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, Alison M. Janke submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Alison M. Janke, Respondent (AWC 2011030660801, November 5, 2012,).
Janke entered the securities industry in 2001 as a General Securities Representative, and from 2007 until March 23, 2011, was registered withWells Fargo Advisors, LLC .
SIDE BAR: On April 12, 2012, FINRA issued an AWC (No, 2011027400401) charging Janice with violation of NASD Rules 2370 and 2110 and FINRA Rule 2010 for borrowing from a customer and failing to disclose the loan and to obtain approval from her member firm, Janice was fined $7,500 and suspended for six months,
Around April 4, 2008, Janke allegedly referred a customer (who was seeking alternative investments) to a registered representative at a different firm. Subsequently, that customer invested $200,000 in Inland American Real EstateInvestment Trust ("REIT") through the other stockbroker at the other firm. On May 5, 2008, an LLC allegedly owned by Janice received a payment of $6,600 in connection with the sale. Although still receiving distributions from the REIT, the customer is unable to liquidate his investment.
In determining whether Janice had merely referred the client or had "participated" in a private securities transaction (PST in industry parlance), FINRA appears to have applied a test and concluded that Janice's conduct had constitutedparticipation by:
In light of the above findings, FINRA alleged that Janice had participated in a PST without providing prior written notice to her employer member firm in violation of NASD Rules 3040 and 2110. In accordance with the terms of the AWC, FINRA imposed upon Janice a $11,600 fine (includes $6,600 disgorgement) and a 3-month suspension in all capacities with any FINRA member firm.
Anytime a regulatory violation is known by its acronym - PST, for example - that's a tip-off that this is a problem area being closely watched by regulators. Of course, the more cynical among us would also suggest that regulators loves these speed traps because it's a regular source of fines.
Given the recent pressures of the Great Recession many registered persons found themselves in need of or enticed by the possibility of extra income from the sale of product away from their employer FINRA member firm. This attraction was as likely to bedazzle those at indie firms such as LPL, at discount firms such as Charles Schwab, or at any major player the likes of JP Morgan, Morgan Stanley, Merrill Lynch, or Wells Fargo. If you feel compelled to engage in PST, make sure to follow industry rules/regulations and to abide by your employer's in-house requirements. Otherwise, you could be paying dollars out of your own pocket while you're sitting on the sidelines
NASD Conduct Rule 3040. Private Securities Transactions of an Associated Person
No person associated with a member shall participate in any manner in a private securities transaction except in accordance with the requirements of this Rule.
(b) Written Notice
Prior to participating in any private securities transaction, an associated person shall provide written notice to the member with which he is associated describing in detail the proposed transaction and the person's proposed role therein and stating whether he has received or may receive selling compensation in connection with the transaction; provided however that, in the case of a series of related transactions in which no selling compensation has been or will be received, an associated person may provide a single written notice.
(c) Transactions for Compensation
(1) In the case of a transaction in which an associated person has received or may receive selling compensation, a member which has received notice pursuant to paragraph (b) shall advise the associated person in writing stating whether the member:
(A) approves the person's participation in the proposed transaction; or
(B) disapproves the person's participation in the proposed transaction.
(2) If the member approves a person's participation in a transaction pursuant to paragraph (c)(1), the transaction shall be recorded on the books and records of the member and the member shall supervise the person's participation in the transaction as if the transaction were executed on behalf of the member.
(3) If the member disapproves a person's participation pursuant to paragraph (c)(1), the person shall not participate in the transaction in any manner, directly or indirectly.
(d) Transactions Not for Compensation
In the case of a transaction or a series of related transactions in which an associated person has not and will not receive any selling compensation, a member which has received notice pursuant to paragraph (b) shall provide the associated person prompt written acknowledgment of said notice and may, at its discretion, require the person to adhere to specified conditions in connection with his participation in the transaction.
For purposes of this Rule, the following terms shall have the stated meanings:
(1) "Private securities transaction" shall mean any securities transaction outside the regular course or scope of an associated person's employment with a member, including, though not limited to, new offerings of securities which are not registered with the Commission, provided however that transactions subject to the notification requirements of Rule 3050, transactions among immediate family members (as defined in Rule 2790), for which no associated person receives any selling compensation, and personal transactions in investment company and variable annuity securities, shall be excluded.
(2) "Selling compensation" shall mean any compensation paid directly or indirectly from whatever source in connection with or as a result of the purchase or sale of a security, including, though not limited to, commissions; finder's fees; securities or rights to acquire securities; rights of participation in profits, tax benefits, or dissolution proceeds, as a general partner or otherwise; or expense reimbursements.