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

July 28, 2020

FINRA asked for a respondent's cooperation in an investigation about allegedly undisclosed tax liens. Then FINRA waited. And waited. Then it asked again but with a bit more oomph. But, still, all that occurred was non-compliance from the other end. And so the failed cooperation became a suspension and then a Bar. Lo and behold, the respondent informs FINRA that he had been hospitalized and never got its demands. At that point, FINRA shrugged and said it's too late. Which propelled the matter to the SEC. 

A Matter of Taxes

According to online FINRA BrokerCheck files as of July 24, 2020, Brendan Daniel Feitelberg was first registered in 2005, and from May 2017 to April 2018 he was registered with FINRA member firm United Planners' Financial Services of America. BrokerCheck discloses under "Judgment/Lien" that Feitelberg was the subject of a: 
  • $10,492 State of Massachusetts Tax Lien/Judgment filed on February 27, 2017; 
  • $4,571.54 Internal Revenue Service Tax Lien/Judgment filed on September 15, 2016; and
  • $39,875.93 Internal Revenue Service Tax Lien/Judgment filed on April 8. 2016
2017 Massachusetts Consent Order

BrokerCheck discloses in part under "Regulatory - Final" that the Massachusetts Securities Division entered into a Consent Order with Feitleblerg on July 19, 2017, based upon allegations that:

Mr. Feitelberg has three outstanding liens all with the Internal Revenue Service ("IRS"). Feinberg does not currently have a payment plan.

In resolving the matter, the Securities Division imposed imposed the following undertaking on Feitelberg's BD state agent registration:

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.

2018 United Planners Discharge

BrokerCheck further discloses under "Employment Separation After Allegations," that United Planners had "discharged" Feitelbrg on April 11, 2018, based upon allegations that:

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.


FINRA Suspension

In FINRA's "Disciplinary and Other FINRA Actions" (November 2018)
https://www.finra.org/sites/default/files/publication_file/
November_2018_Disciplinary_Actions.pdf, the self-regulatory-organization reported on Page 26 under the heading: 

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

FINRA Bar

In FINRA's "Disciplinary and Other FINRA Actions" (January 2019)
https://www.finra.org/sites/default/files/publication_file/
Disciplinary_Actions_January_2019.pdf, the self-regulatory-organization reported on Page 23 under the heading: 

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

SEC Opinion July 2020

On June 21, 2019, Feitelberg appealed FINRA's Bar to the SEC; and, in response, FINRA argued that the application was untimely and that Feitelberg had also failed to exhaust his administrative remedies. In the Matter of the Application of Brendan D. Feitelberg for Review of Action Taken by FINRA (SEC Opinion, '34 Act Rel. No. 89365; Admin. Proc. File No. 3-19214)
https://www.sec.gov/litigation/opinions/2020/34-89365.pdf In detailing the underlying conduct that allegedly justified FINRA's imposition of a Bar, the SEC Opinion states in pertinent part [Ed: footnotes omitted]:

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.

at Pages 2 - 3 of the 2020 SEC Opinion

In consideration of the above history pertaining to its Rule 8210 requests, FINRA commenced a FINRA Rule 9552(a) Expedited Hearing; and, thereafter, on August 20, 2018, FINRA sent Feitlberg a Pre-Suspension Notice effective September 13, 2018 absent his compliance. As noted above, FINRA suspended Feitelberg on September 13, 2018; and thereafter, on November 23, 2018, sent him a Bar Notice effective within 30 days of his receipt. As noted above, FINRA barred Feitelberg on November 23, 2018.


May 2019 Response from Feitelberg

As noted in the SEC Opinion:

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. 

at Pages 4 - 5 of the 2020 SEC Opinion

According to the Opinion, this is what transpired in pertinent part [Ed: footnotes omitted]:

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."

at Page 5 of the 2020 SEC Opinion

Aligning the events in their proper chronological order, FINRA barred Feitelberg on November 23, 2018; and, thereafter, about six months later in May/June 2019, he finally responded to FINRA's Rule 8210 demands and his Bar. Clearly, the SEC also noted that continuum [Ed: footnotes omitted]:

Feitelberg filed his application for review on June 21, 2019. But FINRA served the Bar Notice on Feitelberg in accordance with its rules on November 23, 2018. As a result, the deadline for him to file an appeal was December 27, 2018. Feitelberg did not file his application for review until almost six months later. Accordingly, it was untimely. 

at Page 6 of the 2020 SEC Opinion

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. 

The PennMont Test

As set forth on pages 8-10 of In the Matter of the Application of PennMont Securities and Joseph Carapico for Review of Disciplinary Action Taken by the Philadelphia Stock Exchange, Inc. (SEC Order Granting Motion to Dismiss Application for Review; '34 Act Rel. No. 34-61967 / April 23, 2010) (aff'd 414 Fed. Appx. 465 , 3d. Cir. 2011)
http://www.sec.gov/litigation/opinions/2010/34-61967.pdf. [Ed: footnotes omitted and highlighting added below]: 

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.

Extraordinary Circumstances

Hanging by a thread, Feitelberg has one hope; namely, to argue that his "untimely" appeal should be waived as an exercise of the SEC's discretion based upon the "extraordinarily circumstances exception" enunciated in PennMont Securities. Luckily for Feitelberg, the SEC found that [Ed: footnotes omitted]:

[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.

at Pages 7 - 8 of the 2020 SEC Opinion

Exhaustion of Administrative Remedies

All of which brings us to a somewhat odd place. The SEC concluded that it may invoke the "extraordinary circumstances exception" to deem Feitelberg's untimely appeal as entitled to the federal regulator's review; however, FINRA is still arguing that Feitelberg should be denied any SEC review of his Bar because he failed to exhaust his administrative remedies. In dealing with that stalemate, the SEC notes that the same alleged illness that prevented Feitelberg from filing a timely appeal also prevented him from pursuing FINRA's administrative procedures attendant to challenging his bar/suspension. Perhaps attempting to gently note its own confusion about FINRA's somewhat arbitrary and petty posture, the SEC explained that:

[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. 

at Page 8 of the 2020 SEC Opinion

Revisiting Mantar

In justifying its remand to FINRA, the SEC cited its holding in  In the Matter of the Application of Destina Mantar for Review of Action Taken by FINRA (SEC Opinion, '34 Act Rel. No. 79851; Admin. Proc. File No. 3-17544 / January 19, 2017)
http://brokeandbroker.com/PDF/MantarSECOpinion.pdf):

[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. 

at Page 9 of the 2020 SEC Opinion

For a detailed analysis of Mantar, READSEC Slams Brakes On FINRA In A Hurry To Get Things Done (BrokeAndBroker.com Blog /  January 25, 2017)
http://www.brokeandbroker.com/3370/sec-finra-mantar/

Provide an Explanation

In remanding Feitelberg back to FINRA, the SEC urges the self-regulator to consider the totality of circumstances, such as that:

[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.

at Page 9 of the 2020 SEC Opinion


One last observation: It is now July 2020 and Feitelberg filed his appeal with the SEC in June 2019. Wow . . . it's taken over a year for the SEC to adjudicate this issue! And what's the result of that flurry of regulatory activity? A remand. Nothing changes. Feitelberg is directed back to where this all started. One would hope that FINRA exercises some sensible discretion and fully and fairly considers (and reconsiders) Feitelberg's excuses and explanations. It strikes me as an absurd waste of time and money for FINRA to simply reiterate its prior rulings and send the whole dispute back up the chain to the SEC, where it may sit for another year and, who knows, maybe get remanded to FINRA, yet again, or, maybe moves onto federal court via the next stage of appeals. 

Also READ: 

(BrokeAndBroker.com Blog /  December 11, 2018)
http://www.brokeandbroker.com/4323/finra-8210-9552/

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


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