Rather than present the numbing five years of facts in my typically artful
prose, I have opted for the rather more convenient numbered format below.
Frankly, I hope this choice of format better depicts the Juggernaut of inanity
that passes for serious regulation.
Suffice it to say that not only did FINRA get it wrong and did so with
amazing consistency (in my humble opinion) but the SEC saw the same wayward
footsteps on the beach and decided to step into them with equally admirable
consistency (again, in my humble opinion). Before unleashing a salvo
against this case and its oh so studied rationale, let me untie some of the
SEC's balloons and let them float into the air for your admiration or (as in my
In affirming FINRA's denial of waiver, the SEC notes that FINRA's
Waiver Guidelines authorize granting waiver requests based on educational
achievement to "persons who terminate their registrations and enroll in a
master’s program with a substantial emphasis on Finance and Investments."
In order to qualify for a waiver under this provision of the Waiver Guidelines
"[an] applicant must return to a member firm promptly after completing the
course of study and furnish a copy of the course transcript with the waiver
In response to that standard, Stegawski argued that his legal studies and
bachelor’s degree demonstrate his "broad
exposure" to the securities industry and qualify him for a waiver based on
educational achievement. Stegawski states that he received a law degree and
studied courses in "securities regulation, bankruptcy, federal taxation,
security interests, corporations, agency and partnership, wills and trusts, and
contracts." He also stated that he earned a bachelor’s degree in finance
and completed Level I of the CFA Program.
Okay, so, just for the sake of it, let's see if we can at least reduce the
point and counterpoint here to something basic. You can get a waiver of the
Series 7 if you demonstrate post-registration enrollment in a master's program
with a finance/investment emphasis and you promptly return to a member firm upon
completion of said studies and furnish a transcript with the waiver
request. We know that Stegawski terminated his registrations (yeah, that's
plural: he passed the 7, 31, and 66!) in July 2004, immediately attended law
school, associated with FINRA member Capstone in October 2006, and sought
registration in November 2006. And, yeah, okay, fine, we also know that
the two-year window to keep his Series 7 active closed in July 2006 -- all of
three or so months before he rejoined the industry.
On what principled
basis did both FINRA and the SEC dispose of the sole issue as to whether
Stegawski's legal degree satisfied the waiver requirement that he enroll in a
master's program with substantial emphasis on finance/investments? Oh,
that was simple, and I quote from the SEC's decision on Page 6:
As an initial matter, the degree programs and examinations Stegawski
relies on do not meet the Guidelines’ requirements because they are not
master’s degree programs. He has a bachelor’s degree -- not a master’s
degree -- in finance. His law degree, while including some relevant subjects,
does not appear to have a "substantial emphasis on Finance and
Investments." Capstone further failed to provide a copy of Stegawski’s
law school transcript, as required by the Waiver Guidelines, showing
completion of the courses he had taken and verification of his
We have a young man who previously sat for and passed three separate
registration exams, who worked at the SEC, who sat for and passed part
of the CFA program, and graduated law school -- and we're now splitting hairs
over whether his law school curriculum substantially emphasized finance and
investments...and, even more foolishly, we're jerking this kid around because he
didn't timely produce a law school transcript (or a note from his doctor or
mother?) to prove that he completed his curriculum and graduated. Does
that fact that he passed the bar examination give those scholars at FINRA
and the SEC any clue as to whether Stegawski graduated law school? Would
it have killed anyone or destroyed the regulatory system if someone had the
simple decency to say: Whoa, let's not go nuts here. Send us your transcript,
even if it's belated, and we'll see what's what.
Timing Is Everything?
But we're not done putting this kid through the wringer. Among other issues
that the regulators considered, were granting a waiver when an applicant’s
"most recent employment has been with a securities regulatory agency"
and the applicant "was previously registered with a member firm."
Hmmm...that should have given the good folks at FINRA and SEC a dignified way
out of this. Stegawski had worked at the SEC for a few months in 2005, during
the hiatus at issue. But, "no," the laser-like analysis of
FINRA and SEC will not lighten up. The SEC concludes on Page 7 of its decision
Stegawski’s most recent employment was not with the Commission or another
regulatory agency, as the Waiver Guidelines require, but with Capstone and the
Law Office of Gregory Bartko. The Waiver Guidelines also instruct FINRA to
"consider the scope of the regulatory experience in deciding the waiver
request." Stegawski’s experience with the Commission lasted four
months, during which he states that he was a research assistant for the trial
unit and "aided the Enforcement Division in the investigation of
Securities Act violations." Based on the limited nature of Stegawski’s
duties and the short duration of his experience, we agree with FINRA’s
conclusion that Stegawski’s regulatory experience did not "evidence the
breadth of experience necessary to warrant a waiver" of the examination
How refreshing and comforting to see the overseers of Wall Street exact such
diligence upon the shoulders of so young a man. Not only is his waiver
request subjected to a consideration as to whether his law school curriculum
substantially emphasized finance/investments, but now he is asked to jump a
hurdle of "breadth of experience." God only knows how many qualified
stockbrokers are out in the field today with law degrees and CFA credits and
passing grades on three separate qualifying exams plus a more recent Series 24 and a
stint at the SEC (oh, sorry, Stegawski should apologize for the "short
duration" of that apparently meaningless gig).
At this point, so much of what I read by way of justification by NASD, FINRA,
and SEC simply strikes me as blah-blah-blah. Let me try to put this all in
Like Lawyers, Except Not
I passed my Bar examination in 1984 and was promptly admitted to practice in
1985. Over the ensuing years, I have become required along
with other lawyers to take Continuing Legal Education credits every two
years. If I do not satisfy those CLE credits, I cannot continue to
practice law within the relevant jurisdiction. Sounds like the same
regulatory scheme for Wall Street? Not quite, and here are the significant
differences (again in convenient numbered form):
- I didn't have to file to take the Bar exam through a law firm licensed in
my state of application. FINRA exams can only be accessed through a U4
submitted through the member firm;
- Once admitted to practice, my license does not go into limbo when I resign
from a law firm. My license is not held hostage by any employer or
partnership. I, Bill Singer, am personally licensed to practice law, and
that is in my personal capacity--NOT as an employee, agent, or partner of
any law firm. If I want to quit a law firm, I am not concerned about
that firm's ability to jam up my license;
- If I cease practicing at a law firm and accept a corporate in-house
position or that as a regulator, my law license does not start a two-year
countdown resulting in its termination if I don't return to private
- If I want to retain my license, I must personally ensure that I satisfy my
two-year CLE requirement by paying out of my own pocket for credits (offered
by many, many organizations via seminars, home study, or online materials)
and personally confirming same with the state court.
A Bankrupt Registration System?
Frankly, the above scenario is similar for most professionals in our society
-- lawyers, doctors, accountants -- but, oddly, stockbrokers are subjected to an
anachronistic system that binds them to an employer, replete with the panoply of
conflicts and innate threats that such control of the bottleneck gives to the
employer in such situations. The stupidity here is that it exalts form
Take a colleague of Stegawski--another young man or woman who didn't
terminate his/her registration and stayed in production. That former
colleague would not have gone to law school, would not have worked at the SEC,
would not have passed part of the CFA. And the benefit to society and the
industry of that other registered person's continued employment was what?
Does FINRA and the SEC truly believe that during those ensuing two years that
Stegawski's former colleagues were learning about the breadth of experience that
is Wall Street? What utter, sheer nonsense, if not garbage! Those
regulators themselves are out of touch with reality if they believe that
crap. The benefit of remaining in production during those two years is
that Stegawski's former colleagues made more cold calls, followed up on more
leads, sat in on more sales meetings and were pressured to sell house product
and meet sales quota, and the list of similar experiences goes on and on.
Do not for a second believe that the typical, daily experience of a Wall Street
stockbroker is learning about the intricacies of new product or new
regulations. If that were the case, how come we can't find a single
registered person or regulator who now claims to fully understand what a CDS is
or the supposed good-as-cash ARS?
When is enough, enough? The entire registration system on Wall Street
is a sham. It gives false comfort to an easily mislead consumer public.
You want to reform Wall Street in a meaningful manner that will shake the dirty
business to its core? Fine--listen to me, a nearly three-decade veteran of
the Street: free the stockbrokers from the oppressive registration system.
Let the registered men and women of the industry register on their own and
directly with the regulator. End the nonsense that their registration starts to
lapse once they resign or are laid off. Give them the same licensing
status as a doctor or lawyer, and require them to stay current by satisfying
biennial continuing education.
At the end of the day, it just strikes me as idiotic that young Stegawski
passed three exams in 2004 and then the even more demanding Series 24 in 2007,
graduated law school, qualified for part of his CFA, worked at the SEC, and
because he submitted a re-registration application some three months and change
after the artificial two-year deadline, he is denied a waiver of a lousy Series
7. Could he just take the exam over? Of course. Why shouldn't he? Because
it's just unfair and silly.
Still not convinced? Okay, let me take this parting shot.
Driving the Point Home
When did you pass your first driver's test and get your first driver's license?
- Did you have to renew your driver's license every time
you sold each of your cars?
- Did you apply for a driver's license renewal through the car dealer where you bought your car?
- Did you lose your driver's license if you sold your car and subsequently leased or rented an auto, or opted for mass transit?
- Have you ever taken a mandatory brush-up course every two-years to ensure
that you still understand how to drive your car?
- Sure, commit a crime or amass enough points and you lose your license and
may well have to requalify. That's a sensible approach.