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, Thomas Shannon Ensign submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Thomas Shannon Ensign, Respondent (AWC 20100239271, April 26, 2012).
Ensign entered the securities industry as a registered representative in 1985 and employed during the relevant time at the Worthing, OH, branch office of Ameriprise Financial Services until his voluntary resignation on September 3, 2010. According to the AWC, Ensign had no prior relevant disciplinary history.
Around April 2010, Ensign allegedly owed about $23,000 on a personal credit card but did not have sufficient funds in a joint bank account that he maintained with his wife at an unaffiliated bank. The AWC alleges that Ensign expected to receive a $65,000 IRS tax refund, which he planned to use to pay the credit card bill.
In April 2010, Ensign allegedly contacted one of his Ameriprise customers and indicated that he knew a restaurant owner seeking investors for a short-term $80,000 loan, which would be repaid at 20% interest ($16,000). This pitch for the outside investment was allegedly done without notice to Ameriprise.
Apparently, Ensign told his customer that he was personally going to invest $40,000 in the $80,000 loan and asked the customer for the $40,000 balance. The customer agreed and on April 30, 2010, wired $40,000 from his Amerprise broker account to what appears to have been Ensign's personal bank account.
By May 11, 2010, Ensign had transferred $23,000 of the customer's $40,000 wire to Ensign's joint bank account, which then used that deposit to pay his personal credit card bill. Subsequently, Ensign wired $44,000 to RP's brokerage account at the Firm to repay the customer, which resulted in repayment of the $40,000 principal and $4,000 in purported interest.
Side Bar: Despite several re-reads of the AWC, I can't figure out whether Ensign first promised the customer that they would split $16,000 interest but, thereafter, modified the gross payment to $8,000; or whether Ensign persisted in representing that the customer's take on the loan would be an $8,000 interest payment but then only paid the customer $4,000. Regardless, there did not appear to be any real loan made to the supposed restaurant owner, so whatever vig was paid on this loan came out of Ensign's pocket.
Following the failure to repay three notes, on April 23, 2010, a company obtained a judgment for $277,648 from the Franklin County, OH, Court of Common Pleas against Ensign and two entities that he controlled: Powell and ProVest Management Group . On or between April 23, 2010 and April 27, 2010, Ensign received notice of the judgment, but he did not timely amend his Uniform Application for Securities Industry Registration ("Form U4″) within the required 30 days to disclose the event. On or about June 23, 2010, Ameriprise received a Notice of Garnishment related to the judgment. On August 17, 2010, for the first time, Ensign updated his Form U4 to reflect the judgment. The AWC notes that he voluntarily resigned from Ameriprise on September 3, 2010.
On October 17, 2011, during an on-the-record interview ("OTR") of Ensign, FINRA requested that he provide certain documents and information, including his personal bank records, bank records for ProVest and Powell Investment Group L.L.C., documents evidencing an outside business request and approval to Ameriprise relating to a company associated with Ensign and contact information for the purported restaurant owner who had offered the short-term loan. Although Ensign informed FINRA that he was compiling the requested materials, he failed to produce the requested materials by the due date of October 30, 2011. Despite subsequent communications from FINRA staff and replies from Ensign, he did not produce the materials.
As a result of the foregoing, Ensign violated FINRA Rules
According to the terms of the AWC, FINRA imposed upon Ensign a bar from association with any FINRA member in any capacity.
Perhaps not the clearest AWC posted by FINRA - the issue of whether the customer was fully repaid the promised interest remains obtuse: was it $4,000 or $8,000? Regardless, the customer did get repaid the principal and what appears to be with a $4,000 profit. Frankly, these customer loans/outside business activity/private securities transactions cases often end up far, far worse. To that extent, Ensign's dealings with the customer were quite benign; however, before we're too quick to give this a positive spin, let's recall that Ensign sold this deal to his customer as a loan arranged by a restaurant owner - which had no resemblance to the truth, according to the AWC.
Given how things ultimately played out, Ensign might have been a pretty good candidate for settlement with FINRA on terms that would have required a suspension of, at worst, a few months and possibly even a few weeks - with a few thousand in fines tossed in for good measure (or if his financial status was taken into account, maybe not even that).
The killer here was his decision to not produce the requested documents. That's a somewhat odd stand-off for such a case as this because Ensign appeared at an OTR, which is conducted under oath. If a broker is not going to produce documents or information, that individual usually doesn't show up for the OTR. Given that Ensign did, we can only speculate as to why he opted to not produce the requested material - perhaps there was more to be uncovered or he was concerned about further civil/criminal matters or exposure. Regardless, by not cooperating he made FINRA's case an easy one and his Bar effectively closes the book.
As reported in "Street Sweeper," the Great Recession caused rising levels of personal and commercial debt and the lack of ready funds to satisfy such obligations. Whether employed at an LPL or Charles Schwab, or at a larger industry participant such as JP Morgan, Morgan Stanley Smith Barney, or Merrill Lynch, the shortfall in registered persons' bank and brokerage accounts pose considerable in-house compliance issues and present employers with the prospect of litigation and regulatory actions.