UPDATE: Stockbroker Barred For Abusive Conduct Deemed Threat to Public and Industry

March 15, 2018

This is an UPDATE of "Stockbroker Barred For Abusive Conduct Deemed Threat to Public and Industry" (BrokeAndBroker.com Blog, March 30, 2017)

After 36 years on Wall Street, I'd like to say that I've seen it all; however,  I'm wise enough to know that every day will bring something new. During my career prosecuting and defending the biz, I've handled cases involving fistfights, throwing of heavy objects, office feuds, office vendettas, nastygrams, obscene emails, racist and sexist notes left around the office, and an inventive range of comments about someone's mother and lack of good looks. The supply of such nonsense seems endless. The lengths to which some folks will go to get even or get back are immeasurable. Unfortunately, what initially strikes us as entertaining may prove frightening. What initially horrifies us may, at times, mellow into something sad, if not pathetic. In that spirit, let's consider today's featured regulatory case.

The Well-Traveled Industry Veteran

By way of introduction, the Financial Industry Regulatory Authority's ("FINRA's") online database BrokerCheck discloses that Ahmed Gadelkareem was first registered in 1996 and through May 2016, was employed by 19 different FINRA member firms. BrokerCheck discloses that five of Gadelkareem's employer firms were expelled from FINRA membership from 2002 through 2016, the latest expulsion being Blackbook Capital in June 2016. The following additional disclosures are presented on BrokerCheck:

  • Under "Employment Separation After Allegations"
    • In 2000, First Liberty Investment Gropu [sic] Inc. permitted Gadelkareem to resign based upon an allegation of "UNAUTHORIZED TRADING."
    • In 1999, Bishop, Rosen & Co., Inc. discharged Gadelkareem based upon an allegation of a customer complaint about commissions and a lack of explanation about options risks.
  • Under "Customer Dispute - Settled," in 1999, Bishop Rosen settled a customer complaint for $12,800, of which Gadelkareem is reflected as having paid the full amount.
  • Under "Customer Dispute - Award/Judgment" a 2001 NASD Arbitration Complaint sought $374,000 in damages based upon allegations of churning, fraud, unauthorized trades, and unsuitability, which appears to have resulted in a 2003 Award of $31,790.65 against Gadelkareem.
FINRA Complaint

Given his two-decade career, Gadelkareem's record isn't all that tarnished: a discharge, a permitted to resign, a settled customer complaint, and one arbitration award. Not saying he's squeaky clean. Just saying that the record speaks for itself -- and comes off as a few dings rather than anything particularly serious. Or so it seems. You never know whether an employer or customer had it in for a rep; or, in contrast, whether what bubbled to the top and wound up on the record is merely a hint of more undisclosed issues.

Whatever Gadelkareem's past may or may not imply, he wound up with a regulatory problem in 2015, when FINRA filed a regulatory complaint against him. FINRA Department of Enforcement, Complainant, v. Ahmed Gadelkareem, Respondent (Complaint, FINRA Office of Hearing Officers, Disc. Proc. 2014040968501 / April 13, 2015)  As stated in the Complaint's "SUMMARY":

1. Between April 16, 2014 and June 8, 2014, while associated with a FINRA member, Gadelkareem sent abusive and threatening communications to persons associated with his former employer, Blackbook Capital LLC (BD No. 123234) ("Blackbook" or the "Firm"), to retaliate against them and Blackbook for terminating his employment and to force a settlement of a claim for unpaid commissions. As a result of this conduct, Gadelkareem violated FINRA Rules 2010 and 5240.

Although not disclosed on FINRA's BrokerCheck files, the Complaint asserts that:

5. According to the Uniform Termination Notice for Securities Industry Registration (Form U5) filed by Blackbook on April 21, 2014, Gadelkareem "was terminated for repeatedly engaging in unprofessional conduct in workplace, including without limitation, threatening and abusive interaction with female employees."

As much as I would love to synopsize FINRA's Complaint, I cannot do justice to the that pleading by trying to re-state the allegations in fewer or different words:

The Commencement of Gadelkareem's Abusive and Threatening Communications

6. In retaliation for his termination, Gadelkareem sent a series of offensive emails and made phone calls in which he disparaged, threatened and harassed Blackbook, its President, F.O., and a registered representative who worked at Blackbook named D.H.

7 Two days after his termination from Blackbook, on Wednesday, April 9, 2014, Gadelkareem left an obscene and highly insulting voicemail message for D.H.

8. The next day, on Thursday, April 10,2014, Gadelkareem sent three emails from his personal AOL account to R.W., who was one of Blackbook's owners. The emails to R.W. made accusations about DH including unauthorized trading, involvement in fraudulent deals and engaging in sexual relations with an office employee. 

9. On Friday, April 11, 2014, the Firm notified Gadelkareem by email that it intended to sue Gadelkareem for libel and that Blackbook would be withholding his unpaid commissions as security against the claims that it intended to assert against him.

10. In response, on Saturday, April 12, and Sunday April 13, 2014, Gadelkareem sent several additional harassing emails and left three harassing voicemails for D.H.

Gadelkareem's Threatening and Abusive Communications During His Association with a Member Firm

11. On Wednesday, April 16, 2014, Gadelkareem became associated with another FINRA member firm. The same day, he sent an email to a FINRA examiner claiming that he and his clients were being "abused by Blackbook" and alleging that the Firm was wrongfully holding his paycheck and his personal belongs.

12. Later that afternoon, the FINRA examiner responded by email and asked to speak with Gadelkareem the following day regarding his claims.

13. In an attempt to intimidate Blackbook and force a settlement, on the evening of April 16, 2014, Gadelkareem forwarded his exchange with FINRA's examiner separately to D.H. and R.W. with the following threats demanding that Blackbook pay him his commissions and return his property:

To D.H.:  "Settlement . . . , my money 100 % pay out and my stuff or I will
keep going !!!! [sic]"

"Every small thing, my phone charger, my calculator . . . Every thing . . .[sic]"

To R.W.: Settlement, Or you want me to continue . . ."

14. Later that day,, Blackbook again demanded in writing that Gadelkareem stop defaming Blackbook and harassing its employees. 

15. On Friday, April 18,2014, Gadelkareem emailed Blackbook stating that he had filed a complaint against Blackbook with the police and reported the Firm to FINRA, and threatening to report the Firm to the New York Attorney General. In the same email, Gadelkareem then offered to drop all charges that he made with the police and FINRA if Blackbook paid him all his commissions and returned his property. That same day, via email, Blackbook rejected the proposal.

16. On about April 22, 2014, Gadelkareem learned that Blackbook had reported on his Form U5 that he was terminated for harassing female employees.

17. In retaliation, on the morning of April 23, 2014, Gadelkareem sent an email to D.H. purporting to forward an email from a FINRA examiner named Steven McMellon (who does not actually exist), in which the examiner states, among other things, that D.H. is going to be arrested.

18. Later that morning on April 23 , Gadelkareem sent another broker at Blackbook rd text messages suggesting that the FBI was "coming after" D.H.

19. In reality, there was no examiner at FINRA named Steven McMellon and the April 23, 2014 email was fabricated using a real FINRA investigator's signature block and contact information.

OHO Decision

Having represented himself at the FINRA Office of Hearing Officers Disciplinary Hearing, Gadelkareem was unable to prevail and the OHO Panel barred him from associating with any FINRA member firm in any capacity. FINRA Department of Enforcement, Complainant, v. Ahmed Gadelkareem, Respondent (OHO Decision, FINRA Office of Hearing Offiers, Disc. Proc. 2014040968501 / May 2, 2016). As is the case with such regulator matters, with each turn of the screw, more facts and allegations emerge as the dispute progresses from a mere Complaint, to a contested hearing, and to a Decision.

The OHO Decision asserts that [Ed: footnotes omitted]:

[A]lthough Gadelkareem has no prior disciplinary history with FINRA, he has repeatedly been discharged or asked to resign by industry employers for a number of reasons, including but not limited to "failure to follow management instructions," charging excessive commissions, unauthorized trading, and he was formally reprimanded by an employer for "aggressive behavior in soliciting potential clients."

Bill Singer's Comment: Not to be too snarky here but, well, you know, maybe just to be a bit snarky, what exactly is the point of noting the fact that Gadelkareem had a repeat history of discharge or asked-to-resign? I mean, after all, it didn't seem to bother any of the 19 or so firms that employed him: The majority of which likely knew (or should have known) of his tempestuous employment history. And while we're on this point of nobody caring, FINRA isn't exactly on the moral high ground either. After all, if the regulator is perturbed about someone with such a history, why hasn't the organization drafted a rule to respond to such an issue? Are we told that Gadelkareem had "no prior disciplinary history" as a flippant defense for FINRA's tolerance of such individuals in its community? What steps, if any, did FINRA take when it became aware that member firms were hiring folks who exhibited "aggressive behavior in soliciting potential clients?"

By way of further color, the OHO Decision explains that [Ed: footnotes omitted; black-out in original]:

In his short tenure at Blackbook Capital, Gadelkareem was a problematic employee and "very disruptive in the office." He was "constantly getting into arguments" with co-workers. For instance, about a week after a company holiday party he approached a branch manager from another office and, referring to the branch manager's longtime girlfriend, asked "[h]ow much do you pay the XXXXX that you brought to the Christmas party?" Gadelkareem was "uncontrollable in the office" to a point where his disputes and confrontations with other employees became "just too much."

In addition to his substantive defenses, Gadelkareem also argued that an existing medical condition should be taken into consideration. As set forth in the OHO Decision [Ed: Footnotes omitted]:

F. Gadelkareem's Medical Condition
Gadelkareem presented the testimony of his psychiatrist in defense of his actions. Gadelkareem claimed that there was a "toxic" work environment at Blackbook Capital that he described as a "circus." He asserted that the environment led him to become "irritated" as a result of his psychiatric condition. His condition was explained by his psychiatrist. 

The doctor reviewed Gadelkareem's history of bipolar disorder, including bouts of "hyperactivity, hyperindulgence, . . . irritable, agitated states, impulsive behaviors, . . . along with frequent arguments, altercations with those around him at times at his workplace, . . . grandiose thinking with inflated self-esteem and rapid speech. The psychiatrist further acknowledged Gadelkareem's "history of violent aggressive behavior," his ''ten-plus arrests for domestic violence," and his "physical and verbal altercations with coworkers and people in stores which have resulted in police being called. The psychiatrist indicated that since he began treatment  Gadelkareem showed improved ability to maintain control over his behavior. 

But the psychiatrist acknowledged that he was not treating Gadelkareem during April 2014, the period now at issue, and cannot attest to his mental state at that time. Medical records indicate that Gadelkareem's first effort to obtain treatment in more than ten years was on November 25, 2014 -- 14 days after Enforcement advised him of its intent to recommend that this disciplinary action be brought against him.
The psychiatrist also acknowledged that Gadelkareem had a history of not taking medication necessary to treat his disorder and missing treatment appointments. The psychiatrist recounted that Gadelkareem was "skeptical about psychiatric medications" and his treatment. Treatments notwithstanding, "psychiatric conditions are usually chronic conditions with remissions and exacerbations. And symptoms can vary from time to time. As the condition worsens, the degree and level of intensity of symptoms can . . . include thought disorder, perceptual disorder, including hallucinations, including paranoia, delusions and things of that sort."

Pages 7 - 8 of the OHO Decision 

As fascinating and riveting as the details of Gadelkareem's conduct are, I would simply urge you to click on the OHO Decision link to get as granular a degree of detail as you wish. I can assure you that the time you invest will be rewarded with some jaw-dropping revelations. Moving on from the underlying facts, it does not appear that Gadelkareem did himself that much of a service by acting as his own lawyer, as noted in the OHO Decision [Ed: footnotes omitted]:

Acting as his own representative in this matter, Gadelkareem falsified subpoenas and served the fictitious subpoenas on witnesses he sought to enlist to his defense, including his psychiatrist who ultimately provided medical testimony. When asked why he fabricated subpoenas after being told in writing -- twice -- by Enforcement that there was no subpoena power in this matter and being told by the Hearing Officer at a pre-hearing conference that he was required to obtain the voluntary appearance of his witnesses, Gadelkareem testified that he ''took a second opinion" from another attorney he knew and falsified the subpoenas anyway.

. . .

Footnote 76: Tr. 606 (Gadelkareem testimony). At the hearing, Gadelkareem repeatedly and inappropriately interjected during the testimony of witnesses, e.g., Tr. 203,263,269,283, 359-60, argued with witnesses, see Tr. 362 ("You're a damn liar."), made inappropriate throat-slashing gestures at a witness, Tr. 59, made disparaging remarks toward Enforcement, Tr. 377,514, and continually disrupted the proceedings.

Having found Gadelkareem guilty as charged, the OHO Panel ordered him to pay $5,649.78 in costs and Barred him from associating with any FINRA member firm in any capacity. In offering its rationale for the Bar, the OHO Hearing Panel explained that:

After weighing the evidence and considering all applicable factors, we conclude that Gadelkareem poses a potential threat to the investing public and to FINRA member firms in any circumstance where his personal preferences or self-interest might not coincide with the interests of clients or employers. For these reasons, and in order to effectuate the remedial purposes of the Sanction Guidelines, protect the public interest, improve overall business standards in the securities industry, and deter others from engaging in similar misconduct, the only appropriate sanction is a bar from association with any FINRA member firm in any capacity.

NAC Decision

Not surprisingly, Gadelkareem appealed the OHO Decision. On appeal to FINRA's National Adjudicatory Council ("NAC"), Gadelkareem purportedly admitted much of the underlying misconduct but argued that the Bar was too severe a sanction and that cited such mitigating factors as the absence of customer harm and his claimed medical condition. FINRA Department of Enforcement, Complainant, v. Ahmed Gadelkareem, Respondent  (NAC Decision, FINRA, Disc. Proc. 2014040968501 / May 23, 2017). 
Although the NAC affirmed the OHO Panel's finding of a violation of FINRA Rule 2010 and affirmed the Bar, the NAC reversed the OHO Panel's finding of a Rule 5240 violation. In pertinent part, FINRA Rule 5240. Anti-Intimidation/Coordination states:

(a) No member or person associated with a member shall:
(1) coordinate the prices (including quotations), trades or trade reports of such member with any other member or person associated with a member, or any other person;
(2) direct or request another member to alter a price (including a quotation); or
(3) engage, directly or indirectly, in any conduct that threatens, harasses, coerces, intimidates or otherwise attempts improperly to influence another member, a person associated with a member, or any other person.

This includes, but is not limited to, any attempt to influence another member or person associated with a member to adjust or maintain a price or quotation, whether displayed on any facility operated by FINRA or otherwise, or refusals to trade or other conduct that retaliates against or discourages the competitive activities of another market maker or market participant . . .

The NAC Panel read Rule 5240 as regulating "price manipulation and anticompetitive behavior, which supports that it is meant to prohibit intimidating and harassing conduct in connection with pricing." As such the NAC Panel declined to extend the ambit of the rule to cover Gadelkareem's conduct, which did not involve pricing. The NAC also provided a thoughtful and comprehensive analysis of Gadelkareem's presentation of a medical condition as a mitigating factor in his conduct. The NAC Decision states:

B. Gadelkareem's Claimed Medical Condition Is Not Mitigating

Gadelkareem presented evidence of his medical condition and his doctor testified at the hearing. On appeal, he argues that his condition and the fact that he is now under the care ofa doctor is mitigating. Gadelkareem's argument is unavailing. A medical condition can mitigate a sanction where the respondent has presented evidence that it interfered with his ability to comply with FINRA rules. See Paul David Pack, 51 S.E.C. 1279,1283 (1994) (allowing mitigation where the respondent introduced uncontroverted medical evidence that respondent's misconduct was the result ofhis medical condition, including clinical depression and a chronic sleep disorder); DBCC v. Nelson, Complaint No. C9A920030, 1996 NASD Discip. LEXIS 17, at *9, 15 (NASD NBCC Mar. 8, 1996) (finding mitigating circumstances where the respondent failed to respond to FINRA's information requests, and respondent was hospitalized or bedridden with chronic fatigue syndrome). In general, however, medical problems do not mitigate violations ofFINRA rules and proving mitigation based on a medical condition is a difficult burden to overcome. See Dep 7 of Enforcement v. Saad, Complaint No. 2006006705601R, 2015 FINRA Discip. LEXIS 49, at *9-11 (FINRA NAC Mar. 16, 2015), aff'd Exchange Act Release No. 76118, 2015 SEC LEXIS 4176, at *1 (Oct. 8, 2015). Gadelkareem has not met this burden here.

Significantly, Gadelkareem's doctor testified that he was not treating Gadelkareem
during the relevant period and could not attest to his condition at the time. Accordingly, there is no evidence of Gadelkareem's inability to comply with FINRA rules at the time of his misconduct due to medical reasons. To the contrary, rather than mitigate his misconduct, the evidence presented by Gadelkareem's doctor further supports that he is not fit to serve as a securities industry professional and should be barred. The doctor testified that Gadelkareem has a history of missing appointments and not taking his medication. Further undermining Gadelkareem's claim that we should consider his medical condition as mitigating is his conduct during the hearing, which included aggressive and disruptive behavior and the submission of falsified evidence at a time when he claims his condition was being treated. 14

Footnote 14: For these same reasons, we agree that, to the extent Gadelkareem's seeking medical treatment can be considered a "subsequent corrective measure," it is not sufficiently mitigating to overcome the myriad aggravating factors. See Guidelines, at 6 (Principal Considerations, No. 3).

In summing up its rationale for imposing a Bar, the NAC Decision pulls no punches:

We have no confidence in Gadelkareem's future ability to control his behavior, and we believe he poses a danger to the industry and the investing public. For these reasons, the sanction of a bar is appropriately remedial.

Bill Singer's Comment

First and foremost, compliments to both the OHO and NAC for rendering comprehensive and thoughtful decisions, replete with sufficient content and context. Both decisions show a great degree of professionalism and sensitivity given the very troubling underlying issues and in light of Gadelkareem's medical issues.

I want to pointedly compliment the NAC for taking its appellate role seriously and for investing the time to consider whether the Department of Enforcement had gone overboard in attempting to push and shove Gadelkareem's conduct into a Rule 5240 violation. From my perspective, I concur with the NAC's observations and conclusions and do not believe that Rule 5240 was meant to cover abusive conduct unrelated to pricing. By declining to engage in the regulatory equivalent of piling-on, the NAC made FINRA's final decision stronger and more consistent. It is comforting to see that when confronted with such a challenging fact pattern, some members of the NAC appreciate their appellate role in doing justice and do not merely go through the motions.  Thank you!

No one should come away from this case feeling satisfied or smug.  FINRA presents this registered rep as a hot-head, a walking time-bomb, and a danger to his colleagues and the public." Whoever Gadelkareem is and was, the fact remains that much of his cited history was available for the asking to any number of employers and regulators.  He did not become a raging storm overnight and his anger issues never seemed to have stopped any number of FINRA member firms from hiring him -- and it's more than a bit unnerving to realize that FINRA tolerates the presence of such folks in its community and, similarly, never quite seems to take exception with a firm's hiring of such folks until all hell breaks loose." 

At what point does sexism cross the line and pose a threat to the public and industry? At what point does homophobia and racism drag a member firm and an industry into the gutter and becomes a regulatory issue? At what point does FINRA and its member firms stop excusing outrageous conduct when the bad actor is a big producer or in a C-Suite? It's always funny until it's not.


On April 19, 2017, Gadelkareem filed an appeal of FINRA's disciplinary action with the Securities and Exchange Commission ("SEC") and moved to stay the self-regulatory-organization's pending Bar. In the Matter of the Application of Ahmed Gadelkareem For Review of Disciplinary Action Taken by FINRA (Order Denying Stay, SEC, '34 Release No. 80586; Admin. Proc. File No. 3-17934 / May 3, 2018) https://www.sec.gov/litigation/opinions/2017/34-80586.pdf

In denying the requested stay, the SEC found that Gadlekareem had failed to satisfy his burden of its four-part consideration of the factors involved in granting a stay:

(i) the likelihood that the moving party will eventually succeed on the merits of the appeal; (ii) the likelihood that the moving party will suffer irreparable harm without a stay; (iii) the likelihood that another party will suffer substantial harm as a result of a stay; and (iv) a stay's impact on the public interest.

In sustaining FINRA's Bar. the SEC found that Gadelkareem had engaged in the harassing, threatening, and deceptive conduct that was the basis for FINRA's findings of violation  In the Matter of the Application of Ahmed Gadelkareem For Review of Disciplinary Action Taken by FINRA (Opinion, SEC, '34 Release No. 82879; Admin. Proc. File No. 3-17934 / March 14, 2018)

The SEC found that Gadelkareem's threats were "intended to coerce Blackbook to pay commissions he claimed he was owed and likewise involved highly inappropriate efforts to tarnish Blackbook's reputation." Page 8 of the SEC Opinion. In more pointed terms [Ed: Footnote omitted]:

Similarly unpersuasive is Gadelkareem's claim that he acted "with ethical intentions." FINRA does not dispute that Gadelkareem believed he had been mistreated by Blackbook, or that he may have been entitled to the commissions and personal effects he sought. But that cannot in any way excuse the methods he employed.

Further, the SEC concluded that Gadelkareem had

engaged in a series of dishonest acts- impersonating a police officer, fabricating the McMellon email, and adopting the Alperovich alias. He engaged in those acts as part of his harassing and threatening campaign against Blackbook designed to extract commissions he believed he was owed. Gadelkareem's harassing, threatening, and deceitful conduct violates Rule 2010, even if the conduct did not involve his professional responsibilities as a broker or harm investors or markets, because his attempts to extract commissions were unethical and such unethical misconduct is "actionable" under the rule. 19
= = =
FOOTNOTE 19: James A. Goetz, Exchange Act Release No. 39796, 1998 WL 130849, at *3 (Mar. 25, 1998) (rejecting applicant's claim that his conduct was not actionable because it had "nothing to do with his functions as a securities salesman"); see also Henry E. Vail, Exchange Act Release No. 35872, 1995 WL 380152, at *3 (June 20, 1995) (finding violation of just and equitable principles of trade based on respondent's misappropriation of funds from political club unaffiliated with his securities firm while club treasurer), aff'd, 101 F.3d 37 (5th Cir. 1996)

In sustaining FINRA's disciplinary action against Gadelkareem, the SEC found that the Bar was consistent with the public interest and the protection of investors, and, as such, was neither excessive nor oppressive. As to Gadelkareem's alleged medical condition and his contentions about the conduct of Blackbook and its employees, the SEC admonishes that [Ed: Footnote Omitted]:

Nor do we agree with Gadelkareem that the evidence he presented regarding his medical condition justifies a lesser sanction. We agree that a medical disability can be mitigating if it interfered with an applicant's ability to comply with the rule at issue, but we do not find that Gadelkareem established that this was the case. The evidence he introduced addressed his condition at the time of the hearing and not during the period at issue. Even assuming that he suffered from the condition earlier, and that it made him more impulsive, that would not explain or excuse the several instances where his conduct was repeated or where such conduct was the result of premeditation on his part. Nor would the described condition, with its asserted tendency towards aggression, explain or excuse his repeated willingness to resort to dishonest and deceptive conduct to achieve his objectives. The evidence also does not warrant a lesser sanction because there are serious doubts about whether Gadelkareem's condition, to the extent it contributed to his misconduct, is likely to be effectively controlled in the future given his doctor's reservations about Gadelkareem's willingness to obtain the necessary treatment.

We also do not find mitigating Gadelkareem's claims that the environment at Blackbook was "toxic" and that its "petty and unprofessional actions" sent him "into a rage." The record does not support Gadelkareem's negative characterization of Blackbook or the actions of its personnel. In any event, the conduct at issue occurred after his termination when he was no longer subject to the asserted toxic environment.

Similarly unpersuasive is Gadelkareem's claim that he acted "with ethical intentions." FINRA does not dispute that Gadelkareem believed he had been mistreated by Blackbook, or that he may have been entitled to the commissions and personal effects he sought. But that cannot in any way excuse the methods he employed.

Pages 11 - 12 of the SEC Order