she wanted to pay for the membership with a check in 2016 because she had exhausted her 2015 marketing budget. Mellon gave the Director of Sales her credit card information to secure her membership. However, because Mellon did not have an existing relationship with the Outback Bowl, the Outback Bowl also asked RL to personally guarantee Mellon’s payment, and RL did . . .
[O]n January 27, the Director of Sales asked Mellon if a check was on the way, noting that the Outback Bowl was about to close its books for 2015. Mellon told him he would get a check shortly but said he had earlier agreed to hold off depositing it until late February. The Director of Sales disputed that he had agreed to hold onto the check, saying that the Outback Bowl deposits checks soon after it receives them. Additionally, Mellon complained to him that she was disappointed by the business networking opportunities at the game because she had met no one at the event. . . .
[M]ellon instructed Maraman to submit $1,000 in expenses to Concur and the remaining $2,800 to her FAEMS account, as Stuhlsatz had directed. Maraman did so and included copies of the front and back of the $3,800 check with both expense reports. Mellon approved her $2,800 expense submission a few minutes after Maraman entered it into FAEMS. Mellon never told Maraman, or anyone else at Wells Fargo, that her check to the Outback Bowl had bounced.Stuhlsatz approved payment of the expenses on April 20. Wells Fargo transferred $1,000 to Mellon’s joint account from the Concur system on April 21. The Firm also transferred $2,800 from Mellon’s FAEMS account to the joint account between April 25 and June 3. Mellon was thus “reimbursed” $3,800 for expenses she had not actually paid.
[S]he “may not have been aware of the ... full allocation of the expense, that the [$3,800] expense had been eaten up.” Mellon said Maraman was responsible for tracking all her expenses because “he held them in queue” and therefore was the one responsible for knowing whether the $3,800 expense already had been submitted and paid by Wells Fargo. When Mellon asked Maraman to submit the $500 expense report, she knew that her check had bounced.Including the payment of $500 in July 2016, Wells Fargo transferred $4,300 to Mellon for the expenses she claimed to have incurred for attending the Outback Bowl.
In mid-July 2016, the Outback Bowl charged RL’s credit card $3,800. RL emailed Mellon that the Director of Sales’s job “was on the line” as a result of the missing payment and that RL’s relationship with the Outback Bowl had suffered “irreparable harm.” In her email, RL also stated, “I should not have been placed in this position.” RL warned Mellon that if she did not pay her within two weeks she would have to take legal action.Within minutes, Mellon responded to RL’s email. She told RL to stop using her Firm email address to communicate with her because the Outback Bowl expense “ha[d] nothing to do with work” and Wells Fargo “did not provide [her] any support or marketing funds.” Mellon added, “I have enough on my plate .... I will do what I can when I can.” Mellon never told RL that Wells Fargo had already paid her $4,300 for the Outback Bowl expense reports.On August 2, 2016, RL filed a civil complaint against Mellon in Hillsborough County, Florida, seeking repayment of the $3,800 that she had paid to the Outback Bowl on Mellon’s behalf.
[M]ellon told the bank, “I need your help. Either a letter deny[ing] the documents or the docs.” In a subsequent email later in the day, she asked, “Wouldn’t it be illegal for [FINRA] to demand [the information] since it is a joint account and [my husband] would not want our laundry aired? [W]ould not that be an appropriate answer by Bank?”Mellon responded to FINRA’s Rule 8210 request by email on January 12, 2018. She provided a copy of the receipt from the Outback Bowl confirming her payment of $3,800 by credit card in December 2016, but she did not provide copies of monthly bank statements, an explanation of the steps she took to try to get the statements, or correspondence she had with the Bank of Tampa. Rather, Mellon told FINRA that because she did not use a check to pay the Outback Bowl, “the banking document requests seem a bit broad of scope.” The bank statements were unavailable, Mellon said in her email, because “[she] no longer [had] online access, nor ... copies of statements.” Mellon provided no evidence of her efforts to obtain the documents FINRA requested, even though the staff had given her instructions to do so.
asked the Bank of Tampa to provide a letter stating whether it would provide Mellon copies of statements for the joint account and detailing communications it had with her about obtaining account statements. The same day, the bank’s commercial banking officer wrote to FINRA that the bank would provide either account holder of the joint account with copies of bank statements and canceled checks. Therefore, according to the bank, if Mellon asked for “any documentation” about her accounts, it “would provide her with any/all information requested.” It added that the bank “ha[d] not received any requests for account information” from Mellon. The commercial banking officer wrote that Mellon wanted a letter from the bank stating that it could not produce the statements FINRA requested. In response, according to the bank’s letter, the commercial banking officer told Mellon that she should consult an attorney.
[B]ecause she had incurred other business expenses, which offset the amount she was reimbursed for the Outback Bowl, she did not receive more than she was entitled to. The other business expenses, she claims, exceeded the amount of her $20,000 FAEMS account and the $2,000 branch allowance. She also argues that money from the FAEMS account actually belonged to her because it was funded with contributions from her Wells Fargo compensation. However, an employee forfeits unused FAEMS funds at the end of the year. Even if the Panel were to credit this argument, Mellon also obtained $1,500 of the $4,300 that Wells Fargo paid her from the Concur system, which was funded directly by the branch, not Mellon’s compensation. And even if Mellon incurred other reimbursable expenses, she submitted false reimbursement requests for an expense she did not incur, and she obtained money to which she was not entitled.Mellon also argues that she made an “administrative error” involving an “over allocation of an expense,” which “clearly should have been allowed to be corrected internally,” and that she did not act with intent. The Panel disagrees. Mellon acted intentionally when she submitted each of the expense reports. There is no evidence that the reimbursements resulted from the “mis-allocation of expenses” or “administrative errors” caused by Concur, FAEMS, Maraman, or anyone else at Wells Fargo. Mellon made a deliberate decision to deceive Wells Fargo. She knowingly submitted an expense report in January 2016 using a check she had not sent to the Outback Bowl. She again acted deliberately when she submitted two separate expense reports in April 2016—one to Concur (for $1,000) and one to FAEMS (for $2,800)—even though she knew that her check to the Outback Bowl had bounced. She acted intentionally in July 2016 when she asked Maraman to allocate the $500 quarterly branch allowance to the Outback Bowl, an expense she knew she had not paid.The Panel also rejects Mellon’s argument that the Firm was intent on getting rid of her, which created an environment of “ill will and toxicity” that prevented her from fixing the expense report “errors.” Based on the evidence presented at the hearing, Wells Fargo was engaged in appropriate supervision of Mellon. In any event, any possible friction between Mellon and Wells Fargo does not excuse her deliberately submitting false expense reports.
SIDE BAR: Note that the FINRA OHO Panel Decision indicates that:
For the Complainant: Kathryn M. Wilson, Esq., John F. Guild, Esq., and Tino A. Lisella, Esq., Department of Enforcement, Financial Industry Regulatory Authority.
For the Respondent: Pro se.
No mitigating circumstances exist that would warrant any sanction less than a bar. Instead, the Panel is troubled by many aggravating factors. Mellon repeatedly tried to conceal her actions from Wells Fargo. She also caused RL to pay the Outback Bowl even though Mellon had already been reimbursed by Wells Fargo. Mellon submitted four false expense reports over a period of six months. She has not acknowledged her misconduct, choosing instead to blame others, including her assistant, for supposed administrative failings. She downplays her actions, noting that the “amount of the error is not one that changed [her] life style.” Mellon construes the problem as a clerical error that could easily have been rectified by re-allocating the expenses had the negative atmosphere in the office not prevented her from approaching her superiors. The Panel rejects her arguments and determines that Mellon acted deliberately.
[T]he Panel member finds it mitigating that Mellon ultimately gave FINRA staff her written permission to obtain the requested records from the Bank of Tampa. Therefore, the more appropriate sanction, the dissenting Panelist finds, is the one the Guidelines provide for a failure to respond in a timely manner to requests for information. For failing to respond in a timely manner, the Guidelines tell adjudicators to consider a fine between $2,500 and $39,000 and to suspend an individual in any or all capacities for up to two years. Guidelines at 33. After considering all the circumstances, the dissenting Panelist finds it appropriately remedial to impose a sanction at the lower end of the ranges suggested by the Guidelines: a $2,500 fine and a six-month suspension from associating with any member firm in any capacity.
SIDE BAR: Note that the FINRA NAC Decision indicates that:
For the Complainant: Megan Davis, Esq., Kathryn M. Wilson, Esq., and John Guild, Esq., Department of Enforcement, Financial Industry Regulatory Authority
For the Respondent: Pro se.
The NAC made short work of Respondent Mellon's appeal. As to the issue of conversion, the NAC found in pertinent part that:
We conclude that the record clearly supports a finding of conversion, as Mellon intentionally took funds she was not entitled to possess. Mellon knowingly caused her assistant to file false expense reports to obtain reimbursement for expenses she had not paid. Mellon knew that to receive reimbursement for a business expense she must have already paid for it, and therefore she was not entitled to any reimbursement. However, despite this understanding, Mellon submitted a check that she knew had bounced as proof of payment. Therefore, Mellon was not entitled to receive reimbursement from either the Concur or the FAEMS reimbursement system. In addition, even after seeking reimbursement for the entire amount of the Outback Bowl invoice, Mellon sought and received an additional $500 from Wells Fargo using the same dishonored check. This $500 was an amount that, again, Mellon had not paid for expenses and which she would never be able to claim as an unreimbursed expense. It was $500 for which Mellon had no legitimate claim. Thus, Mellon converted firm funds in violation of FINRA Rule 2010.9Mellon attempts to minimize the seriousness of her misconduct by claiming it involved an “error in judgment” and just “one returned check.” In fact, Mellon’s misconduct involved a great deal more. Mellon repeatedly sought reimbursement for a $3,800 expense that she knew she had not paid, and she submitted misleading documentation to Wells Fargo in support of her reimbursement claims. Mellon continuously rebuffed JK’s and RL’s efforts to collect the amount due, even though Mellon knew RL was “on the hook” to pay the invoice if Mellon did not. Moreover, when she did receive reimbursements from Wells Fargo for the Outback Bowl expense, Mellon used the funds to pay other personal expenses.= = = = =Footnote 9: We acknowledge that the money from the FAEMS account was funded by Mellon with pre-tax contributions from her Wells Fargo compensation. Mellon, however, submitted false reimbursement requests for the Outback Membership before she had paid it, and obtained money from the FAEMS account to pay for personal expenses. Under Wells Fargo’s policies, Mellon was not permitted to use the Wells Fargo FAEMS funds except for legitimate reimbursement. Instead of heeding these conditions, Mellon intentionally submitted false expense reports to collect monies to which she was not entitled. Thus, we conclude that Mellon converted the funds from her firm’s FAEMS account.
Mellon now asserts that she is “remorseful and did nothing with intent.” The record belies these claims, demonstrating a troubling lack of remorse by Mellon throughout the proceedings below, and establishing that her misconduct was intentional. As the Hearing Panel observed, Mellon “has not acknowledged her misconduct, choosing instead to blame others, including her assistant, for supposed administrative failings,” and downplayed her actions. Even if we were to credit Mellon’s claim of remorse, it comes too late and is too limited to mitigate the severity of her misconduct.We find that Mellon’s deception and dishonesty to Wells Fargo, the Outback Bowl, and FINRA undoubtedly makes her unfit to serve in an industry that heavily relies on the honesty and integrity of its securities professionals. The bars are imposed to protect the public interest. Given that aggravating factors predominate here and that Mellon has failed to establish the presence of any mitigating factors, she has not shown that sanctions less than a bar would protect the public and would be appropriate. Accordingly, Mellon is barred from associating with any member firm in any capacity for her violations.
Mellon identifies what she describes as “extenuating” circumstances, which she claims “made life exceptionally hectic” during and after the filing period and made it difficult to meet the deadline: “family’s move, final exams in graduate school and administrative difficulties navigating the SEC website.”14 But she fails to explain why these circumstances qualify as “extraordinary,” provide any evidentiary support for this claim, or identify any precedent where we have waived the filing deadline under similar circumstances. For example, Mellon provides no basis for us to conclude how or why her move prevented her from meeting the filing deadline. 15 She does not identify any particular reason for why taking academic exams should excuse her delay. And she links her holiday travel to Thanksgiving and Christmas, which occurred after the filing deadline, and thus could not have prevented her from complying with it.
Finally, Mellon’s assertion that she had difficulty navigating the Commission website is undermined by the instructions provided in FINRA’s October 18, 2022 transmittal letter—and subsequent communications—about what she needed to do. 16 She even acknowledges having had “multiple, very helpful discussions” with staff from our Secretary’s Office, which facilitated her eventual filing of an application, but she fails to explain why she did not seek such assistance at an earlier point. Nor does Mellon’s pro se status exempt her from complying with the Commission’s deadlines. As we have held, “‘[w]e expect even unrepresented parties to comply with our rules,’ and ‘[p]arties, including those appearing pro se, are obligated to familiarize themselves with the Rules of Practice.’”17
In short, even accepting Mellon’s vague assertions that she was busy during the month she had to file her appeal, she has not shown how those circumstances prevented her from doing so.18 To the contrary, her repeated interaction with FINRA staff during this time indicates that she had the time and ability to communicate regarding her intention to challenge the FINRA action. 19 Given Mellon’s failure to establish the requisite extraordinary circumstances to justify her late filing, we grant FINRA’s motion to dismiss.
= = =
Footnote 14: Much of Mellon’s arguments, both in her initial response to the motion to dismiss and subsequent sur-reply, focus on attacking the merits of the underlying FINRA action. As we have
held, “the measure of whether an untimely application presents an extraordinary circumstance is not simply the relative weight of the arguments presented on appeal—otherwise, the ‘extraordinary circumstances’ requirement would be read out of [Rule 420].” PennMont Sec., 2010 WL 1638720, at *5. And we find that none of Mellon’s merits arguments, which she could have raised in a timely appeal, present extraordinary circumstances warranting review.
Footnote 15: See, e.g., Ourand, 2016 WL 4258138, at *3 (finding that applicant’s “relocation from Illinois to Florida” was not an extraordinary circumstance).
16 See Ballard, 2016 WL 1169072, at *3 (dismissing untimely application in part based on fact that FINRA advised applicant that it needed to file its appeal within 30-day deadline).
Footnote 17: Ourand, 2016 WL 4258138, at *3 (quoting Ballard, 2016 WL 1169072, at *3); see also Ballard 2016 WL 1169072, at *3 (noting that “[t]he filing deadline is clearly set forth in our rules” and that that “an applicant need not identify every contention or argument in an application for review appealing an SRO decision”).
Footnote 18: We have held that, “even ‘when circumstances beyond the applicant’s control give rise to the delay’ in appealing, the applicant must ‘demonstrate that he or she promptly arranged for the filing of the appeal as soon as reasonably practicable.’” Kenneth Joseph Kolquist, Exchange Act Release No. 82202, 2017 WL 5969252, at *4 (Dec. 1, 2017).
Bill Singer's Comment on the SEC Opinion
As is evident from my coverage (starting in 2019) of Mellon's case, I had no sympathy or empathy for her misconduct. See:
FINRA Takes Wells Fargo Stockbroker Outback To A Bar (BrokeAndBroker.com Blog / July 15, 2019)
FINRA Takes Wells Fargo Stockbroker Outback To A Bar For A Second Round (BrokeAndBroker.com Blog / October 20, 2022)
For those of you who may be wondering as to my view of FINRA's cases against Mellon, consider these quotes for some guidance:
SCOTUS Holds That Direct-Listing Plaintiff Must Plead and Prove Purchase of Shares Traceable To Defective Registration Statement
SLACK TECHNOLOGIES, LLC, f/k/a SLACK TECHNOLOGIES, INC., et al.. Petitioners v. FIYYAZ PIRANI