Sometimes the Financial Industry Regulatory Authority's approach to regulation seems like an Easter egg hunt. The regulator's idea of what needs to be hidden from public disclosure comes off as a bit of a childish game of hide-and-seek. Readers of the BrokeAndBroker.com Blog know that publisher Bill Singer, Esq. has written about this aspect of FINRA's published decisions and settlements before -- some might even say ad nauseum. Oh well, nothing like turning our stomachs yet again!
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, Robert Brian Lefkowitz submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Robert Brian Lefkowitz, Respondent (AWC 2016047565701, June 29, 2017).
SIDE BAR: Read about the variations in FINRA AWCs pertaining to the presentation of a respondent's background: "FINRA's Foolish Inconsistency" (BrokeAndBroker.com Blog, June 9, 2017).
NASD Membership and Registration Rule 1031. Registration Requirements(a) All Representatives Must Be RegisteredAll persons engaged or to be engaged in the investment banking or securities business of a member who are to function as representatives shall be registered as such with NASD in the category of registration appropriate to the function to be performed as specified in Rule 1032. Before their registration can become effective, they shall pass a Qualification Examination for Representatives appropriate to the category of registration as specified by the Board of Governors. A member shall not maintain a representative registration with NASD for any person (1) who is no longer active in the member's investment banking or securities business, (2) who is no longer functioning as a representative, or (3) where the sole purpose is to avoid the examination requirement prescribed in paragraph (c). A member shall not make application for the registration of any person as representative where there is no intent to employ such person in the member's investment banking or securities business. A member may, however, maintain or make application for the registration as a representative of a person who performs legal, compliance, internal audit, back-office operations, or similar responsibilities for the member, or a person who performs administrative support functions for registered personnel, or a person engaged in the investment banking or securities business of a foreign securities affiliate or subsidiary of the member.(b) Definition of RepresentativePersons associated with a member, including assistant officers other than principals, who are engaged in the investment banking or securities business for the member including the functions of supervision, solicitation or conduct of business in securities or who are engaged in the training of persons associated with a member for any of these functions are designated as representatives.(c) Requirement for Examination on Lapse of RegistrationAny person whose registration has been revoked pursuant to Rule 8310 or whose most recent registration as a representative or principal has been terminated for a period of two (2) or more years immediately preceding the date of receipt by the Association of a new application shall be required to pass a Qualification Examination for Representatives appropriate to the category of registration as specified in Rule 1032.
FINRA Rule 8311. Effect of a Suspension, Revocation, Cancellation, Bar or Other DisqualificationIf a person is subject to a suspension, revocation, cancellation of registration, bar from association with a member (each a "sanction") or other disqualification, a member shall not allow such person to be associated with it in any capacity that is inconsistent with the sanction imposed or disqualified status, including a clerical or ministerial capacity. A member also shall not pay or credit to any person subject to a sanction or disqualification, during the period of the sanction or disqualification or any period thereafter, any salary, commission, profit, or any other remuneration that the person might accrue during the period of the sanction or disqualification. However, a member may make payments or credits to a person subject to a sanction that are consistent with the scope of activities permitted under the sanction where the sanction solely limits an associated person from conducting specified activities (such as a suspension from acting in a principal capacity) or a disqualified person has been approved (or is otherwise permitted pursuant to FINRA rules and the federal securities laws) to associate with a member.(b) Notwithstanding paragraph (a) of this Rule, a member may pay to a person that is subject to a sanction or disqualification described in paragraph (a) of this Rule, any remuneration pursuant to an insurance or medical plan, indemnity agreement relating to legal fees, or as required by an arbitration award or court judgment***Supplementary Material***.01 Remuneration Accrued Prior to Effective Date of Sanction or Disqualification. Notwithstanding this Rule, a member may pay or credit to a person that is subject of a sanction or disqualification salary, commission, profit or any other remuneration that the member can evidence accrued to the person prior to the effective date of such sanction or disqualification; provided, however, the member may not pay any salary, commission, profit or any other remuneration that accrued to the person that relates to or results from the activity giving rise to the sanction or disqualification, and any such payment or credit must comply with applicable federal securities laws. FINRA Rule 8311 provides if a person is subject to a suspension sanction, ' a member shall not allow such person to be associated with it in any capacity that is inconsistent with the sanction imposed or disqualified status, including a clerical or ministerial capacity."
FINRA By-Laws ARTICLE III: QUALIFICATIONS OF MEMBERS AND ASSOCIATED PERSONS / Ineligibility of Certain Persons for Membership or AssociationSec. 3. (a) No registered broker, dealer, municipal securities broker or dealer, or government securities broker or dealer shall be admitted to membership, and no member shall be continued in membership, if such broker, dealer, municipal securities broker or dealer, government securities broker or dealer, or member fails or ceases to satisfy the qualification requirements established under Section 2, if applicable, or if such broker, dealer, municipal securities broker or dealer, government securities broker or dealer, or member is or becomes subject to a disqualification under Section 4, or if such member fails to comply with the requirement that all forms filed pursuant to these By-Laws be filed via electronic process or such other process as the Corporation may prescribe.(b) No person shall become associated with a member, continue to be associated with a member, or transfer association to another member, if such person fails or ceases to satisfy the qualification requirements established under Section 2, if applicable, or if such person is or becomes subject to a disqualification under Section 4; and no broker, dealer, municipal securities broker or dealer, or government securities broker or dealer shall be admitted to membership, and no member shall be continued in membership, if any person associated with it is ineligible to be an associated person under this subsection.(c) If it deems appropriate, the Board, upon notice and opportunity for a hearing, may cancel the membership of a member if it becomes ineligible for continuance in membership under subsection (a), may suspend or bar a person from continuing to be associated with any member if such person is or becomes ineligible for association under subsection (b), and may cancel the membership of any member who continues to be associated with any such ineligible person.(d) Any member that is ineligible for continuance in membership may file with the Board an application requesting relief from the ineligibility pursuant to the Rules of the Corporation. A member may file such application on its own behalf and on behalf of a current or prospective associated person. The Board may, in its discretion, approve the continuance in membership, and may also approve the association or continuance of association of any person, if the Board determines that such approval is consistent with the public interest and the protection of investors. Any approval hereunder may be granted unconditionally or on such terms and conditions as the Board considers necessary or appropriate. In the exercise of the authority granted hereunder, the Board may conduct such inquiry or investigation into the relevant facts and circumstances as it, in its discretion, considers necessary to its determination, which, in addition to the background and circumstances giving rise to the failure to qualify or disqualification, may include the proposed or present business of a member and the conditions of association of any current or prospective associated person.(e) An application filed under subsection (d) shall not foreclose any action which the Board is authorized to take under subsection (c) until approval has been granted.(f) Approval by the Board of an application made under subsection (d) shall be subject to whatever further action the Commission may take pursuant to authority granted to the Commission under the Act.(g) The Board may delegate its authority under this Section in a manner not inconsistent with the Delegation Plan.
continued to associate with DSI and conduct a securities business while suspended, by among other things, communicating with DSI's customers about securities holdings and account statements and making securities recommendations to DSI's customers. Additionally, during the Suspension Period, Lefkowitz was aware that BZ engaged in clerical activities on behalf of the firm by, among other things, communicating with DSI's vendors.
While Zipper was associated with DSI, Zipper willfully failed to timely amend his Uniform Application for Securities Industry Registration and Transfer ("Form U4") to disclose three unsatisfied judginents against him.
From September 1, 2011 through September 18, 2013 (the ' relevant time period'). DSI failed to preserve and maintain all business-related electronic communications, and DSI and Zipper failed to establish, maintain. and enforce an adequate supervisory system to ensure that business-related electronic communications were subject to retention and supervision.
COMPLAINT LETTER ALLEGING CHURNING, UNSUITABLE TRADING UNAUTHORIZED TRADING FROM APRIL 1995 -- JULY 1995 WITH DAMAGES ALLEGED OF $65,000.
[T]HE CUSTOMER EXECUTED A MARGIN AGREEMENT WHICH FULLY DISCLOSED THE RISKS ATTENDANT TO TRADING IN SECURITIES ON MARGIN, AND CERTAIN SECURITIES HAD TO BE SOLD TO COVER MARGIN CALLS, THE CUSTOMER AUTHORIZED THE USE OF MARGIN IN THE ACCOUNT AND NEVER OBJECTED, IN A TIMELY FASHION, TO ANY OF THE TRADING ACTIVITY IN THE ACCOUNT NOT WITHSTANDING THE RECEIPT OF TRADE CONFIRMATIONS AND ACCOUNT STATEMENTS FOR THE SAME. THE INSTANT COMPLAINT WAS NOT INITIATED UNTIL APPROXIMATELY 2 1/2 YEARS AFTER TRADING IN QUESTION BEGAN.
CONCERNS OVER THE HANDLING OF A CUSTOMER ACCOUNT WITH ISSUES OF UNSUITABILITY EXCESSIVE TRADING AND USING DISCRETION WITH AUTHORIZATION.