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Undisclosed Tax Liens And State Regulatory Action Trip Up Stockbroker
Written: November 15, 2012

IRS 1040 Tax Form Being Filled Out

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, Philip Alan Goldstein submitted a Letter of Acceptance, Waiver and Consent (“AWC”), which FINRA accepted. In the Matter of Philip Alan Goldstein, Respondent (AWC, 20110285468, November 5, 2012).

Goldstein  entered the securities industry in 1981. From 2004 until March 7, 2011 Goldstein was associated with Berthel Fisher & Company Financial Services, Inc. On March 7, 2011 Goldstein then became associated with WFG Investments, Inc.  On July 7, 2011 WFG filed a Uniform Termination Notice for Securities Industry Registration (the “Form U5″) reporting that Goldstein was “Permitted To Resign” on June 10th because of a “lack of confidence by management.” The AWC asserts that Goldstein has no orior relevant disciplinary history.

Tax Liens

The Internal Revenue Service filed the following six tax liens against Goldstein in Pennsylvania state court:

  • December 5, 2005: $66,314.02
  • May 1, 2006: $86,148.289
  • October 17, 2008: $306.58 and $25,302.87
  • October 5, 2009: $879.59
  • December 22, 2010: $6003.49

The AWC alleges that until March 2011, when WFG conducted a review of Goldstein’s credit history and inquired about the undisclosed information, Goldstein had failed to amend hisUniform Application For Securities Industry Registration Or Transfer (“Form U4″) to reflect the six tax liens detailed above that totaled  $184,952.

State Regulatory Action

In October 2009, Goldstein was named in a regulatory action filed by the Pennsylvania Department of Insurance. On August 17, 2010, Goldstein entered into a Consent Order, which provided for a $5,000 fine, $828.65 in restitution and a Cease And Desist from violations of the Pennsylvania Insurance Code. The AWC alleges that until March 2011, Goldstein failed to amend his Form U4 to reflect either the the October 2009 state action or the August 2010 Consent Order.


Question 14M of Form U4: requires the disclosure of unsatisfied judgments or liens.

Question 14D of the Form U4: requires the disclosure of federal or state regulatory actions.

Article V, Section 2 of FINRA’s By-Laws:requires that a person applying for registration with FINRA disclose certain information, including  unsatisfied judgments/liens — and to update such information within 30 days of learning of facts that are required to be disclosed.

NASD Membership and Registration IM-1000-1: requires registered representatives to fully and accurately disclose information required in the Form U4. (Similar requirements exist in FINRA Rule 1122, which replaced NASD IM-1000-1 as of August 17, 2009)

NASD Conduct Rule 2110 and FINRA Conduct Rule 2010: “[a] member, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.”

Tallying It All Up

FINRA alleged that Goldstein’s failure to disclose the information required by the Form U4 constituted violations of NASD Rule 2110, NASD IM-1001-1 and FINRA Rules 1122 and 2010.  Moreover, the AWC alleged that Goldstein willfully failed to amend his Form U4 to disclose the six liens and the Pennsylvania regulatory action.  Accordingly, FINRA imposed upon Goldstein a fine in the amount of $5,000 and a four-month suspension from association with any FINRA member in any capacity.  Note: The finding of willful omission on the Form U4 rendered Goldstein statutorily disqualified.

Bill Singer's Comment

Lately, FINRA seems to be on a tear when it comes to investigating and charging for the non-disclosure of liens and judgments on the Form U4. If you take a gander at the list of recent “Street Sweeper” articles below on this topic, you’ll note a number of recent AWCs.  With the economy being what it is and the Great Recession’s legacy still causing pain, it’s no wonder that many registered persons experienced problems paying their bills or taxes. All of which may explain why FINRA is on top of this developing trend and why there seems to be so many cases.  Clearly, the answer to this issue for registered persons is not found in untimely or failed disclosure.

Gaming Wall Street‘s disclosure system is not a new compliance problem but it remains a common one.  Coming up with strained rationale for non-disclosure is an old dodge.  And while this problem often arises among the fringes of the securities industry at lesser and often dubious brokerage firms, this practice also occurs at the big boys, be they Merrill Lynch,Morgan StanleyUBS, Wells Fargo, Goldman Sachs, or the like.  If there’s something that someone would prefer to hide, you can bet that a whole batch of ifs, buts, and you could argues bubble to the surface.


Topics: FINRA  AWC  U4  U5  Tax Lien  Judgment  Bill Singer  BrokeAndBroker  

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