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by Bill Singer

Undisclosed Customer Settlement By 3 Brokers Comes To Light

September 3, 2014

Here we go again with another installment of Hide-And-Seek courtesy of Wall Street's self-regulator FINRA.  In this latest frustrating version, we have three seemingly unrelated settlements involving the same underlying customer complaint. None of the three AWCs references by name the two other involved registered persons. One of the AWCs is either missing a fact or has noted a distinguishing aspect of one registered person's involvement. And the point of this subterfuge is what?

Case In Point

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, David Barthold, Marc Kalter, and David Wolk each submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. 
  • In the Matter of David Barthold, Respondent ((2012034393401, August 14, 2014)
  • In the Matter of Marc Kalter, Respondent (2012034393402, August 15, 2014)
  • In the Matter of David Wolk, Respondent (2012034393402, August 18, 2014)
In 2009, Barthold first became registered when he associated with Woodstock Financial Group.

In 1990, Kalter first became registered and by 1999 he was registered with Woodstock Financial Group.

In 1998, Wolk first became registered and by 2003 he was registered with Woodstock Financial Group.

The AWC asserts that Barthold, Kalter, and Wolk had no relevant prior disciplinary history with the Securities and Exchange Commission, any state securities agency, FINRA, or any other self-regulatory organization. 

Unhappy Camper

Barthold, Kalter, and Wolk were joint brokers for a Woodstock customer, who in July 2012 verbally complained to Kalter about account losses. In response to the customer's complaints, Barthold, Kalter, and Wolk agreed to jointly pay $4,000. In furtherance of the agreement to pay the customer, the AWC alleges that Kalter sent $1,500 to the customer. 
FINRA asserted that Barthold, Kalter, and Wolk's conduct constituted an attempt to settle a customer complaint (or customer loss) without the prior knowledge or consent of Woodstock, in violation of FINRA Rule 2010.

In accordance with the terms of the AWC, FINRA imposed upon:
  • Barthold: a 10-business-day suspension in all capacities from association with any FINRA member firm; and a $2,500 fine.
  • Kalter: a 10-business-day suspension in all capacities from association with any FINRA member firm . In consideration of his submission of a sworn financial statement and a demonstrated inability to pay a fine, in light of his financial status, no monetary sanction was imposed.
  • Wolk: a 10-business-day suspension in all capacities from association with any FINRA member firm; and a $2,500 fine.  
Bill Singer's Comment

FINRA's AWCs persist in failing to offer internal links to companion cases. In the three separate AWCs for Barthold, Kalter, and Wolk, each AWC only references the other conspirators as "the two other registered representatives" without any further indication of their names of their enumerated AWC.

Consider this ambiguity as presented in each of the three AWCs:
  • From Barthold AWC: In response, Barthold and the other two registered representatives agreed to jointly pay $4.000 to ES and sent $1,500 in cash to ES in furtherance of this settlement agreement without the Firm's knowledge or consent.
  • From Kalter's AWC: In response, Kalter and the other two registered representatives agreed to jointly pay $4.000 to ES and sent $1,500 in cash to ES in furtherance of this settlement agreement without the Firm's knowledge or consent.
  • From Wolk's AWC: In response, Wolk and the other two registered representatives agreed to jointly pay $4,000 to ES without the Firm's knowledge or consent.
In Barthold and Kalter's AWC, it seems that each named respondent and the two other unnamed registered persons agreed to the $4,000 payment and sent $1,500 to the customer; however, in Wolk's AWC, the three registered representatives only agreed to pay $4,000. If FINRA meant to differentiate Wolk by noting that he did not join in with Barthold and Kalter in sending the $1,500, that result is more ambiguous than clear when reading all three AWCs. Moreover, in reading Wolk's AWC alone, you would never know that $1,500 had even been sent to the customer.

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