FINRA Fines And Suspends Lawyer For Practicing Law

May 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, Guy G. Sirois submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted.  In the Matter of Guy G. Sirois, Respondent (AWC 2011028719601, April 30, 2012).

In September 2007, Sirois first became registered with FINRA , and during the relevant period from December 7, 2009, to June 28, 2011, he was initially registered as a General Securities Representative and in December 2010, also as a General Securities Sales Supervisor with Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Firm"). Sirois is a licensed attorney. The AWC asserts that Sirois had no prior FINRA disciplinary history.

Merrill Lynch's written procedures prohibited representatives from practicing law unless an exception is granted. At some point during his employment with Merrill Lynch, Sirois allegedly requested permission to practice law outside the scope of his employment, but the firm denied his request; and, thereafter, Sirois appealed.  The AWC alleges that around April 2011, before receiving a decision on his appeal, Sirois engaged in a business activity with a law firm by drafting a will for $200 for an individual who was not a Merill Lynch customer.

Apparently, upon learning of Sirois's practice of law for compensation, Merrill Lynch terminated him for engaging in an unauthorized outside business activity. At the time of his termination, the AWC asserts that Merrill Lynch had not responded to Sirois's pending appeal.

Accordingly, FINRA alleged that Sirois violated FINRA Rules 3270 and 2010 and imposed the sanctions of a $2,500 fine and a 30-business-day suspension from association with any FINRA member in any capacity.

Bill Singer's Comment

So, you hear the joke about the lawyer who walked into a bar - well, in this case, he actually walked into a suspension . . . yeah, I know, not so funny and I'm sure that Sirois agrees.

One of the impacts of the Great Recession is that the deck was shuffled, painfully so.  A lot of veteran stockbrokers saw their careers short circuited and left the business; and, similarly, many folks who had been pursuing careers outside of Wall Street found their way to the emptied chairs.  Consequently, talk to some newly minted brokers and you're apt to find folks who had previous lives as accountants, teachers, lawyers, real estate agents, cab drivers, whatever.  Moreover, as business continues to be a tad softer than during the boom days, some registered persons can't quite meet their monthly nut solely on the basis of their brokerage industry paycheck.  All of which has resulted in a proliferation of second jobs, weekend jobs, and independent consulting for many full-time stockbrokers and back-office staff.

Unfortunately, the traditional notion and understanding of what exactly is an "outside business activity," sort of gets blurred these days amidst so many newbies on the job and so many variations on the old idea of doing odd jobs to bring in a few extra bucks. Frankly, it's not just an issue for registered persons in production but also for their supervisors and compliance departments. Sometimes it just doesn't occur to you that a given activity requires prior notice to and approval from the firm.

Sirois case, however, strikes me as fairly cut and dry.  He knew that he needed to get prior approval because he had submitted a request, which was denied, and he had appealed.  Additionally, Sirois should probably be held to a slightly higher standard because he is a lawyer and presumably has a greater appreciation for the purpose of these rules.

In Sirois's favor is that Merrill Lynch knew he was a lawyer, he didn't provide the outside work to a customer of his or even of Merrill Lynch, and the work performed did not constitute something clearly related to the securities industry - plus, we're talking about a lousy $200.  Still, it's hard to add place all of that mitigation on one side of the scale when, on the other side, we have the overwhelming fact that when Sirois first asked permission to practice law, he was told "No," and despite awaiting a hoped-for reversal of that decision on appeal, nonetheless, he did what he lacked permission to do.  All of which made for a fairly simple case for Merrill Lynch and, thereafter, for FINRA.

FINRA Rule 3270: Outside Business Activities of Registered Persons

No registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member, in such form as specified by the member. Passive investments and activities subject to the requirements of NASD Rule 3040 shall be exempted from this requirement.

Supplementary Material

.01 Obligations of Member Receiving Notice. Upon receipt of a written notice under Rule 3270, a member shall consider whether the proposed activity will: (1) interfere with or otherwise compromise the registered person's responsibilities to the member and/or the member's customers or (2) be viewed by customers or the public as part of the member's business based upon, among other factors, the nature of the proposed activity and the manner in which it will be offered. Based on the member's review of such factors, the member must evaluate the advisability of imposing specific conditions or limitations on a registered person's outside business activity, including where circumstances warrant, prohibiting the activity. A member also must evaluate the proposed activity to determine whether the activity properly is characterized as an outside business activity or whether it should be treated as an outside securities activity subject to the requirements of NASD Rule 3040. A member must keep a record of its compliance with these obligations with respect to each written notice received and must preserve this record for the period of time and accessibility specified in SEA Rule 17a-4(e)(1).