by Bill Singer
A FINRA Member Firm In Name Only But Not Even That
July 12, 2012
On closer inspection, this FINRA member firm wasn't
In response to the filing of a Complaint on December 5, 2011, by the Department of Enforcement of the Financial Industry Regulatory Authority ("FINRA"), Respondent Eymen Errais submitted an Offer of Settlement dated June 13, 2012, which the regulator accepted. Under the terms of the Offer of Settlement, without admitting or denying the allegations in the Complaint, Respondent Eymen Errais consented to the entry of findings and violations and to the imposition of the sanctions. FINRA Department of Enforcement, Complainant, vs Eymen Errais, Respondent (Offer of Settlement, 2010023849201, July 6, 2012).
Background
Eymen Errais entered the securities industry in 2006 and was most recently registered until his May 26, 2011 termination.
What's In A Name?
Bill Singer
The Offer of Settlement alleges that on January 25, 2010, Errais sent an email to FINRA's Regulatory Review and Disclosure Department ("RAD"), indicating that he was interested in launching an inter-dealer brokerage firm specializing in credit derivatives, and provided three different names that he proposed using for the new firm. His first choice was "CreditFlow."
Via official FINRA letterhead dated January 26, 2010, an Assistant Director in RAD, informed Errais that the name "CreditFlow" had been reserved for him for a period of 120 days, and that he had until the expiration of that period to submit a membership application to secure the name.
The Offer of Settlement asserts that Errais never submitted the follow-up membership application and "CreditFlow" was never used for a FINRA member firm's name.
Bank On It
Around March 2010, Errais attempted to establish a relationship with a specific Bank in order to provide it with brokerage services through CreditFlow; and, in furtherance of such efforts, he provided a Services Agreement defining the proposed business relationships between the two entities. In an apparent attempt to close the deal, Errais falsely claimed to the Bank that the Services Agreement was "signed and approved by almost all the major banks;" and he separately falsely stated that he was "already set up" with the Bank's competitors, among which he referenced UBS, Credit Suisse, Morgan Stanley, and J.P. Morgan. Additionally, Errias falsely stated that CreditFlow was a FINRA member firm.
In August 2010, the Bank informed Errais that it was unable to find proof of FINRA membership and asked him to provide such proof - to which Errais falsely represented CreditFlow as a FINRA member. In support of this fabrication, Errais provided a purported confirmation of his firm's FINRA membership on FINRA letterhead dated June 12, 2010, that was supposedly prepared, signed, and sent by same Assistant Director in RAD who Errais contacted about reserving the CreditFlow name. The Offer of Settlement asserts that the Assistant Director did not prepare, sign, or sent the bogus letter.
I'm Outta Here
On May 24, 2011, Errais appeared at a FINRA office for sworn, on-the-record testimony. After approximately three hours of testimony, Errais refused to answer any further questions from the staff although he had previously been informed that such a failure to cooperate could result in the imposition of a Bar. Notwithstanding, Errais terminated the interview by leaving during a pending question.
Sanctions
Based upon the above allegations, FINRA charged Errais with violating:
- FINRA Rule 2010: for making false statements and providing a fake letter to the Bank, and
- FINRA Rules 8210 and 2010: for refusing to provide information to FINRA.
In accordance with the terms of the Offer of Settlement, FINRA imposed upon Errais a Bar from association with any FINRA member in any capacity.