Something Up Continuing Ed Sleeve Leads To FINRA Bar

March 7, 2013

Illustration for Cheating Français : Illustrat...

Show me a test and I'll show you a way to cheat -- but maybe not successfully

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, James Eesong Ooi  submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted.In the Matter of James Eesong Ooi , Respondent (AWC 2012032545901, February 28 2013).

Ooi entered the securities industry in 1993 and on January 6, 2012, he associated with FINRA member firm Transamerica Financial Advisors, Inc. The AWC asserts that Ooi has no prior disciplinary history.

CE Regulatory Element

FINRA Rule 1250: Continuing Education Requirements (formerly NASD Rule 1120) includes provisions for a Regulatory Element, which  requires all registered individuals to complete a computer-based training program within 120 days of the second anniversary of their registration approval dates and every three years thereafter. The Regulatory Element program focuses on compliance, regulatory, ethical and sales practice standards, which are derived from industry rules and regulations, as well as widely accepted standards and practices within the industry.  Regulatory Element sessions can be taken at thePearson VUE or the Prometric Testing Centers.

Regulatory Element Programs have been developed for:

  • S201: registered supervisors/principals;
  • S106: Series 6 Investment Company Products/Variable Contracts Representatives; and
  • S101: Series 7 registrants and individuals in other registration categories not covered by the other programs,

A person's initial registration date (the "Base Date") establishes the cycle of anniversary dates. If a registered person fails to complete the Regulatory Element within the prescribed time, his registration will be deemed inactive and he is prohibited from engaging in or being compensated for activities requiring a securities registration until he or she satisfies the requirements. In addition to the Regulatory Element, there is a Firm Element administered by the member firm.

A Window Closes

The S201

Ooi's Base Date was December 10, 1997; and, as such, December 10, 2011, triggered the 120-day Regulatory Element completion period. Ooi attempted to satisfy the S201 for supervisors/principals on February 7 and 22, 2012 and March 5 and 14, 2012, but was unable to successfully complete the material. His principal registration became inactive on April 7, 2012.

The S106

Although Ooi had voluntarily terminated his Series 26 (Investment Company/Variable Contracts Limited Principal) registration on April 12, 2012,  he was still a Series 6 Investment Company Representative required to complete the S106 Regulatory Element Program (rather than the S201 Supervisor Program for Registered Supervisors and Principals).

SIDE BAR: The S106 Program is organized into four modules, and registered representatives must demonstrate proficiency in each of the four modules via multiple choice examination. Participants who do not demonstrate proficiency in any one module may continue to review the material for the added educational benefit; however, they must schedule another session and subsequently demonstrate proficiency to satisfy the Regulatory Element requirement.

On April 16, 19, and 30, 2012, Ooi failed to demonstrated the requisite proficiency for the S106 Program. On May 7, 2012, Ooi attempted to demonstrate proficiency on the S106 for a fourth time. Before beginning the session at a Prometric Testing Center in Diamond Bar, CA, Ooi acknowledged and agreed to follow the FINRA Test Center Rules of Conduct.

SIDE BARFINRA Test Center Rules of Conduct (Ed: emphasis added)

Prohibition Against Assistance, the Use of Study Materials or Misconduct

The purpose of this form is to make sure that you understand and acknowledge the rules of conduct you must follow in completing this session. You must read and agree to these rules before you will be permitted to start your session.

I understand that:

  1. I am attesting that I am the person I represent to be for this session.
  2. I must not take or attempt to take any personal items including but not limited to, notes, formulas, study materials, or electronic devices into the testing room. I will place all personal belongings in the locker provided by the testing vendor prior to entering the testing room.
  3. I must not receive or attempt to receive, any form of assistance during the test or restroom breaks.
  4. I must not give or attempt to give any form of assistance during the test or restroom breaks.
  5. I must not use or attempt to use a telephone, cellular phone, pager, hand held computer or other communication device, electronic or otherwise, during the test or restroom breaks.
  6. I must only go to the restroom when on a break. I must not deviate during my travels to and from the restroom for any reason. I must not leave the building. I must not access my locker.
  7. I must not remove or attempt to remove any written, printed, or recorded materials from the test center other than the score report provided by the center staff. The test materials remain the property of FINRA and/or developing organization(s), and I shall maintain the confidentiality of the materials, including the questions and my answers to them.
  8. I must not engage in any conduct that is disruptive or threatening to a test center staff member or another candidate.
  9. I must not engage in any conduct that creates a disturbance or interferes with the administration of the test or with the administration of other candidates' tests.
  10. Any violation of these rules will subject me to possible disciplinary action by FINRA, another self-regulatory organization, or the Securities and Exchange Commission and could result in my being barred from employment/association with any securities dealer and forfeiture of my test results.

At Arm's Length

Prometric Testing Center personnel stopped Ooi's session after they had allegedly observed him repeatedly rolling up his shirt sleeve and appearing to read something written on his left arm - after examining his arm, a series of numbers and letters written in black ink were observed. Subsequently, FINRA allegedly determined that the numbers and letters corresponded to the answers to the questions on the scenario of the module that Ooi was attempting when proctors stopped the session.

SIDE BAR: In addition to FINRA Test Center Rules of Conduct, Prometric enforces its own site regulations:


The following test center regulations are enforced at Prometric test centers. All test takers are shown this list upon arrival at the center.

1. You will be continuously monitored by video, physical walk-throughs and the observation window during your test. All testing sessions are video and audio recorded.
2. You must present valid (unexpired) and acceptable ID(s) in order to take your test. Validity and number of IDs required is predetermined by your test sponsor.
3. You are required to sign out on the test center roster each time you leave the test room.You must also sign back in and show your ID to the Test Center Administrator (TCA) in order to be re-admitted to the test room.
4. You are prohibited from communicating, publishing, reproducing, or transmitting any part of your test, in any form or by any means, verbal or written, for any purpose.
5. You must not talk to other candidates or refer to their screens, testing materials, or written notes in the test room.
6. You must not use written notes, published materials, or other testing aids, except those allowed by your test sponsor. (The TCA will refer to the applicable client practice for allowances.)
7. You are allowed to bring soft ear plugs or center-supplied tissues in the test room.
8. Any clothing or jewelry items allowed to be worn in the test room must remain on your person at all times. Removed clothing or jewelry items must be stored in your locker.
9. You must not bring any personal/unauthorized items into the testing room. Such items include but are not limited to: outerwear, hats, food, drinks, purses, briefcases, notebooks, pagers, watches, cellular telephones, recording devices, and photographic equipment. Weapons are not allowed at any Prometric Testing Center. You will be asked to empty and turn your pockets inside out prior to every entry into the test room to confirm that you have no prohibited items.
10. You will be scanned with a metal detector wand prior to every entry into the test room. If you refuse, you cannot test.
11. You must return all materials issued to you by the TCA at the end of your test.
12. You must comply with the policy of your test sponsor regarding the use of phones during scheduled breaks in your test.
13. Your test may have either scheduled or unscheduled breaks which are determined by your test sponsor. The TCA can inform you what is specifically permitted during these breaks.
14. Repeated or lengthy departures from the test room for unscheduled breaks will be reported by the TCA.
15. If you need access to an item stored in the test center during a break such as food or medicine, you must inform the TCA before you retrieve the item. You are not allowed to access any prohibited item (as defined by the client practice applicable for the test you are taking).
16. You must conduct yourself in a civil manner at all times when on the premises of the testing center. Exhibiting abusive behavior towards the TCA, or any other staff member of the test center, may result in criminal prosecution.
17. To protect the privacy of all testers, the TCA can neither confirm nor deny if any particular individual is present or scheduled at the test center.
18. Persons not scheduled to take a test are not permitted to wait in the test center.

FINRA Sanctions

FINRA alleged that Ooi's use of notes at the testing center violated FINRA Rule 2010.  In accordance with the terms of the AWC, FINRA imposed upon Ooi a Bar from association with all FINRA members in all capacities.

Bill Singer's Comment

Compliments to FINRA of presenting an AWC that went the extra length to explain what happened and how the Respondent was caught. Although I have often admonished the self-regulatory organization for frequently giving short shrift to its regulatory pronouncements, Ooi is a fine example of how such matters should be presented to the industry and investing public.

Exam cheating is not a particularly isolated fact pattern on Wall Street. "Street Sweeper" has written about testing hi-jinks by folks at Merrill Lynch, Wedbush, Chase, MetLife, and other firms. As the reported cases show, if you can think of a variation for cheating, someone has likely done it already.  Word to the wise: Study!

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