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, Andrey V. Tkatchenko submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Andrey V. Tkatchenko, Respondent (AWC 2008011743304, May 23, 2012).
Tkatchenko was first registered with a FINRA/NASD regulated firm in 1994, and during the relevant times for this AWC, he was registered from April 2008 through October 22, 2012 with Fordham Financial Management, Inc., a FINRA registered firm, as a registered. The AWC asserts that Tkatchenko had no prior disciplinary history.
The AWC alleged that between April 29, 2008 and June 30, 2008, Tkatchenko marked as "unsolicited" trade tickets and/or confirmations pertaining to more than two dozen transactions in the stock of UniPixel, Inc. (UNXL) that he effected on behalf of his customers. The AWC alleges that the transactions were, in fact, "solicited." Consequently, FINRA alleged that Tkatchenko's mismarking prevented Fordham from accurately reporting those trades and properly supervising him.
NASD Rule 3110(a) requires member firms to "make and preserve books, accounts, records, memoranda, and correspondence in conformity with all applicable laws, rules, regulations, and statements of policy . . . and as prescribed by the Securities Exchange Act of 1934, Rule 17a-3."
Exchange Act Rule 17a-3 requires member firms to make and keep, among other things, "[a] memorandum of each brokerage order, and of any other instructions, given or received for the purchase or sale of securities."
In accordance with the terms of the AWC, FINRA imposed upon Tkatchenko a $10,000 fine and a 15-business-day suspension from associating with any FINRA registrant in any capacity.
All around, an acceptable resolution. A sensible, fair settlement achieved by the Respondent and, similarly, an appropriate sanction imposed by FINRA. Of course, it's a bit disconcerting to note that the subject trades occurred some four years ago, but, alas, the snail's pace of modern day Wall Street regulation persists.
Each day, at every brokerage firm in the industry, stockbrokers enter orders. Some of the orders are instigated by the customer and the result of that client's research or design. In the purest sense of the word, they are "unsolicited" by the broker and should be so marked. Other orders are generated by the stockbroker as a result of his or her recommendation or suggestion and, typically, should be marked as "solicited."
In keeping with industry practice, the order tickets submitted the the firm's traders and the confirmations sent to the firm's customers are supposed to accurately reflect whether an order was solicited or unsolicited. Given the volume of such order documentation, it's understandable that at very busy firms - the Morgan Stanley, the Charles Schwabs, JP Morgan, Merrill Lynch, Wells Fargo - that someone is going to inadvertently check the wrong box or handwriting may be misread. When there's enough rote work involved, human error and the numbing repetitiveness of such tasks often combine to screw up more than a handful of tickets or confirms.
On the other hand, sometimes a broker may be up to no good - trying to move a ton of stock that he's getting paid to push or hoping to paint the tape and influence the market. In such cases, the reward for moving the product may prompt a lot of tickets getting marked as "unsolicited" when they were anything but.
As a customer, always, always, always carefully read your trade confirms and discern what trades were reported as unsolicited. In the event you have a dispute with your broker in the future concerning representations that were made to you about the stock, your case may be weakened if it's successfully argued that the investment was your idea from the start. A suitability case could easily go out the window if the defense is that neither the firm nor its registered person "recommended" the disputed investment.