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FINRA Says That's Not How To Keep HSBC Customers Satisfied

May 18, 2017

After a while, it vacillates somewhere between idiotic and exasperating. I mean, geez, how many more times ya gotta tell a stockbroker that when you leave your firm, you can't simply print out all of your customers' names and confidential information and then use that data to solicit those folks at your new place of business? Today, I am not getting into the issue of whether clients should be deemed the property of the firm or its employees. I am not getting into the fairness of the Broker Protocol. Today's BrokeAndBroker.com Blog is about reiterating that you can't disregard the industry's rules and regulations concerning non-public, confidential customer information.


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, Respondent submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of [REDACTED], Respondent (AWC  2016050590401, May 10, 2017).

NOTE: In the sole discretion of the BrokeAndBroker.com Blog and following the original publication of this article, we have redacted the name of the Respondent.

In 1993, Respondent entered the securities industry and was first registered in 2004. In 2008, Respondent  was associated with FINRA member firm HSBC Securities (USA) Inc.

HSBC Confidentiality Policies

The AWC asserts that during all relevant times, HSBC' policies and procedures required its employees to protect the firm's confidential customer information, which included customer names, addresses, telephone numbers of customers, account information and/or documentation, investment holdings and other personal financial information, account histories, customer  statements, confirmations and customer risk profiles. HSBC prohibited the reproduction or use of such confidential information outside of the conduct of its business.

SIDE BAR: Regulation S-P prohibits firms from disclosing "nonpublic personal information" about a customer unless the customer receives proper notice and an opportunity to opt out. Non-public personal information generally means any information provided by customers to a broker-dealer to obtain any product or service. It includes, but is not limited to, account numbers, social security numbers, birth dates, and account balances. READ the FULL-TEXT of Regulation S-P.

Client Profile Print-Outs

The AWC alleges that in anticipation of joining a new FINRA member firm, on May 12, 2016 [Ed: FINRA's AWC discloses the Respondent's name but in keeping with our redaction, we have removed it but noted the revisions]:

[REDACTED] printed out client profile pages for approximately 328 HSBC customer accounts that included, among other things, date of birth, social security number, financial account number and account balances for each customer -- information that [REDACTED] was not permitted to take from HSBC.

The 328 customer account records constituted non-public personal information under Regulation S-P, because that information: (1) was provided by Firm customers to obtain financial products and services; 2) resulted from transactions involving financial products or services the Firm provided to its customers; and/or (3) was obtained in connection with providing financial products or services to Firm customers.

On June 8, 2016, [REDACTED]resigned from HSBC, commenced employment with his new firm, and continued to maintain possession of the non-public customer information he improperly took from the Firm. Thereafter, [REDACTED] contacted approximately 90 of the 328 clients whose personal confidential information he removed from HSBC, and began soliciting their business.

Internal Review

The AWC asserts that on July 8, 2016 (about a month after Respondent had resigned), HSBC filed a [Ed: FINRA's AWC discloses the Respondent's name but in keeping with our redaction, we have removed it but noted the revisions]:

Form U5 indicating that [REDACTED] was under internal review for among other things, fraud or wrongful taking of property, or violating investment related statutes.

FINRA Sanctions

FINRA deemed Respondent's conduct as causing HSBC to violate Regulation S-P and, as such, he violated FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon Respondent a $10,000 fine and a 15-business-day suspension from association with any FINRA member firm in any capacity.

Bill Singer's Comment 

Not much, if anything, one can argue in Respondent's favor. About a month before he resigns from HSBC, he prints out some 328 confidential client files and upon joining his new firm, he starts soliciting business from that list. You know that's not the way it's supposed to be done. You know it's wrong. You know that if you get caught, you're going to have Hell to pay. And yet, still, folks check off the empty "DONT DO" boxes and then wonder why they get in trouble. Frankly, Respondent is very lucky that FINRA only hit him with a 15-business-day suspension. So much for Respondent keeping his customers satisfied.


Of course, since I'm a curious fellow, I would have loved to have learned from the AWC how HSBC discovered that Respondent had printed out the client files. Did the firm do some hard-boiled forensics and opened the Printer folder on Respondent's computer and found that he had printed out those restricted files? Did someone who had inherited Respondent's clients at HSBC get frustrated when told by the supposedly up-for-grabs clients that Respondent had already contacted them and they were transferring out? I could pose endless numbers of questions but, in the end, we just don't know because the AWC doesn't say.

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