying that he did not engage in misconduct, it seems that he may well have, but I'm not quite sure that this AWC spells out the mechanics of his wrongdoing. Consider these allegations by FINRA in its AWC:
[D]erricotte possessed paper and writing instruments in violation of the Rules of Conduct. He used those materials to take personal notes and referenced those notes throughout the examination. A test center staff member discovered and confiscated his writing instrument during the examination, but did not discover the notes he had taken, Derricotte then took a second unauthorized writing instrument from the desk of a test center staff member, which he used to continue taking personal notes . . .
For starters, this is a largely conclusory allegation. If, in fact, it is a violation of the Rules of Conduct to merely "possess" paper and writing instruments, show me where in said rules you are not allowed to possess those things. And before you start citing to me chapter and verse, understand that the key phrase in the Rules at issue is "1. For the duration of my examination or CE session, I will not use or attempt to use any personal items, such as:" Accordingly, the focus in the AWC should not be on Derricotte's mere "possession" of paper and writing instruments but on his "use" or "attempt to use" those items.
As to the so-called "Personal Items" at issue, I truly hate it -- detest it -- when someone uses a seemingly more impressive word for a simpler term. Just what the hell are "writing instruments"? Seriously?? Are we talking about a couple of pens or pencils? Are we talking about some electronic writing instrument -- which if we are, would you please explain to me what an electronic pen or pencil is? Anyone who would reference a "writing instrument," would likely also characterize a "piece of paper: as a "fixed, textured, compressed surface for the purpose of preserving indelible impressions from a writing instrument." Ya got my drift?
As to Derricotte's alleged misconduct involving his use of a writing instrument to take notes during the examination, go review FINRA's Test Center Rules of Conduct and cite to me where it says that you can't bring into a test center a blank piece of "paper" and/or a "writing instrument." What I discern in the Rules is that:
1. For the duration of my examination or CE session, I will not use or attempt to use any personal items, such as:
. . .
. . .
Regardless of what the Test Center Rules intend to convey, I think it could be argued -- and I would so argue -- that a fair interpretation of Rule #1 above is that you cannot bring into the Test Center any personal notes (which raises the further question of what are "impersonal" notes). In contradistinction to that interpretation, I think a reasonable person would say that I could bring in a pen and blank paper and make notes or jot down thoughts after the start the examination provided that I had not created those notes before entering the Center.
Having graduated college, studied for an MBA, and received a J.D., I've taken a fair number of tests that were subject to all sorts of rules. Typically, you are not allowed to bring electronic handheld devices with memory capacity into most testing facilities. More recently, you are prohibited from wearing an Apple Watch or similar device into a test center. But why would you not be permitted to bring in a pen or a pencil (the infamous "writing instrument") -- and if that is the prohibition, why don't the rules explicitly state that? No one in their right mind would normally refer to a pen or a pencil as a prohibited "personal item." After all, I normally wear underpants into a test center, and that's about the most personal item I can think of.
Similarly, lots of folks who take tests make notes during the test. They may want to write out a formula or jot down some thoughts -- it's not necessarily the stuff of cheating. As I noted above, I certainly understand why you would be prevented from bringing any notes into a test session BUT that's not the same as prohibiting the creation of contemporaneous notes during a testing session. Moreover, look at the actual language in the AWC describing Derricotte's alleged misconduct:
He used those materials to take personal notes and referenced those notes throughout the examination.
I don't know about you but I tend to "take" notes when someone is speaking or I am reviewing written materials, in contradistinction to "make" notes, which is something that I tend to do to memorialize my thoughts or set down reminders. Yeah, that may be splitting hairs but the point is still about the need for precision when a regulator is setting out the underlying facts and attempting to characterize such conduct as in violation of a given rule.
Yes -- the Rules states that "I will not use or attempt to use . . . Personal Notes" during "my examination or CE session," but doesn't such a prohibition typically involve cheating whereby you "use" personal notes that you created and brought into the testing session in contrast to notes that you created after the session began? Sometimes you make a note to remind yourself to check an answer or to jog your memory. Again, not all notes are made pursuant to cheating.
I readily acknowledge that Derricotte engaged in what sets up as misconduct in terms of unscheduled breaks and non-compliance with test-center staff' instructions. To that extent, FINRA makes a case, and, to that extent, fine, sanction the guy. On the other hand, I wish FINRA would make more of an effort to say what it means and means what it says.