When An Undisclosed Settlement Gets Disclosed to FINRA

March 29, 2021

In a recent FINRA regulatory settlement, we got a stockbroker who goofed. We got a customer, who paid a price for the stockbroker's goof. In the spirit of let's just move on and put this behind us, the stockbroker dug into his pocket, came out with a wad of cash, tried to settle with the customer, and -- hey, you look like a smart person, if I'm writing about it, ya think things worked out for the best?

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, John O'Bannon submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of  John O'Bannon, Respondent (FINRA AWC 2020068182001)

The AWC asserts that O'Bannon was first registered in 2017 with Edward Jones. The AWC asserts that O'Bannon "does not have any relevant disciplinary history." 

A Transfer Turns Into a Liquidation

In June 2020, an individual referred to only as "Customer A" in the AWC wanted to transfer shares of his employer-company stock into his Edward Jones account. That should have made O'Bannon and Edward Jones happy. Unfortunately, the AWC alleges that O'Bannon mistakenly advised Customer A about the mechanics of completing various transfer documents. Hey, it happens. So . . . when you couple erroneous advice with a contemplated transfer of securities, things tend to get exponentially worse. This case was no exception. Instead of transferring the shares at issue, those shares were liquidated. All of which prompted Customer A to complain to O'Bannon in July 2020. From there, this is what the AWC alleges transpired:

On August 7, 2020, O'Bannon sent Customer A a personal check for $2,678.50 to attempt to settle his complaint and to partially compensate him for missing out on the appreciation in the value of Customer A's company's stock following the liquidation of Customer A's shares. O'Bannon did not inform Edward Jones about Customer A's complaint or his attempt to resolve it. After receiving O'Bannon's check, Customer A complained to Edward Jones.


Online FINRA BrokerCheck records disclose that on September 17, 2020, Edward Jones discharged O'Bannon based upon allegations that:

Concerns the registered representative tried to remedy a processing error in a client account by providing personal funds of the registered representative to the client.


FINRA found that O'Bannon's undisclosed settlement constituted a violation of FINRA Rule 2010, and, in accordance with the AWC, FINRA imposed upon O'Bannon a $5,000 fine and a 15-business-day suspension from associating with any FINRA member in all capacities.

Bill Singer's Comment

On the one hand, an out-of-sight settlement frustrates in-house compliance efforts to supervise and hampers regulation by undercounting problems. On the other hand, isn't it better to avoid protracted litigation and smooth ruffled feathers by having reps pay out of their own pockets? Unfortunately, even I don't buy the "on the other hand" because the negatives far outweigh the positives -- but if you allow me to hold my nose and close my eyes, well, sure -- it's the lesser of two evils thing where you still got two evils. 

See "Undisclosed Settlement" archive at BrokeAndBroker.com Blog