An irreverent Wall Street Blog
by Bill Singer

Lien, Judgment, Bankruptcy, and Undisclosed Settlement

September 12, 2013

When playing pinball, it's a good thing if you hit all the targets and set off the bells and bright lights -- particularly if it earns you lots of points and extra balls.  When dealing with regulators, however, stockbrokers would be well advised not to join the ranks of all-time high scorers. Here is the case of one broker who managed to rack up far too many FINRA violations; notwithstanding, it is an impressive game to watch unfold.

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, Marcos Leiva submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Marcos Leiva, Respondent (AWC 2012032658601, September 10, 2013).

Leiva first became registered in 1996 and has been associated with several FINRA member firms.  The AWC asserts that Leiva is currently statutorily disqualified until approximately March 2020 because of a March 2010 misdemeanor conviction involving false statements in Arizona. The AWC states that Leiva had no prior relevant disciplinary history.

Away Settlement

Sometime around 2009 Leiva allegedly learned that a customer was unhappy with the performance of brokerage accounts previously serviced by Leiva at a prior employer brokerage firm.  Leiva allegedly offered to settle the customer's verbal complaint without informing either his current or former employer FINRA member firm. In furtherance of that away settlement, Leiva purportedly deposited $800 into the client's bank account in October 2010 and April 2011.

Financial Disclosure

On or about November 11, 2008, the Internal Revenue Service filed a $12,447.21 lien against Leiva. Within 30 days of the lien filing, Leiva was required to amend Item 14M on his Uniform Application for Securities Industry Registration or Transfer ("Form U4"). In addition to failing to update his U4 at his then employer FINRA member firm, on May 11, 2009, Leiva filled out a new Form U4 pursuant to starting a job with another member firm and entered "NO" in response to Item 14M. 

On February 26, 2009, a $13,687.91 default judgment was entered in favor of American Express against Leiva in the Superior Court of the State of Arizona. In accordance with Item 14M on his Form U4, Leiva should have amended his prior "NO" answer to a "YES" within 30 days of the judgment but he failed to do so.

Around June 19, 2009, Leiva voluntarily filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court in the District of Arizona, and he received a discharge around February 9, 2010. Leiva failed to timely amend his prior "NO" answer to a "YES" within the requisite 30 days for either the bankruptcy filing or the subsequent discharge. 

SIDE BAR:  Here are the questions listed under the Form U4 heading of "Financial Disclosure":

14K. Within the past 10 years:
(1) have you made a compromise with creditors, filed a bankruptcy petition or been the subject of an involuntary bankruptcy petition?
(2) based upon events that occurred while you exercised control over it, has an organization made a compromise with creditors, filed a bankruptcy petition or been the subject of an involuntary bankruptcy petition?
(3) based upon events that occurred while you exercised control over it, has a broker or dealer been the subject of an involuntary bankruptcy petition, or had a trustee appointed, or had a direct payment procedure initiated under the Securities Investor Protection Act?

14L. Has a bonding company ever denied, paid out on, or revoked a bond for you?

14M. Do you have any unsatisfied judgments or liens against you?

Criminal Disclosure

On or about January 31, 2010, Leiva was arrested in Arizona and charged with False Report to Law Enforcement, a misdemeanor to which he pled guilty on or about March 25, 2010. The AWC asserts that this conviction subjects Leiva to statutory disqualification until approximately March 2020. Moreover, Leiva failed to timely amend his Form U4 to disclose his criminal history in response to Question 14B(1) 

SIDE BAR: Here are the questions listed under the Form U4 heading of "Criminal Disclosure":

14A.
(1)  Have you ever:
(a) been convicted of or pled guilty or nolo contendere ("no contest") in a domestic, foreign, or military court to any felony?
(b) been charged with any felony?
(2) Based upon activities that occurred while you exercised control over it, has an organization ever:
(a) been convicted of or pled guilty or nolo contendere ("no contest") in a domestic or foreign court to any felony?
(b) been charged with any felony?

14B.
(1) Have you ever:
(a) been convicted of or pled guilty or nolo contendere ("no contest") in a domestic, foreign or military court to a misdemeanor involving: investments or an investment-related business or any fraud, false statements or omissions, wrongful taking of property, bribery, perjury, forgery, counterfeiting, extortion, or a conspiracy to commit any of these offenses?
(b) been charged with a misdemeanor specified in 14B(1)(a)?
(2) Based upon activities that occurred while you exercised control over it, has an organization ever:
(a) been convicted of or pled guilty or nolo contendere ("no contest") in a domestic or foreign court to a misdemeanor specified in 14B(1)(a)?
(b) been charged with a misdemeanor specified in 14B(1)(a)?

The AWC alleges that Leiva's settling away constituted a violation of FINRA Rule 2010. Additionally, while employed with various FINRA member firms during portions of 2008 and 2013, the AWC alleges that Leiva willfully failed to report on his Form U4 a judgment and criminal action and that he also willfully failed to timely report an IRS tax lien and personal bankruptcy in contravention of Article V, Section 2(c) of the FINRA By-Laws and in willful violation of FINRA Rules 1122 and 2010. 

In accordance with the terms of the AWC, FINRA imposed upon Leiva a $10,000 fine and a 13-month suspension from association with any member in any capacity.

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