Former Sales Manager Barred By FINRA After Assistant Takes His CE Training

June 9, 2022

Among the dirty secrets on Wall Street is so-called CE (continuing education) -- or at least the short cuts that some folks take when it comes to satisfying their need to take various courses, training, and tests. Some of the short cuts involve getting someone else to sign in and sit through your training.  Some of the short cuts involve getting someone to take your tests for you.  Some of the short cuts involve cheating. Frankly, it's not a unique problem on Wall Street because wherever an industry or profession requires CE, there are those who never quite seem to have the time to do what's required. Among the more troubling aspects of getting around CE is when a male manager relies upon a female subordinate to, hey, well, you know, not that anyone actually needs to know, but, ummm, it would really help me out if, you know, well, you know, right? Read about a recent FINRA settlement involving a number of CE short cuts that, in the end, short circuited one associated person's career.

Skyrocketing Demands

Matthew R. Logan was first registered in 2007, and by 2010, he was registered with FINRA member firm Hornor, Townsend & Kent, LLC ("HTK") until his January 2019 termination. FINRA's Department of Enforcement filed a Complaint alleging that in October 2018, Logan directed an office administrative assistant to take the required FINRA Regulatory Element Continuing Education ("CE") training on his behalf, and that Logan further had the assistant take three non-FINRA CE courses on his behalf. FINRA Department of Enforcement, Complainant, v. Matthew R. Logan, Respondent (FINRA Office of Hearing Officers Hearing Panel Decision, Discip. Proc. No. 2019063570502 / June 29, 2021) (the "OHO Decision")

By way of background, the OHO Decision explains that [Ed: footnote omitted]:

Besides being associated with HTK, Logan was employed as an insurance agent by Penn Mutual Life Insurance Company ("Penn Mutual"), HTK's parent company. In 2013, Logan was promoted to sales manager at Penn Mutual's Greater Boston agency, Concord Wealth Management ("Concord Wealth"). At the hearing, Logan testified that in 2018 he managed "around 20 full-time sales agents and about ten part-time life insurance broker agents." According to Logan, 95 percent of his time and effort were spent on life insurance, and five percent was securities-related. 

Logan testified that the Firm "increased [the] sales target significantly year over year." The demands of the Firm skyrocketed while Logan was sales manager. When he first became sales manager in 2013, the annual sales target for his office was to generate $300,000 of life insurance premiums. In 2018, the sales requirement for the office was $1.5 million of life insurance premiums. Logan testified that, on average, he worked 60 hours per week.

at Page 3 of the OHO Decision

The Ethics Exam Not Taken

In October 2017, Logan was supposed to take a three-module "Ethics" CE course,  and, in fact, HTK sent him reminders to that effect. In response to the purported skyrocketing demands upon his time, Logan came up with what, in hindsight, wasn't that great a solution:

[L]ogan directed the Assistant to take the Ethics Training for him. Logan testified he communicated his directive to the Assistant by "forward[ing] the regular company e-mail to her company e-mail." In the forwarding email, Logan stated, "[W]e need this done today." The Assistant took each module for Logan by logging onto the Firm's online training portal using his credentials. Logan did not complete the modules at any time.

at Page 4 of the OHO Decision

The HTK Training Not Taken

When things go bad they then to get worse, and more often than not, what's worse gets worser. When you've arrived at worser, you have generally dug yourself a hole from which you find it impossible to escape. In May 2018, Logan thought that he had completed another CE course: "HTK Processing Checks and Securities Training" ("HTK Training"). Turns out, it was wishful thinking [Ed: footnotes omitted]:

Logan forwarded the Licensing Director's email to the Assistant, asking, "[I]s this completed?" The Assistant replied, "Not yet will complete today." Logan admitted that his purpose in forwarding the Licensing Director's email was to have the Assistant "complete the training on [his] behalf." The Assistant took the HTK Training by logging onto the Firm's web-based Learning Resource Center using Logan's credentials. Logan himself did not take the HTK Training at any time.

at Pages 4 - 5 of the OHO Decision

The LIMRA Training Not Taken

Finding himself in the Land of Worser, Logan seems to have opted for the in-for-a-penny-in-for-a-pound gambit:

In October 2018, Logan instructed the Assistant to complete for him several anti-money laundering continuing education courses provided by the Life Insurance and Market Research Association ("LIMRA Training"). Logan had to take the LIMRA Training to sell Columbus Life Insurance products. He received an email from First American Insurance Underwriters informing him of the requirement to take the LIMRA Training; the subject line of the email was "Matthew Logan CL00064790-pending-ANTI-MONEY LAUNDERING REQUIRED." The Assistant took the LIMRA Training for Logan by logging onto LIMRA's online testing portal using his credentials. Logan himself did not complete the LIMRA Training at any time.

At Page 5 of the OHO Decision

The FINRA Regulatory Element Not Taken

In 2018, HTK sent Logan several reminders about his need to satisfy the Regulatory Element component of CE. Sensing his firm was getting exasperated with his inability to schedule time to take the Regulatory Element, Logan demonstrated some consistency in his approach:

Logan received another reminder email about the Regulatory Element on October 24, 2018. Logan forwarded this email to the Assistant stating, "Let's discuss today." Logan testified, "I saw FINRA CE, I forwarded the e-mail to [the Assistant]. And I understood that this was an online course." In a reply email, the Assistant stated, "I have been working on this in between my work but I'm almost done." On October 30, 2018, the Assistant completed Logan's Regulatory Element, logging onto FINRA's CE Online System and impersonating Logan by using his login credentials.

at Page 7 of the OHO Decision

Loss of Clarity and Focus

In November 2018, HTK discovered that the Assistant had taken Logan's Regulatory Element. For whatever reasons, the Assistant attempted to provide cover for Logan. Seems that HTK didn't believe the Assistant's version of events. When the firm confronted Logan, he lied by claiming to have logged in through the Assistant's computer in order to take the training. Not buying Logan's explanations, HTK terminated his employment. In trying to explain the "why" of his actions:

Logan testified that the Firm's sales target demands had become so astronomical that he could not keep up with them. He lost clarity and focus and blindly forwarded to the Assistant the Firm emails reminding him of his continuing education obligations. According to Logan, "[i]t was impossible to be reading page 3 of an e-mail among a couple hundred [he] was getting a day at this period in time."

at Page 8 of the OHO Decision

The OHO Hearing

In answering the charges in FINRA's Complaint, to his credit, Logan admitted to the FINRA Rule 2010; and, as such, the OHO Hearing was conducted solely on the issue of sanctions. In arguing for something less than the imposition of a Bar, Logan contended that settlements involving allegations of cheating often resulted in suspension rather than the more expansive Bar. Things did not end well for Logan because the OHO Panel imposed a Bar and ordered that he pay the hearing costs of $2,466.10, consisting of a $750 administrative fee and $1,716.10 for the cost of the hearing transcript. In imposing a Bar, the OHO Decision notes in part that [Ed: footnotes omitted]:

Several aggravating factors support a bar in this case. First, Logan did not accept responsibility for or acknowledge his misconduct to the Firm before detection or intervention. Logan did not attempt to accept responsibility for his cheating-which ended in October 2018- until September 2019, in a letter to FINRA. Second, he engaged in a year-long pattern of cheating from October 2017 to October 2018. Third, in his interview with Núñez, he acted in a premeditated way, with the Assistant as his accomplice, to try to deceive the Firm with a concocted story. It is further aggravating that, even now, he seeks to minimize his lying to the Firm, testifying, "I was evasive with Mr. Núñez." Fourth, he acted intentionally when he directed the Assistant to take the Regulatory Element and three different continuing education courses for him. Logan adopted a calculated method of avoiding his duty as a member of the securities industry to take required continuing education training. 

It is also aggravating that Logan cheated on his continuing education requirements at a time when he was a sales manager in the Firm. Because he enlisted the help of another person in his cheating (the Assistant), he made it more likely that other registered persons in the office would learn about his misconduct. These other registered persons, following the example of their manager, might think they too could use the Assistant, or other individuals, as impostors in meeting their continuing education requirements.

 at Pages 11 - 12 of the OHO Decision

As the OHO Panel saw things, Logan had dug himself a very deep hole by enlisting a subordinate to cheat, lying about it, and doing so as a sales manager. Given his position of authority, Logan's misconduct sent the wrong message to other registered persons in his office. As such, the aggravating factors here were particularly aggravating. 

In arguing for a suspension in lieu of a Bar, Logan cited to Acceptance, Waiver and Consent settlements ("AWCs") involving cheating cases for which FINRA imposed a suspension of a lesser nature than a Bar. The Panel noted that AWCs involve non-litigated settlements; however, Logan was litigating his case by pursuing an OHO Hearing, even if only on the issue of sanctions. Even setting aside the issue of AWCs versus OHO Hearings, the Panel rebuffed several substantive arguments raised by Logan [Ed: footnotes omitted]

Eleven of the twelve AWC cases that Logan relies on involved a person cheating on the Firm Element, not the Regulatory Element. And although a bar is standard for cheating on the Regulatory Element, it is not standard for cheating on the Firm Element. Instead, Firm Element cheating is subject to a separate Sanction Guideline. The twelfth AWC case involved a person cheating on the Regulatory Element, but the cheating did not involve using an impostor to take the training. In a thirteenth AWC matter, which Logan's counsel appropriately brings to the Hearing Panel's attention although it cuts against his position,  the person accepted a bar for cheating on the Regulatory Element. 

. . .

Logan claims his failure to take the Regulatory Element and the three non-FINRA continuing education courses was because his office had to address pressing and urgent matters and was chronically understaffed. This is much like an argument that a respondent's misconduct was due to outside stress. But contrary to Logan's contention, such factors do not mitigate a respondent's misconduct. He did not ask to be excused from any work duties at the Firm because of the stress he was experiencing. Nor did Logan ask for more time to complete any of his continuing education requirements. 

Logan contends that FINRA's move from in-person administration of the Regulatory Element to online administration is a mitigating factor because online administration does not include the trappings of seriousness (e.g., proof of identity, photographing the training subject, constant monitoring by proctors, and so on) that is present in in-person administration. But the move to online administration makes it even more important to apply the governing Sanction Guideline according to its terms. Without the safeguards applied in in-person training, online administration must depend on the good faith of the training subjects. It is also much easier to cheat in online training, as this case demonstrates. The imposition of a bar on a person caught cheating in online training shows the securities industry that such cheating will not be tolerated in the new training environment.

at Pages 11 - 13 of the OHO Decision

NAC Appeal

On appeal to FINRA's National Adjudicatory Council ("NAC"), Logan again did not dispute that his conduct constituted a FINRA Rule 2010 violation, but confined his argument to his contention that the OHO Panel's imposition of a Bar was excessive. FINRA Department of Enforcement, Complainant, v. Matthew R. Logan, Respondent (FINRA NAC Decision, Discip. Proc. No. 2019063570502 / June 2, 2022) (the "NAC Decision")

A Misunderstanding?

Logan argued to the NAC that an OHO Panelist mistakenly believed that Logan has asked the Assistant to impersonate him at the testing center. The NAC rejected the contention by noting that:

[T]he relevant portion of the hearing transcript includes an exchange prompting Logan to make the following clarification to his testimony: 

Logan: I was confusing the online CE courses. Again, in the couple hundred emails [] I was getting per day [], I was recklessly forwarding emails. And I saw FINRA CE, I forwarded the email to [the Assistant]. And [I] understood that was an online course . . . I was certainly not asking her to go to a testing center.

The Hearing Panelist acknowledged Logan's clarification, stating "Thank you for that clarity." To the extent Logan's counsel believed that further clarification was needed, counsel could have taken steps to make that clarification for the record. Cf. Blair v. CBE Grp. Inc., No. 13-00134- MMA, 2015 U.S. Dist. LEXIS 67920, at *26 (S.D. Cal. May 26, 2015) (explaining that asking clarifying questions of a client is a "major part of counsel's role" at a deposition). 

at Pages 8 - 9 of the NAC Decision

In lock-step with the OHO, the NAC found Logan's misconduct as aggravating, and, as warranting the imposition of a Bar [Ed: footnotes omitted]:

Logan argues that his misconduct is mitigated by professional and personal stress, as he was overwhelmed with demands at work and at home during the relevant period. Although a personal problem such as stress may mitigate misconduct in certain circumstances, such a problem may be mitigating only where it explains the misconduct. See John M.E. Saad, Exchange Act Release No. 76118, 2015 SEC LEXIS 4176, at *20-21 (Oct. 8, 2015) (distinguishing between conduct attributable to an "unthinking reaction" to stress and repeated deception), pet. for review denied in part and remanded in part, 873 F.3d 297 (D.C. Cir. 2017), aff'd, Exchange Act Release No. 86751, 2019 SEC LEXIS 2216 (Aug. 23, 2019), aff'd, 980 F.3d 103 (D.C. Cir. 2020). 

Stress does not explain Logan's repeated decisions to cheat, nor does it explain his premeditated attempt to deceive Penn Mutual. See id. And, even if stress could explain Logan's misconduct (which it cannot), the record provides little support for this explanation. As the Hearing Panel observed, Logan did not ask Penn Mutual for more time to complete the continuing education courses, nor did he ask to be excused from any work duties. To the contrary, Logan continued his efforts to earn Certified Financial Planner and Chartered Life Underwriter designations by taking at least one non-mandatory course during the relevant period. While Logan's effort in this respect generally would be commendable, his decision to voluntarily add to the demands on his time undermines his assertion that his cheating on required courses was mitigated by time constraints. 

Logan also argues that a bar is unwarranted because the Regulatory Element is now administered in an online environment, where registered persons are not monitored or subject to other protocol found at testing centers. According to Logan, this change caused the Regulatory Element to be indistinguishable from other continuing education courses, creating a "trap for the unwary." To the extent Logan seeks to shift responsibility for his misconduct to FINRA, his argument lacks merit. See Goldberg, 2012 SEC LEXIS 762, at *18 n.20. Moreover, Logan received at least constructive notice that FINRA changed its rules to provide for online administration of the Regulatory Element when FINRA announced this change to its members and associated persons. Even if Logan was not actually aware of the change, his ignorance is not mitigating because, as a registered person, he was responsible for staying abreast of such developments. See FINRA Rule 0140(a); Elgart, 2017 FINRA Discip. LEXIS 9, at *21.

at Pages 13 - 14 of the NAC Decision

Bill Singer's Comment

Compliments to FINRA at both the OHO and NAC levels. Both bodies produced patient, methodical, and compelling Decisions. 

At the outset, given the facts, it probably would have made more sense for Logan to settle for a Bar via an AWC. An unequivocal statement of his understanding of the cited misconduct coupled with his acceptance of a Bar as warranted under the circumstances might have laid the groundwork for obtaining a waiver of the Bar at some point in the future should he try to re-enter the industry pursuant to a "Membership Continuance Application" (the MC-400 Application) filed on his behalf by a sponsoring member firm. As things stand, FINRA's institutional memory will likely reflect that Logan appeared before both the OHO and the NAC in a state of denial. He may not have argued the elements of his misconduct at OHO and NAC but he did attempt to mitigate some of what he did and didn't do. Further, by arguing against a Bar -- a sanction that, frankly, seemed inevitable -- he persisted in not fully grasping the aggravating nature of his conduct. Among the more troubling aspects of the fact pattern is Logan's involvement of his Assistant -- who was both a female and a subordinate: see, for example, "Getting The Girl To Do It On Wall Street" ( Blog / October 4, 2019)

Another aspect of Logan's case that caught my attention was his argument that OHO should impose a suspension rather than a Bar because various cheating cases he cited did not impose a Bar when those cases were resolved via an AWC. When FINRA negotiates settlements with Respondents, the so-called "settlement premium" is often part of the barter. When Logan refused to accept a Bar via settlement, he placed his lawyer in the uncomfortable position of going to a hearing and arguing that if my aunt were a man she'd be my uncleAs the NAC pointed out, you can't cite to the benefit of a settlement premium when you didn't settle. Logan wasn't offered a settlement premium because his conduct was deemed too aggravating to warrant anything other than a Bar. 

In Logan's case, if the last, best offer from Staff was a Bar, he may well have concluded that he didn't lose anything by arguing his case (even if only the sanction) before OHO and the NAC. But that's not really correct. He likely spent tens of thousands of dollars in fees and costs. Then there's the intangible of what happens in a few years should Logan persuade someone to submit an MC-400 on his behalf. Be that as it may, my hat's off to Logan's lawyer, Jeremy L. Bartell, Esq., for what seems to have been a professionally argued case on behalf of a client who was beyond redemption.