by Bill Singer
Stockbroker Fined and Suspended for Failure To Disclose Bogus Auto Theft Report Misdemeanor
March 2, 2012
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, John Stuart Kuhn, Sr. submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of John Stuart Kuhn, Sr., Respondent (AWC 20110264559, February 24, 2012).
False Report Misdemeanor
According to the AWC, on or about May 30, 2008, in the county of St. Charles, MO, Kuhn knowingly made a false report to a police officer that a theft of an automobile had occurred when it had not. On May 1, 2009, Kuhn was charged with one count of Making A False Report, a class B misdemeanor, in violation of
Missouri Revised Statutes
Chapter 575: Offenses Against the Administration of Justice;
Section 575.080: False reports:575.080. 1. A person commits the crime of making a false report if he knowingly:
(1) Gives false information to any person for the purpose of implicating another person in a crime; or
(2) Makes a false report to a law enforcement officer that a crime has occurred or is about to occur; or
(3) Makes a false report or causes a false report to be made to a law enforcement officer, security officer, fire department or other organization, official or volunteer, which deals with emergencies involving danger to life or property that a fire or other incident calling for an emergency response has occurred or is about to occur.
2. It is a defense to a prosecution under subsection 1 of this section that the actor retracted the false statement or report before the law enforcement officer or any other person took substantial action in reliance thereon.
3. The defendant shall have the burden of injecting the issue of retraction under subsection 2 of this section.
4. Making a false report is a class B misdemeanor.
On June 25, 2009, a Judgment and Sentence was filed by the Circuit Court of St. Charles, MO, indicating that Respondent Kuhn had entered a guilty plea to the charge of Making A False Report. The judge imposed a suspended imposition of sentence, which under Missouri law is not a final judgment. Online FINRA records as of March 1 2012, disclose that Kuhn was sentenced to two years supervised probation; 20 hours of alternative community service; and required to write a letter of apology to the police officer involved. Thereafter, the matter was dismissed after Kuhn complied with the conditions of his plea.
Form U4
Respondent Kuhn entered the securities industry in April 1997, and on July 2, 2009 (after he had been charged with the misdemeanor and after he pleaded guilty), he completed, signed and submitted an an initial Uniform Application for Securities Industry Registration or Transfer ("Form U4″) for employment with Ameriprise Financial Services, Inc. ("Ameriprise"). FINRA advises that he had no prior disciplinary history.
Question 14B(1) of the Form U4 asks:
Have you ever:
(a) been convicted of or pled guilty or nolo contendere ("no contest") in a domestic, foreign or military court to a misdemeanor involving: investments or an investment-related business or any fraud, false statements or omissions, wrongful taking of property, bribery, perjury, forgery, counterfeiting, extortion, or a conspiracy to commit any of these offenses? YES [] NO []
(b) been charged with a misdemeanor specified in 14B(1)(a)? YES [] NO []
Respondent answered "No" to both questions, failing to disclose that he had previously been charged in May 2009 with Making A False Report, a misdemeanor involving a false statement as delineated in Question 14B(l)(a).
FINRA By-Laws, Article V, Section 2(c)require disclosure of certain criminal and non-criminal events involving registered representatives; additionally, FINRA Rule 2010states that "a member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade;" and NASD IM-1000-1 states:
The filing with the Association of information with respect to membership or registration as a Registered Representative which is incomplete or inaccurate so as to be misleading, or which could in any way tend to mislead, or the failure to correct such filing after notice thereof, may be deemed to be conduct inconsistent with just and equitable principles of trade and when discovered may be sufficient cause for appropriate disciplinary action.
Consequently, when Kuhn failed to answer "YES" on the Form U4 and to disclose his May 2009 misdemeanor charge, which involved the making of a false statement, he violated FINRA By-Laws and rules.
FINRA Investigates
On February 18, 2011, FINRA received a Uniform Termination for Securities Industry Registration ("Form U5″) from Ameriprise, which reported that Kuhn's employment with had been terminated on February 18, 2011, due to statutory disqualification by FINRA. According to the terms of the AWC, FINRA imposed upon Kuhn a 30-day suspension from association with any member in any capacity, and a $5,000 fine.
Bill Singer's Comment
In my law practice, I get phone calls from Wall Street's professionals - folks whose cracking voice betrays them, the nervous ones with stories about "my friend has this problem . . ." When they finally stop dancing around and tell me their story, it's often one that could end their career. And don't think for a minute that this is something that only involves involves present and former employees of indie/regional brokerage firms - no way! The calls are just as likely to come to me from employees of the big boys: Merrill Lynch, Wells Fargo, JP Morgan, Morgan Stanley - you name the firm, I've probably counseled someone employed there.
As such, Kuhn isn't an aberration and it's far from a rare set of circumstances. It's also a warning about how failing to timely and honestly disclose a prior criminal charge or conviction can land you in far hotter water than if you had simply checked off the "Yes" box and provided an explanation.
