An irreverent Wall Street Blog
At FINRA, Boys Will Be Boys But Girls Should Act Like Proper Ladies
August 4, 2021
Another day and another FINRA regulatory case against a rep who applied for an Economic Injury Disaster Loan from the SBA. Ho hum. Yet again, FINRA seems to have the respondent dead to rights. The facts are what they are and FINRA makes its case. It's in the making of that case, however, that FINRA's choice of words and its highlighting of some facts gets awkward. Not only does FINRA appear to operate under a double standard when it comes to the industry's men and women versus the regulator's Large Member Firms, but we also see language in the settlement document that comes off as sexist. Boys will be boys but girls should act like proper ladies?
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, Evelyn Batista submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Evelyn Batista, Respondent (FINRA AWC 2020068662501)
https://www.finra.org/sites/default/files/fda_documents/2020068662501
%20Evelyn%20Batista%20CRD%207168518%20AWC%20jlg.pdf
%20Evelyn%20Batista%20CRD%207168518%20AWC%20jlg.pdf
The AWC asserts that Evelyn Batista was registered from December 9, 2019, through November 13, 2020 with Merrill Lynch, Pierce, Fenner & Smith Inc. There is no indication in the AWC that Batista was represented by counsel during FINRA's investigation and ensuing settlement and, as such, the implication is that she represented herself pro se.
The SBA Loans During the COVID Pandemic
In part, the AWC alleges that Batista engaged in the following conduct:
[I]n July 2020, Batista submitted an application to the SBA for an Economic Injury Disaster Loan. Prior to submitting the application, Batista did not review the Economic Injury Disaster Loan program requirements to determine her eligibility. Indeed, Batista authorized a casual acquaintance, whom she met at a party, to complete the application on her behalf from her cell phone using information she provided to him. Batista did not review the application before she electronically signed and submitted it to the SBA.In the application, Batista recklessly misrepresented that she was the owner of a property management real estate business that had been in existence since December 2018; the business earned $35,000 between January 31, 2019 and January 31, 2020; and the business lost $15,000 in rental income due to the pandemic. Batista, then a registered representative of Merrill Lynch with no disclosed outside business activities, did not own any such property management real estate business or have any other business eligible for an Economic Injury Disaster Loan from the SBA. Batista had made plans to rent out a room in her house through an online vacation rental company, including receiving information from the company concerning the estimated rental value of her room. But she did not list the room for rent prior to January 31, 2020.Based on Batista's misrepresentations, the SBA approved the loan application. On August 6, 2020, Batista signed a loan agreement again affirming that the representations in her application were correct. Batista did not make any efforts to review the information she had provided in the loan application prior to recertifying its accuracy. On August 10, 2020, the SBA provided Batista with a $17,500 loan. As noted above, the firm terminated Batista as a result of this conduct. After she was terminated, Batista repaid the loan with interest to the SBA.Based on the foregoing, Batista violated FINRA Rule 2010.
Discharge
Online FINRA BrokerCheck records as of August 4, 2021, disclose the Merrill Lynch "discharged" Batista on October 22, 2020, based upon allegations of:
Conduct involving improperly applying for and receiving an Economic Injury Disaster Loan (EIDL)
Sanctions
In accordance with the terms of the AWC, FINRA imposed upon Batista a seven-month suspension from associating with any FINRA member in all capacities. The AWC asserts that in light of Batista's financial status that no monetary sanctions were imposed.
Bill Singer's Comment
Reduced to basics, FINRA's AWC asserts that during the height of the COVID pandemic, Batista submitted an application to SBA for an EIDL; and that:
[P]rior to submitting the application, Batista did not review the Economic Injury Disaster Loan program requirements to determine her eligibility. Indeed, Batista authorized a casual acquaintance, whom she met at a party, to complete the application on her behalf from her cell phone using information she provided to him. Batista did not review the application before she electronically signed and submitted it to the SBA.
at Page 2 of the AWC
If Batista had merely been confused or mistaken or careless, that's one thing; however, as the AWC alleges, in July/August when she applying for the loan for her real estate business:
[She] did not own any such property management real estate business or have any other business eligible for an Economic Injury Disaster Loan from the SBA. Batista had made plans to rent out a room in her house through an online vacation rental company, including receiving information from the company concerning the estimated rental value of her room. But she did not list the room for rent prior to January 31, 2020.
at Page 2 of the AWC
Batista would not have been the first person to seek a government loan without first reviewing the eligibility requirements; moreover, even if she had attempted to review those requirements, government documents are often unintelligible and indecipherable. About the only mitigation that I can find is that Batista fully repaid the subject loan with interest.
Ultimately, FINRA's case appears to be that Batista made material misrepresentations in her SBA application. That she didn't really have a real estate business. That she pulled the business's financials out of the air. That she never disclosed to her employer that she was engaged in an outside business activity. In consideration of Batista's conduct, FINRA hauled out its ever expansive and always accommodating Rule 2010: Standards of Commercial Honor and Principles of Trade
A member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.
The AWC alleges that Batista's "reckless misrepresentations" rose to the level of conduct that does not observe Wall Street's purported "high standards of commercial honor and just and equitable principles of trade." Yeah, sure, as if Wall Street has any honor or observes equitable principles -- but that's another argument for another day.
I find it interesting that FINRA doesn't see the double standard it espouses when the regulator goes after the industry's men and women for "reckless misrepresentations" but never goes after those in the C-Suites of its Large Member Firms when those organizations also engage in reckless misrepresentations. See, for example the Wells Fargo references in: "FINRA Fines And Suspends Rep For Seeking COVID Loan" (BrokeAndBroker.com Blog / July 22, 2021)
http://www.brokeandbroker.com/5966/finra-awc-covid/
Finally, I am troubled by a somewhat sexist aspect of the Batista AWC. What was FINRA's point and/or purpose with this allegation:
Indeed, Batista authorized a casual acquaintance, whom she met at a party, to complete the application on her behalf from her cell phone using information she provided to him. . . .
at Page 2 of the AWC
What the hell was FINRA's point of injecting that reference to the "casual" acquaintance into Batista's AWC?
What difference did it make if Batista asked a long-term acquaintance or a recent acquaintance or a casual acquaintance to complete the application -- would it have mattered if someone that she knew from elementary school or from church or from the nearby Starbuck's had completed the application for her?
Who the hell cares if Batista met this casual acquaintance at a "party?"
Why does it matter that Batista had a third person complete the SBA application on Batista's cell phone -- would it have mattered if Batista had personally completed the application on her own cell phone or completed the application on someone else's cell phone, or on her laptop or home computer?
Only a few days ago, I reported about the Respondent who successfully defended against a FINRA Complaint in which it was alleged that when he was a BofA/Merrill Lynch rep, he converted $20,768 via unauthorized charges at "an adult entertainment venue" in violation of FINRA Rule 2010. See:
"Makin' It Rain At The Strip Club -- FINRA Goes After Adult Entertainment Charges" (BrokeAndBroker.com Blog / July 26, 2021)
http://www.brokeandbroker.com/5976/finra-adult-entertainment/
FINRA's Complaint https://www.finra.org/sites/default/files/fda_documents/
2019064313901%20Paramveer%20Singh%20CRD%205224401%20Complaint%20va
%20%282020-1606695595498%29.pdf asserts in Paragraph 9 that the Respondent "attended the Adult Venue on a personal, non-business related visit." In Paragraph 28 we have the allegation that Respondent acknowledged that "he went to the Adult Venue with a friend after leaving a restaurant on May 29, 2019." The strip club is gently repackaged by FINRA as an adult venue. The male respondent's acquaintance is neither "casual" or otherwise categorized but merely referenced as a "friend." The Complaint never alleges how the respondent and the friend met or where.
2019064313901%20Paramveer%20Singh%20CRD%205224401%20Complaint%20va
%20%282020-1606695595498%29.pdf asserts in Paragraph 9 that the Respondent "attended the Adult Venue on a personal, non-business related visit." In Paragraph 28 we have the allegation that Respondent acknowledged that "he went to the Adult Venue with a friend after leaving a restaurant on May 29, 2019." The strip club is gently repackaged by FINRA as an adult venue. The male respondent's acquaintance is neither "casual" or otherwise categorized but merely referenced as a "friend." The Complaint never alleges how the respondent and the friend met or where.
Batista agreed to settle FINRA's damn case, right? She didn't have a lawyer. She is so broke that she can't even pay a fine. Despite all of that, FINRA Staff colored the AWC's narrative by noting that some guy that Batista met at a party, who was merely a "casual" acquaintance, filled out the SBA application for her on her own cellphone. When it comes to Wall Street's regulatory cases against women, apparently this depth of detail, this nonsense matters. It shouldn't. It's about time that someone in authority paid more attention to these sexist nuances. Boys will be boys but girls should act like proper ladies?