Who'd a thunk that the Grateful Dead were Wall Street regulators? In a recent FINRA settlement, the fact pattern is somewhat summed up by this refrain:
Truckin, I'm a goin' home. whoa whoa baby, back where I belong,
Back home, sit down and patch my bones, and get back truckin on.
Hey now get back truckin' home.
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, Michael A. Book submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Michael A. Book , Respondent (AWC 2012031652201, October 28, 2013).
Book was first registered in 1991 with MML Investors Services, LLC, where he became the General Agent of an office in New York, NY. In January 2011, Book was the manager of the NYC Office and was responsible for supervising approximately 240 individuals of which some 150 were registered. His responsibilities included, among other things, recruiting and training new registered representatives in his office. The AWC asserts that Book had no prior relevant formal disciplinary history with the Securities and Exchange Commission or any state agency or self-regulatory agency.
The AWC asserts that Book was recruiting registered representatives to join his agency. At some point, Book allegedly became aware that the recruits planned to remove files of customers that they were servicing at their soon-to-be former employer. Consistent with the nature of such files, they contained nonpublic personal customer information.
Two Thought Pieces
First question: Are there any enhanced concerns when you're planning on removing customer files from your current employer to your new employer? Sometimes there is a very fine line between "stealing," "copying," and "removing."
Second question: How do you transport files containing nonpublic personal customer information? Keep in mind that a lot of that information may be deemed confidential -- and then there is that whole issue in question one as to whether you're conduct in transporting the files suggests that you know that you're doing something wrong.
Apparently, someone thought you could simply load customer files into boxes, then toss the boxes into a truck, and then drop off the appropriate files at the former employees' homes. In furtherance of that fairly lame-brained idea, the AWC alleges that one of Book's subordinates rented a truck, which Book agreed to pay for. The AWC further alleges that another representative under Book's supervision assisted the recruits with taking their files out of their firm.
As FINRA seems to have relished noting, MML had provided training to its General Agents about the importance of Regulation S-P and maintaining the security of confidential customer information. Among the topics covered in the training, was that "confidential customer information was not to be removed from a recruit' s firm during the transition process."
The AWC asserts that by facilitating the representatives' misconduct, and failing to effectively supervise the activities of MML associated persons over whom he had supervisory responsibilities, Book violated NASD Conduct Rule 3010 and FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed a Censure and $15,000 fine.