An irreverent Wall Street Blog
by Bill Singer
by Bill Singer
A Stockbroker's Health Club Proves Unhealthy
December 4, 2013
A registered representative embarks upon the operation of a health club with two partners. How could such a venture prove unhealthy to his financial services career? It all comes down to the lack of notice and approval. Unfortunately, this isn't gym glass, and the penalties for an infraction are far worse than ten push-ups.
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, William Larry Hogue, Jr., submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of William Larry Hogue, Jr., Respondent (AWC 2012031865801, November 19, 2013).
Hogue first became registered in 2001 and after associating with three FINRA member firms through 2005, he joined Cambridge investment Research (''Cambridge") as a general securities representative and with Investors Asset Management of Georgia, inc. ("Investors") as a registered investment advisor. The AWC asserts that he had no prior disciplinary history.
The Health Club
The AWC alleges that on August 20, 2010, Hogue and two other partners formed an entity ("SFL") for the purpose of operating a health club -- thereafter, in July 2011, SFL purchased a health club.
Private Securities Transactions: PNs
In order to finance SFL and enable the purchase/operation of the acquired health club, Hogue participated in the sale of nine unsecured promissory notes ("PNs") to nine individuals, including one of his Cambridge customers. The PNs ranged from $50,000 to $200,000, and totaled $1,150,000. In characterizing the nature of his participation in the PN transactions, the AWC alleges that Hogue:
- retained counsel to draft the notes,
- signed the notes on behalf of SFL, and
- issued the notes to customers.
In contravention of private securities transactions ("PSTs") regulatory rules and his firm's compliance policies, Hogue allegedly failed to provide timely, prior written notice to Cambridge about his intent to participate in the sale of the promissory; and, further, he failed to receive his firm's permission to sell promissory notes.
Outside Business Activity
After a routine review of Hogue's emails by Cambridge, the firm purportedly discovered his involvement with SFL. The AWC asserts that Hogue was directly involved in the health club's management as a result of his role as co-chief executive manager of SFL. Following his supervisor's advice to formally disclose the outside business activity ("OBA") to Cambridge, on August 10, 2011, Hogue gave that notification.
Although Cambridge's OBA policies required both prior notice and approval in order to engage in OBA, Hogue failed to timely comply with that protocol. Further, Hogue allegedly submitted a false December 2010 attestation, which failed to disclose his SFL OBA.
PTR
According to online FINRA records as of December 4, 2013, Hogue was "Permitted To Resign" on February 28, 2012, by Investor's and on February 24, 2012, by Cambridge. Cambridge's FINRA filing offering the following allegation:
REPRESENTATIVE RECEIVED DEBT FINANCING FOR REPRESENTATIVE'S OBA THROUGH PROMISSORY NOTES WITHOUT RECEIVING FIRM'S APPROVAL.
FINRA Sanctions
FINRA alleged that the conduct cited above consisted of violations of its:
- OBA rule, in violation of FINRA Rules 3270 and 2010; and
- PST rule, in violation of NASD Conduct Rule 3040 and FINRA Rule 2010.
READ these OBA cases:
- Edward Jones Broker Trips Over Outside Business and Private Transactions
- FINRA Says He Who Smelt It Dealt It\
- EIA Sales Caused Outside Business Activity Violation
- Massaging The Facts Of A FINRA Outside Business Activity Case
- Broker Removed As Executor By Customer
- Stockbroker Fined And Suspended For Managing Clients' Household
- Commodities Biz Turns Into Outside Business Nightmare For FINRA Broker
- Avocado Consulting Makes Guacamole Out Of Stockbroker's Career
- Stockbroker Charged With Outside Business Activity For 401k Consulting