A Lack of Finality: The Trevor Saliba Saga at FINRA and the SEC and Again at FINRA

In 2011, Respondent Trevor Michael Saliba purchased FINRA member firm MCA Securities, LLC ("MCA Securities") through an entity that he owned, NMS Capital Group, LLC ("NMS Capital Group"). After completing the purchase, Saliba changed the name of the firm to NMS Capital Securities LLC ("the Firm" or "NMS Capital Securities") and filed a Continuing Membership Application ("CMA") with FINRA's Membership Application Program ("MAP") seeking approval of the ownership change. While its review of the CMA was pending, MAP imposed certain restrictions on the Firm, including a prohibition against Saliba serving in any principal or supervisory capacity. Ultimately, MAP denied the CMA, MAP's denial was affirmed by FINRA's National Adjudicatory Council ("NAC"), and the Firm withdrew from FINRA membership. 

On March 24, 2016, FINRA's Department of Enforcement filed an eight cause Complaint against Saliba; Sperry Randall Younger, who served as the Firm's Chief Executive Officer ("CEO") and its Chief Compliance Officer ("CCO") during a portion of the CMA process; Richard Daniel Tabizon, who also served as the Firm's CCO during a portion of the CMA process and as a Firm principal during the entire process; and Arthur Mansourian, who was registered with the Firm in a non-principal capacity during the CMA process. In substance, the Complaint alleged that (1) Saliba functioned as a principal during the CMA process, causing the Firm to violate the restrictions imposed by MAP; (2) Saliba made false statements and provided false documents and incomplete information to FINRA; (3) Younger gave false testimony to FINRA and failed to reasonably supervise Saliba to ensure the Firm's compliance with the restrictions; and (4) Saliba, Tabizon, and Mansourian provided backdated firm compliance documents to FINRA examiners and caused the Firm to maintain incomplete and inaccurate books and records. Respondents filed Answers to the Complaint denying the charges and requested a hearing. 

A hearing on the charges was held before a FINRA Extended Hearing Panel during the period September 18 through 23, 2017. The Panel heard testimony from 13 witnesses and received approximately 200 exhibits in evidence. For the reasons set forth in this Decision, the Panel concluded that Enforcement proved, by a preponderance of the evidence, that Respondents violated FINRA and NASD rules in most respects alleged in the Complaint. The Panel further concluded that, considering all the relevant circumstances, the appropriate sanctions for the violations were to bar all four Respondents from association with any FINRA member firm in any capacity.

Saliba violated FINRA Rule 2010 by acting as a principal in violation of the interim restrictions imposed by Member Regulation (Cause 1). For this violation, Saliba is barred in all capacities. Saliba also violated FINRA Rules 8210 and 2010 by failing to cooperate with FINRA and providing false and misleading documents and information to FINRA (Causes 2, 3, 5). For these violations, Saliba is separately barred in all capacities. Saliba also violated FINRA Rule 2010 by participating in the falsification of compliance forms (Cause 6). For this violation, Saliba also is barred in all capacities. Younger provided false information to FINRA, in violation of FINRA Rules 8210 and 2010. For this violation, Younger is barred in all capacities. Younger also violated NASD Rule 3010 and FINRA Rule 2010 by failing to supervise Saliba. For this violation, Younger is separately barred in all capacities. Mansourian violated FINRA Rule 2010 by participating in obtaining backdated compliance forms that were to be provided to FINRA and caused the firm to maintain inaccurate books and record in violation of FINRA Rules 4511 and 2010 by using his personal email to obtain the backdated forms. 

For these violations, Mansourian is barred in all capacities. We affirm the Hearing Panel's order that respondents pay, jointly and severally, $12,184.82 in hearing costs, and we order that respondents Saliba, Younger, and Mansourian pay, jointly and severally, appeal costs in the amount of $1,733.28. 

ORDERED that FINRA's findings of violations against Trevor Michael Saliba and Arthur Mansourian are sustained, except that FINRA's findings that Saliba violated FINRA Rule 2010 by providing falsified memos to FINRA's Department of Member Regulation, and FINRA Rules 8210 and 2010 by providing falsified memos to FINRA's Department of Enforcement, are remanded to FINRA for further proceedings consistent with our opinion; and it is further 

ORDERED that the sanctions imposed by FINRA on Saliba and Mansourian are sustained, except that FINRA's imposition of a bar on Saliba based in part on the violations being remanded by this opinion is also remanded to FINRA for further proceedings consistent with our opinion, and FINRA's imposition of a bar on Mansourian is modified to a bar with a right to reapply for association with a FINRA member firm in two years.

We cannot determine whether the NAC predicated Saliba's liability on a finding that (1) Saliba was responsible for falsifying the memos or knowingly producing falsified memos to FINRA; or (2) the memos were falsified and Saliba should have known that he was providing falsified memos to FINRA. In order for us to properly discharge our review function, we must know whether the NAC concluded Saliba was acting intentionally and knowingly or merely negligently. This is true both with respect to FINRA's finding that Saliba violated Rules 8210 and 2010 by providing the Miller Memos and Eighth Younger Memo to Enforcement in response to a Rule 8210 request, and FINRA's finding that Saliba violated Rule 2010 by providing the Miller Memos and Eighth Younger Memo to Member Regulation. 

If the NAC concluded Saliba acted intentionally and knowingly, then it is not clear why it said it was "affirm[ing] the Hearing Panel's finding" that Saliba created or had someone create the Miller Memos and knowingly provided them to FINRA. The Hearing Panel found that "the evidence was not sufficient for the Panel to find that Saliba personally created, or caused the creation of, the [Miller] Memos." And if the NAC concluded Saliba acted merely negligently, it did not explain why Saliba's negligence would establish violations of FINRA Rules 8210 and 2010 on the facts of this case. FINRA relied on its decision in Merrimac Corporate Securities, Inc., to support liability, but on appeal of that decision we sustained liability because "the record establishe[d] that Merrimac and Nash knew that DSR forms had been falsified at the time the firm and Nash responded to the Rule 8210 requests for information." 

We note further that the NAC devoted only a single sentence to its additional finding that Saliba had earlier violated Rule 2010 by providing the memos to Member Regulation. That single sentence did not discuss the case law applicable to violations of Rule 2010 that are not predicated on a violation of another FINRA rule. . . .

[W]hether the Commission's opinion constitutes a "final order" within the meaning of the statute in light of the fact that the Commission's opinion affirmed two bars and remanded a third bar for further proceedings by FINRA. We conclude that the Commission's opinion is a final order as to the two industry bars sustained for Saliba's violations of FINRA Rule 2010 by defying the Interim Restrictions and backdating compliance forms; however, the Commission's opinion is not a final order as to its determination that Saliba violated FINRA Rules 8210 and 2010 by failing to produce his computers, because the sanction for this violation has been remanded for further proceedings by FINRA.

As to the remaining issue-whether Saliba violated FINRA Rules 8210 and 2010 by falsely testifying about and failing to produce his computer-the jurisdictional analysis is different because the corresponding sanction relating to that violation was remanded by the Commission. Nevertheless, the parties both maintain that this issue is still part of a "final order." Applying the Bennett test, the parties conclude that the Commission's opinion on this issue is the consummation of the decision-making process because the Commission will not reconsider whether this violation occurred. This, however, ignores the fact that a sanction for this violation is still being deliberated by FINRA. . . .

SIDE BAR: The SEC Opinion marks the "consummation" of some decision-making process but when FINRA is still deliberating a sanction after having imposed said sanction but for the fact that the SEC remanded the sanction back to FINRA for lack of an explanation as to the basis for said sanction, well, 9Cir says that all of the aforementioned renders the SEC's Final Order as not so much "final" but still an "order," but the federal court won't consider the appeal of the FINRA Bar because it's now under reconsideration because the SEC said that FINRA pretty much wasted everyone's time when it failed to explain why it did what it did. 

[O]n appeal, the Commission affirmed the NAC's findings that Saliba violated FINRA Rule 2010 by acting as a principal in violation of the interim restrictions that the MAP Group imposed on NMS Capital Securities during the CMA process (cause one), and the Commission affirmed the NAC's bar for that violation. The Commission also affirmed the NAC's findings that Saliba violated FINRA Rule 2010 by obtaining backdated compliance records from NMS Capital Securities' associated persons and by providing those records to FINRA staff (cause six), and the Commission affirmed the NAC's bar for that violation. Finally, the Commission affirmed the NAC's findings that Saliba violated FINRA Rules 8210 and 2010 by providing false testimony about his computers to FINRA staff during his on-the-record interview and by failing to provide FINRA staff with all his computers used for firm business (cause two). The NAC's findings under causes one, two, and six, and the bars that the NAC imposed on Saliba under causes one and six are not under review as part of this remand.

The Commission remanded the case to the NAC to clarify the NAC's findings that Saliba violated FINRA Rule 2010 because he knew or should have known that he provided the falsified Miller Memoranda to the MAP Group during the pendency of the CMA (cause three), and that he violated FINRA Rules 8210 and 2010 because he knew or should have known that he provided the falsified Miller and Eighth Younger Memoranda to Enforcement during its investigation (cause five). Considering these clarifications, the Commission also directed the NAC to reconsider the bar that the NAC imposed on Saliba as a unitary sanction for the misconduct under causes two, three, and five. 

On remand, we find that: (1) Saliba violated FINRA Rule 2010 because the Miller Memoranda were falsified, and Saliba knew that he was providing falsified memoranda to the MAP Group during the CMA process (cause three); and (2) Saliba violated FINRA Rules 8210 and 2010 because the Miller Memoranda were falsified, and Saliba knew that he was providing falsified memoranda to Enforcement during its investigation (cause five). For sanctions, we impose a bar for Saliba violations under cause two and a separate bar for his violations under causes three and five.

After a careful application of these factors, we conclude that Saliba did not substantially comply with all aspects of FINRA's request, there is no evidence of mitigation, and, accordingly, Saliba should be barred for the misconduct. The information FINRA sought about Saliba's business computers was critical to its investigation of his violation of the interim restrictions while the CMA was pending and to the origin of the Miller and Eighth Younger Memoranda. Saliba's failure to testify truthfully and produce his computer concealed his misconduct and obstructed FINRA's investigation because his computer could have shown that he was acting as a principal in violation of the interim restrictions and could have shed light on the origin of the Miller and Eighth Younger Memoranda. Saliba's misconduct demonstrates a lack of integrity and ability to comply with regulatory rules and, accordingly, a bar is an appropriately remedial sanction.

FINRA's request was important to its investigation of Saliba's violation of the interim restrictions. By providing the falsified Miller Memoranda that Saliba knew reflected conversations and approvals that never actually occurred, Saliba sought to conceal his misconduct.29 Knowingly producing falsified documents in response to a FINRA Rule 8210 request reflects strongly Saliba's unfitness to serve in the securities industry. 30 A bar is appropriate to protect the investing public from persons who will provide false information and false documents to FINRA when it is investigating if FINRA rules have been violated. Accordingly, we bar Saliba in all capacities for his violation of FINRA Rules 8210 and 2010 by providing the falsified Miller Memoranda to the MAP Group and in response to a FINRA Rule 8210 request.

• Trevor Saliba
• FINRA
• NMS
• CMA
• MAP
• OHO
• NAC
• SEC
• Rule 2010
• Rule 8210
• BrokeAndBroker
• Bill Singer