SEC Remands Feitelberg Bar to FINRA Citing Respondent's Serious Illness

Feitelberg will undergo annual credit checks to be conducted by the Firm for a period of two (2) years or until such time as no further financial obligations of Feitelberg represented by liens that remain outstanding or unsatisfied. Records of the results of such credit checks shall be maintained in Feitelberg's personnel file.

Firm Determined that the RR fail [sic] to disclose a state tax lien after entering into a Consent Order with the state of Massachusetts regarding financial issues.

Individuals Suspended for Failure to Provide Information or Keep Information Current Pursuant to FINRA Rule 9552(d) 

(The date the suspension began is listed after the entry. If the suspension has been lifted, the date follows the suspension date.)

. . .

Brendan Daniel Feitelberg (CRD #4897015)

Boston, Massachusetts

(September 13, 2018)

FINRA Case #2018058123601

Individuals Barred for Failure to Provide Information or Keep Information Current Pursuant to FINRA Rule 9552(h) 

(If the bar has been vacated, the date follows the bar date.)

. . .

Brendan Daniel Feitelberg (CRD #4897015)

Boston, Massachusetts

(November 23, 2018)

FINRA Case #2018058123601

On April 26, 2018, FINRA sent Feitelberg a request pursuant to FINRA Rule 8210 seeking information concerning Feitelberg's alleged failure to disclose the tax lien. The request asked Feitelberg to provide a signed statement responding to the allegations and copies of all documents related to the matter, and to state whether there were any additional reportable financial events that he failed to timely disclose to FINRA. The request also asked Feitelberg to confirm whether there were any complaints regarding his employment that were open or unresolved within the three years prior to his termination, and, if so, to provide additional documentation. The request further informed Feitelberg that he was obligated to respond "fully, promptly, and without qualification," and warned that "any failure on [Feitelberg's] part to satisfy these obligations could expose [him] to sanctions, including a permanent bar from the securities industry." The request directed Feitelberg to respond by May 10, 2018. 

FINRA sent the request to Feitelberg by certified and first-class mail to the address listed in FINRA's Central Registration Depository (the "CRD address"). Before sending the request, FINRA conducted a public records database search and confirmed that Feitelberg's CRD address was his current mailing address. The U.S. Postal Service returned the certified mailing to FINRA as "unclaimed" but did not return the first-class mailing. 

On May 9, 2018, Feitelberg acknowledged in an email to FINRA that he received the April 26, 2018, request and asked for an extension of time to file a response. FINRA granted the request and extended the deadline to May 24, 2018. On May 23, 2018, Feitelberg emailed FINRA seeking a second extension, stating that he "need[ed] to consult my lawyer on this matter." FINRA granted the request and extended the deadline to June 13, 2018. That deadline passed without Feitelberg requesting another extension or providing the information that FINRA sought as part of the April 26, 2018 request. 

On July 24, 2018, FINRA sent Feitelberg a second Rule 8210 request that reiterated his obligation to provide the requested information and set a deadline for responding of August 3, 2018. FINRA again warned Feitelberg that a failure to provide the requested information could result in disciplinary action against him. FINRA sent the request to Feitelberg's CRD address by certified and first-class mail and to the email address Feitelberg had used to communicate with FINRA. The return receipt from the U.S. Postal Service showed that the certified mailing arrived at Feitelberg's CRD address but that "no authorized recipient [was] available." The first-class mailing and email were not returned. Feitelberg failed to respond in any way.

In May 2019, more than five months after FINRA barred him, Feitelberg retained counsel. Counsel contacted FINRA and provided a written response to FINRA's requests. In the response, Feitelberg explained that his delay in responding was due to the fact that he suffered a serious illness that required hospitalization, surgery, and an extended recovery period. 

On May 24, 2019, FINRA sent Feitelberg a letter stating that he failed to respond to FINRA's requests for information, failed to respond to FINRA's notices, and failed to appeal FINRA's action barring him within the 30-day appeal period. The letter stated further that "[b]y failing to avail himself of FINRA's administrative process" Feitelberg "failed to exhaust his administrative remedies[,]" and therefore FINRA "[would] not reconsider the" bar. 

On June 21, 2019, Feitelberg filed an application for review of his bar with the Commission. Feitelberg argued that he never received actual notice of the suspension or possibility of a bar, and that he did not learn that FINRA had barred him until after he "recovered [from surgery] and returned to work in February 2019." Feitelberg also argued that remanding this case to FINRA to determine whether a bar was appropriate was consistent with Commission precedent. Feitelberg argued further that, because FINRA did not afford him a hearing, he did not have an opportunity to submit evidence of his medical condition into the record. 

With his application for review, Feitelberg submitted a sworn affidavit. In the affidavit, Feitelberg stated that he was "hospitalized in August 2018 with diverticulitis"; that "[t]he recovery from this illness was extensive and all-consuming and from mid-July 2018 into 2019 [he] was either in the hospital or recovering"; that he "never received the letters FINRA sent on July 24, 2018, August 20, 2018, and September 13, 2018"; and that he "also never received FINRA's letter dated November 23, 2018, and during that time period [he] was recovering at a relative's residence." In the affidavit, Feitelberg also attested that "[t]he signature on the November 28, 2019 certified mail receipt [was] neither [his] nor one that [he] recognize[d][,]" that he "did not authorize anyone to accept mail for [him][,] and that the building in question does not have a concierge service or some other service that receives mail."

SIDE BAR: Okay, so, sure, I see where this is going. FINRA was patient -- the record supports that appraisal. FINRA followed its rulebook. FINRA sent out the required notices. FINRA issued a "suspension" warning. FINRA issued a "bar" warning. Frankly, I am not going to criticize the self-regulator because it went by the book here. As we lawyers often note, the burden now shifts from FINRA to Feitelberg.

Let's do a quick recap. Beginning in April 2018, FINRA demanded that Feitelberg cooperate in its Rule 8210 investigation of his alleged non-disclosure of tax liens. Deeming that Feitelberg had failed to timely cooperate, FINRA barred him in November 2018. About six months after the imposition of the Bar, in May 2019, Feitelberg belatedly -- frankly, very belatedly -- responds to FINRA via counsel, who explains that the client had been required to undergo surgery and an extended period of recovery. 

In response to counsel's advisory, FINRA sort of pens a non-sequitur of a reply. Without apparently commenting or addressing Feitelberg's alleged hospitalization and period of recuperation, FINRA simply ticks off that he hadn't timely responded to the 8210 demands, hadn't timely appealed his Bar, and had failed to exhaust his administrative remedies. Although Feitleberg comes off as a day late and a penny short, FINRA does it's best to come off as a dickish, peevish, because-we-say-so regulator. I mean, geez, at least explain to the guy why his illness and recovery didn't entitle him to some compassion, even at this late date. 

Pursuant to Rule 420(b), the Commission may, in the exercise of its discretion, hear an otherwise untimely application only if "extraordinary circumstances" are present. Courts have recognized that strict compliance with filing deadlines facilitates finality and encourages parties to act timely in seeking relief. As we have repeatedly stated, "parties to administrative proceedings have an interest in knowing when decisions are final and on which decisions their reliance can be placed." For this reason, the "extraordinary circumstances" exception is to be narrowly construed and applied only in limited circumstances. To do otherwise would thwart the very clear policies of finality and certainty underlying the thirty-day filing deadline set forth in Exchange Act Section 19(d) and Rule of Practice 420(b).

We believe that an extraordinary circumstance under Rule of Practice 420(b) may be shown where the reason for the failure timely to file was beyond the control of the applicant that causes the delay. In construing what constitutes extraordinary circumstances, we have looked to analogous areas of federal law involving deadlines, including the judicial doctrine of "equitable tolling" of filing deadlines. Under this doctrine, federal courts may excuse an untimely filing where the party has been pursuing his rights diligently but some extraordinary circumstance beyond the party's control -- such as attorney misconduct or mental incapacity -- prevented the party from making a timely filing. Even when circumstances beyond the applicant's control give rise to the delay, however, an applicant must also demonstrate that he or she promptly arranged for the filing of the appeal as soon as reasonably practicable thereafter. An applicant whose application is delayed as a result of extraordinary circumstances remains under an obligation to proceed promptly in pursuing appellate recourse.

It is undisputed that no circumstances beyond Applicants' control led to their failure to timely file an application for review. Applicants were notified of their right of appeal to the Commission four times by PHLX (including a response by PHLX on January 7, 2008 to a letter by Applicants' counsel asking for PHLX to provide "any rights of appeal, the time frames and how time is counted, and to which organization"). Despite this, Applicants elected to pursue their objections in the federal courts rather than filing an application for review with the Commission. Having made this election, Applicants cannot complain at this stage about the consequences of their choices.

[P]ennMont's standard has been met in this case. Feitelberg's sworn affidavit indicates that he was suffering from a serious illness that prevented him from timely appealing his bar. And Feitelberg's other submissions indicate that he acted promptly to file an appeal as soon as reasonably practicable after he recovered and learned of the bar. Feitelberg retained counsel, provided a written response to FINRA's requests for information, and filed an application for review within 30 days after FINRA refused to lift the bar. Accordingly, we find that extraordinary circumstances justify our consideration of Feitelberg's untimely appeal.

[A]nd FINRA's letter to Feitelberg stating that it would not reconsider the bar even after receiving Feitelberg's response to its requests for information and explanation for his delay in responding did not include any justification as to why a bar was nonetheless appropriate in these circumstances. Indeed, FINRA's letter did not even mention Feitelberg's explanation for his belated response. We believe it is appropriate to remand the proceeding to FINRA for it to address the circumstances that led to the bar before determining whether Feitelberg failed to exhaust his administrative remedies. 

[L]ike Mantar, Feitelberg is challenging a bar imposed in an expedited proceeding. Also like Mantar, it appears that Feitelberg did not receive FINRA's second Rule 8210 request or any of its notices. As did Mantar, Feitelberg responded to FINRA's requests once he learned of the bar and before he filed his application for review. And, as in Mantar, FINRA provided no explanation for why a bar was nonetheless appropriate despite these circumstances. 

[F]eitelberg may have lacked actual notice of FINRA's second Rule 8210 request and notices as a result of a serious illness; that his serious illness may have prevented him from timely responding to the requests and notices; that he responded once he learned of the bar and before he filed his application for review; and that FINRA failed to provide an explanation as to why it would not his reconsider the bar under these circumstances.

"FINRA Rule 8210 And FINRA Rule 9552 Analysis By Bill Singer Esq"

(BrokeAndBroker.com Blog /  December 11, 2018)

http://www.brokeandbroker.com/4323/finra-8210-9552/

FINRA Rule 8210 and FINRA Rule 9552 Analysis by Bill Singer, Esq. 

Online PDF file

http://brokeandbroker.com/PDF/FINRA8210and9552.pdf

• BrokerCheck
• Taxes
• IRS Lien
• Tax Liens
• Rule 8210
• Rule 9552
• SEC
• Mantar
• PennMont
• Mantar
• Extraordinary Circumstances
• Exhaustion of Administrative Remedies
• BrokeAndBroker
• Bill Singer