An irreverent Wall Street Blog
by Bill Singer
by Bill Singer
FINRA Settlement Needs More Fax Facts
November 5, 2014
According to a recent FINRA regulatory settlement, a registered representative faxed an account statement to a customer. That got a fine and suspension. End of story. Finished. Done. Well, maybe . . . maybe not. When you go online and read the published records on FINRA's BrokerCheck, a somewhat different story emerges. How are we supposed to do we account for the disparity? Why didn't the AWC address the more expansive allegations noted on BrokerCheck? Hey, I dunno. I can't always make sense out of what FINRA does and doesn't do. You take a shot at it for a change.
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, Peter Girgis submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Peter Girgis, Respondent (AWC #2013037123901, October 23, 2014).
Peter N. Girgis was first registered in 2002 and during the relevant time of June 19, 2012, through June 7, 2013, he was registered with FINRA member firm Joseph Gunnar & Co. LLC.
SIDE BAR: The AWC asserts that on April 24, 2013, Gunnar had previously entered into another AWC concerning allegations that he had failed to disclose or timely disclose four unsatisfied judgments and/or liens on his Uniform Application for Securities Industry Registration or Transfer ('Form U4"), for which he was fined $5,000 and suspended in all capacities for three months.
As A Matter Of Fax
The AWC alleges that on May 18, 2013, Girgis faxed a monthly account statement for a Joseph Gunnar customer identified as "WH" to another customer identified as "AS." Said transmission purportedly contained nonpublic customer information, including the account number, name. home address, account holdings and the value of the customer's account. The AWC asserts that the fax was in violation of Regulation S-P of the Securities Exchange Act of 1934 and undertaken without customer WH's knowledge or permission.
SIDE BAR: READ the FULL-TEXT of Regulation S-P
FINRA Sanctions
FINRA deemed Girgis's conduct to constitute a violation of FINRA Rule 2010, and in accordance with the terms of the AWC, the self-regulatory organization imposed upon Girgis a $5,000 fine and a 45-day suspension from association with any FINRA member in any capacity.
Bill Singer's Comment
Strictly going by the AWC, Girgis faxed WH's statement to AS. Maybe that's all that happened, and going by the AWC, which is what I am going by, that is all that happened; however, I find a significant disparity between the AWC fact pattern and what is asserted in additional online information published by FINRA in BrokerCheck (which is not referenced in the AWC).
Online FINRA BrokerCheck records as of November 5, 2014, disclose that on May 24, 2013, Joseph Gunnar & Co. LLC had received a customer complaint alleging $600,000 in damages. The firm characterized the allegations as:
CLIENT CONTACTED THE JGUN STATEN ISLAND OSJ ON MAY 23, 2013, WHERE HE HAD A SINGLE ACCOUNT VALUED AT APPROXIMATELY $60,000.00, AND DEMANDED THAT THIS ACCOUNT BE "COMBINED" WITH ANOTHER ACCOUNT OF HIS, SUPPOSEDLY VALUED AT APPROXIMATELY $687,000. ON MAY 24, 2013, CLIENT ALLEGED THAT PETER GIRGIS AND FAXED TO HIM A MONTHLY STATEMENT INDICATING HIS OWNERSHIP OF THIS ADDITIONAL, HIGHER-VALUED ACCOUNT. WHEN THE CLIENT PRODUCED A COPY OF THE FAXED STATEMENT TO JGUN, HOWEVER, JGUN OBSERVED THAT IT HAD BEEN CLEARLY ALTERED IN THAT THE CLIENT'S NAME, ADDRESS AND ACCOUNT NUMBER WERE CUT AND PASTED OVER ANOTHER EXISTING JGUN CUSTOMER'S IDENTIFYING ACCOUNT INFORMATION.
The BrokerCheck recitation above asserts that a client thought he had two Joseph Gunnar accounts as a result of what the client alleged was a monthly statement faxed to him by Girgis. This complaint would seem to suggest that a customer only had a single account worth $60,000 when he believed that he had two accounts worth $687,000. Now that's what I call a discrepancy!
Also note that Joseph Gunnar apparently "observed" that the customer's statement had been altered to the extent that another customer's account information had been pasted over with that of the complaining customer's.
Anyone note the allegations about the $687,000 valuation or the paste-over referenced in the AWC? Did FINRA consider the allegations and reject them? Was FINRA even aware of the allegations? Ya think it woulda been nice for the regulator to indicate sumthin' about this?
According to the same online FINRA BrokeCheck report, Girgis submitted the following statement:
MR. GIRGIS WAS NEVER INFORMED BY JOSEPH GUNNAR THAT THERE WAS A WRITTEN CUSTOMER COMPLAINT FOR $600,000 AND HE BELIEVES THAT THERE WAS NEVER SUCH WRITTEN COMPLAINT. THE CUSTOMER KNEW THAT HIS ACCOUNT NEVER CONTAINED THE AMOUNT OF EQUITY IN THE COMPLAINT ALLEGED. MR. GIRGIS BELIEVES THE CUSTOMER ATTEMPTED TO PERPETRATE A FRAUD ON JOSEPH GUNNAR BY ALTERING AN ACCOUNT STATEMENT AND VEHEMENTLY DENIES ALL ALLEGATIONS THAT HE FAXED THE CLIENT AN ALTERED STATEMENT OR THAT HE EVER MISREPRESENTED TO THE CLIENT THAT THE VALUE IN THE ACCOUNT WAS HIGHER THAN IT ACTUALLY WAS.
If, in fact, Joseph Gunnar failed to inform Girgis of the customer complaint, what did FINRA determine as to that allegation? Had the firm dismissed the complaint outright and did not notify its registered person; or, did the firm notify Girgis and his recollection was faulty? Did anyone conclude that the customer had fabricated the statement, as alleged by Girgis?
An additional online FINRA record discloses that on June 7, 2013, Joseph Gunnar "Discharged" Girgis based upon these allegations:
DISCHARGED DUE TO VIOLATING CONDITIONS PER FINRA DISCIPLINARY ACTION AWC SUSPENSION COMMENCING 5/20/13; GIRGIS ACCEPTED CONDITIONS BUT VIOLATED THEM BY CONVERSING WITH A CLIENT ON 5/24/2013. THE SAME CLIENT PRODUCED A STATEMENT HE SAID HE RECEIVED FROM GIRGIS. STATEMENT WAS CLEARLY ALTERED WITH INFO FROM ANOTHER EXISTING JGUN CUSTOMER. DURING OUR INVESTIGATION, JGUN RECEIVED INFORMATION INDICATING THAT PETER GIRGIS LIKELY PLAYED A ROLE IN THE CLIENT OBTAINING THE OTHER CUSTOMER'S STATEMENT USED FOR ALTERATION.
According to the online discharge record, Girgis submitted the following statement:
MR. GIRGIS CONTENDS THAT HE NEVER SPOKE TO ANY CLIENTS WHILE ON SUSPENSION AND DENIES ALL ALLEGATIONS THAT HE DID. MR. GIRGIS BELIEVES THE CUSTOMER ATTEMPTED TO PERPETRATE A FRAUD ON JOSEPH GUNNAR BY ALTERING AN ACCOUNT STATEMENT AND VEHEMENTLY DENIES ALL ALLEGATIONS THAT HE FAXED THE CLIENT AN ALTERED STATEMENT OR SUPPLIED THE CLIENT WITH SOMEONE ELSES STATEMENT.
Hey, FINRA, how is it that I can dig up all this crap in your published online records but the AWC says nary a word? If you concluded that Girgis was in the right and that the customer was trying to pull a fast one, it might have been nice for you to note that exoneration. On the other hand, if you are concerned about the allegations by Girgis' former employer and customer, how come there's not even a footnote of reference in the AWC?