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In response to the filing of a Complaint on March 29, 2012, by the Department of Enforcement of the Financial Industry Regulatory Authority ("FINRA"), Respondent Richard H. Wurz submitted an Offer of Settlement dated July 18, 2012, which the regulator accepted. Under the terms of the Offer of Settlement, without admitting or denying the allegations in the Complaint, Respondent Wurz consented to the entry of findings and violations and to the imposition of the sanctions.FINRA Department of Enforcement, Complainant, vs Richard H. Wurz,Respondent (Offer of Settlement, 2011027621701, August 2, 2012).
Wurz first became registered in April 1985 as an Investment Company and Variable Contracts Products Representative. From June 2004 to the present, he has been registered in that capacity through member firm Fortune Financial Services. Inc.
During the relevant time period from at least January 1, 2010, through April 19, 2011, Fortune Financial Services's internal written policies required all securities representatives to use their firm-assigned e-mail address for all business-related e-mails. Personal e-mail accounts and addresses were prohibited for any business-related communications. Fortune retained a vendor to maintain and preserve the firm's business related e-mails, and, accordingly, this vendor archived and preserved associated person's e-mails that were sent and received through their assigned firm e-mail addresses.
Now You See It,
On or about April 19, 2011, two FINRA examiners arrived at Wurz's Holland, OH office (where he worked alone) in order to conduct a branch office examination. Wurz used a computer that he owned for conducting his securities business and for other purposes. On the day of the examiners's visit and prior, Wurz maintained an AOL e-mail account, and one of the examiners asked to review the e-mails contained in his personal AOL account.
The review occurred in a conference room located in Wurz's office and using his computer, which he controlled and operated during the examiner's review of the AOL e-mails. Throughout the relevant time period. Wurz had been assigned and provided with a Fortune Financial e-mail address for the receipt and transmission of business-related emails, but this AOL account was not a company-assigned or approved e-mail address.
During FINRA's on-site examination, the examiner preliminarily reviewed e-mails in the AOL account's Inbox and found a few e-mails that appeared business-related, and the examiner asked Wurz to print those out, which was done- thereupon, the examiner went to retrieve them from the remote printer, which was located in a separate room. TheOffer of Settlement alleges that while the examiner was out of the conference room, Wurz deleted all of the Inbox e-mails.
Now You Don't
Upon returning to the conference room, the FINRA examiner discovered that all of the Inbox e-mails that were displayed on the screen before he went to the printer room were missing from that box and asked Wurz for an explanation. The AWC alleges that Wurz claimed to not know what had happened and offered no explanation.
Uh huh. Yup. Okay. I mean, you know, at this point, we all sort of know that this isn't exactly going to end well for Wurz, right?
Undaunted, the FINRA examiner asked Wurz to open the Deleted AOL folder, where the emails that had formerly been in the Inbox were now displayed.
Gee, what a shock, the Inbox messages suddenly, miraculously, inexplicably wound up in the Deleted folder. Talk about Deus Ex Machina. Hmmm . . . y'all wondering how the files in the Inbox got into the Deleted folder? Maybe it's one of those computer glitches that seems to be going around from NASDAQ to Knight and maybe to Wurz?
Deja Vu Again
At that point, the intrepid FINRA examiner continued to review Wurz's AOL email and discovered additional messages that appeared business-related and again asked Wurz about them. Once again the examiner left the conference room to retrieve the new crop of emails from the remote printer, and, once again, upon his return he discovered that the contents of the Deleted AOL folder had been deleted - as in sent to trash. And, yet again, Wurz claimed no knowledge as to what had happened.
Oh, for godsakes, really??? Ya gotta be kiddin' me. No? Wow.
FINRA Points (Gives) A Finger
FINRA alleged that Wurz had purposely deleted the e-mails from his AOL Inbox and then purposely deleted them from the Deleted folder. Such conduct was deemed to have interfered with FINRA's review of the subject e-mails and inhibited the staff's ability to conduct its investigation. Further, the e-mails contained in Wurz's personal AOL account were allegedly business related, and Wurz was using that account without his firm's knowledge or consent. Similarly, those e-mails were business records that the firm was required to maintain and preserve under '34 Act Rule 17a-4 and NASD Conduct Rule 3110, which Wurz's conduct prevented. By intentionally deleting e-mails from his personal AOL account, thereby impeding FINRA's branch office examination and regulatory oversight of his business activities, FINRA alleged that Wurz violated FINRA Rule 2010. Also, his conduct short-circuited Fortune Financial's ability to review the subject correspondence as required by NASD Conduct Rule 3010(d)(2).
In accordance with the terms of the Offer of Settlement, FINRA imposed upon Wurz a $5,000 fine and a two-month suspension from association with any FINRA member in any capacity.
Is it just me? Or doesn't the sanction in this case seem a bit light? The $5,000 fine is okay but only a two-month suspension? What the hell does a broker have to do these days in order to really get hit with some vacation time - lie to FINRA, hide records, delete records? Oh, wait, that sort of happened here, right? Whatever the explanation, I'm unable to reconcile the misconduct with the sanctions. Perhaps Wurz was represented by a superb lawyer or FINRA has somewhat overstated the facts. Regardless, the facts are fairly stark and I was anticipating a heavier hand from FINRA.
Whether or not the sanctions meet the violations, the FINRA examiner in this case should be commended for staying on top of things during the on-site examination. Although I often criticize FINRA (and my discomfort with the sanctions imposed is but one example), I found this AWC to be very well written because it offered sufficient detail about the underlying events. Similarly, the level of detail offered by the regulator in the settlement document serves to educate the industry as to how these things actually happen, how they are detected, the silly self-help measures that registered persons should avoid, and the cascade of regulatory consequence that may result from seemingly innocuous efforts to avoid a regulator's detection. In Wurz, FINRA makes its case forcibly
With smartphones, portable tablets, and all sorts of wireless devices becoming prevalent in our daily lives, the issues raised in Wurz are going to become far more common concerns for Wall Street's regulators and industry compliance professionals. The mandatory use of firm-approved platforms and email addresses is easily diverted by the iPhone held under the desk or the iPad used at the local lunch spot. Similarly, while an employer may prohibit all unauthorized access and impose a number of online blocks, it requires little more effort than logging on to Facebook or Twitter to circumvent many of the best intentions of an employer's online supervision.
Frankly, based upon what I know, this is a widespread and growing issue that impacts Wall Street's small fry as well as larger firms such as Bank of America, Wells Fargo, Citigroup, JP Morgan, Morgan Stanley, and their ilk. Whether mega-holding companies, their brokerage subsidiaries, or indie/regional players, the aspiration of controlling online conduct is often thwarted by the ingenuity of men and women armed with little more than a wireless phone or tablet. This will be an ongoing battle between compliance departments and registered persons for years to come.