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An unregistered, associated person makes a couple of phone calls to his firm's affiliated insurance company. During the calls, the associated person pretends to be two individuals attempting to complete their whole life insurance applications. Why is the associated person impersonating the applicants? Good question. Actually a great question. The answer is likely found in a combination of stupidity and over-the-top customer service. For FINRA, the solution is a fine and suspension. Sometimes, all that you can do is say a prayer for the pretender, who started out so young and strong, only to surrender.
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, Sean M. Johnson submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Sean M. Johnson, Respondent, (FINRA AWC 2020065349501)
The AWC asserts that Sean M. Johnson entered the industry in August 2019 in a non-registered capacity with NYLIFE Securities LLC, and he was terminated by the firm on January 22, 2020. The AWC asserts that Johnson "does not have any relevant disciplinary history."
The AWC asserts in part that:
On October 31, 2019, Johnson impersonated a non-firm customer on a phone call to the firm's affiliate insurance company without the customer's knowledge or consent. He impersonated the customer in order to complete the customer's whole life insurance policy application. On November 18, 2019, Johnson impersonated a second non-firm customer on a phone call, also to the firm's affiliate insurance company, without the customer's knowledge or consent. As before, Johnson impersonated the customer in order to complete the customer's whole life insurance policy application. While impersonating these customers on the phone, Johnson answered personal and health-related questions about the customers and confirmed that all answers to the questions were true and complete.
Timing in life is everything -- and, alas, Johnson's impersonations got sandwiched between these two dates:
29, 2019, NYLIFE Securities filed a Uniform Application for Securities Registration
(Form U4), opening a window for Johnson to take the Series 6 exam. On January 22,
2020, NYLIFE Securities filed a Uniform Termination Notice (Form U5) terminating
Johnson's association from the firm. The Form U5 disclosed that the firm had terminated
Johnson's association after "he admitted he violated company policy by impersonating
two clients during telephone interviews conducted as part of the underwriting process for
In accordance with the terms of the AWC, FINRA found that Johnson had violated FINRA Rule 2010 and imposed upon him a $5,000 fine and a four-month suspension from associating with any FINRA member in any and all capacities.
Bill Singer's Comment:
Y'know, I just ain't feelin' this one.
Having first joined NYLIFE in August 2019, about two months into his job, Johnson allegedly "impersonated a non-firm customer." In and of itself, that sounds pretty bad. I'm not going to argue that point because as a consumer, I sure as hell don't want anyone impersonating me. So, no, I'm not excusing Johnson's conduct. Except, let's focus a bit on exactly what Johnson is accused of doing. The AWC alleges that Johnson's alleged impersonations occurred during a "phone call to the firm's affiliate insurance company . . ." If we go by the AWC, and that's all that we should go by, Johnson's impersonations were in furtherance of attempting to "complete the customer's whole life insurance policy application." Sometimes we deal with the lesser of two evils. There are still two evils though. On the other hand, sometimes we need context and perspective. As alleged, Johnson was phoning a NYLIFE affiliate insurance company -- as in an "affiliate" of his employer, NYLIFE Securities LLC. Like I said, that the call was made to an affiliated company is no excuse for the impersonation but, c'mon, let's not pump this up into something far worse than it was. Wrong, yes. Stupid, yes. The regulatory/compliance crime of the Century? Not by a long shot. Frankly, it comes off as the over zealous efforts of a newbie.
In olden days, when employers were not so quick to throw kids under the bus, NYLIFE might have sat Johnson down, rapped him on the knuckles, and let him off with a warning along the lines of this is your first and last warning about impersonations -- you got it? Was Johnson a "kid" at the time of the cited impersonations? I don't know and the AWC doesn't give us enough background to make that determination. Could be a second career. Could be a Baby Boomer for all I know. That aside, I'm going with my instinct about these things. If I'm wrong, then factor that too into the equation.
These days, the industry has no sense of loyalty or second chances, and, frankly, many say that's a good thing. Been too much fraud tolerated for too long. Been too much coddling of recidivists and too much excuse-making for scamsters. Come to think of it, I often argue as much, so, hey, guess my critique of this FINRA settlement exposes me for something of a double-talker and a hypocrite. Ouch! Regardless of my potential short-comings, I still don't see why FINRA had to impose both a $5,000 fine and a four-month suspension on Johnson but it may have been fostered by his apparent pro se status and the lack of a lawyer's guidance. On that point too, I'm largely guessing. In the end, Johnson, an unregistered, associated person gets fined and suspended on top of getting canned by his employer. Sort of seems like a bit of overkill given the facts but, hey, that just might be me getting softened up by too many months of social distancing.
Beyond my unease with the amount of the fine coupled with the length of the suspension, the AWC does not come across as consistent on a key point. In one sentence, the AWC says that Johnson "impersonated a non-firm customer," but in the very next sentence, the AWC says that he "impersonated the customer."
Can't be both ways.
Can't be a non-customer and a customer.
On a roulette table you can bet red. You can bet black. Ya gotta pick one when you place your chip on the table. You can't bet on red and black with the same chip. Same goes for FINRA. Customer. Non-customer. Pick one!