Statutory Disqualification Applicants: Keep 'em Out or Let 'em Back In?

March 20, 2009

One of the most popular features of is its comprehensive treatment of Statutory Disqualfication cases. Nationally known Regulatory lawyer Bill Singer has updated with the recently published 2008 FINRA SD decisions.  

  1. : X is statutorily disqualified because he pled guilty in April 2001, in a State 1 state court to felony conspiracy to commit theft by deception. When he was 18 and a senior in high school, X falsely reported to his insurance company that his car had been stolen when, in fact, he had arranged for a friend to take the vehicle. X reported on his Uniform Application for Securities Industry Registration or Transfer ("Form U4") that "[m]y senior year in high school, between school and sports it was very difficult for me to work to pay my car and I was ashamed to tell my father to pay for the car that I had promised to pay for. It was a humiliating mistake for me and my family."
  2. : X became statutorily disqualified In March 2006, when FINRA's Department of Enforcement ("Enforcement") accepted his submission of a Letter of Acceptance, Waiver and Consent ("AWC") for willfully failing to disclose material information-his bankruptcy-on a Uniform Application for Securities Industry Registration or Transfer ("Form U4"). 
  3. : X is statutorily disqualified because in 2006, the NAC issued a decision imposing a bar in all capacities on X for his failure to respond to FINRA's repeated requests for information in an ongoing investigation regarding the adequacy of research reports. 
  4. : X is statutorily disqualified because he consented to a January 2003 Letter of Acceptance, Waiver and Consent ("AWC"), in which FINRA imposed an unqualified bar on him. The AWC found that from March through December 2000, X violated NASD Rule 2110 by engaging in a practice known as "cherry picking"-entering certain personal and customer trades into a holding account with his then employer, Firm 1, without designating customer account numbers, and then later, at the end of the trading day, allocating the trades among these different accounts. The AWC also found that X violated NASD Rules 2110 and 2510(b) by exercising discretionary authority over the accounts of six customers by causing securities transactions to be effected in these accounts without obtaining the customers' prior written authorization and Firm 1's acceptance of the accounts as discretionary.
  5. : X is statutorily disqualified because in September 2006, he pled guilty to driving under the influence of alcohol ("DUI"), a felony in the state of State 1. X's 2006 DUI conviction was a felony because he had three prior DUI misdemeanor convictions in State 1 in 1995, 1987, and 1985. 

All five of the above Statutorily Disqualified individuals sought re-entry into the industry.  How did they fare?  Well, two were approved and three denied. 

Don't Miss This Jaw Dropper: Among the five cases above is one truly incredible fact pattern.  In addition to the specific event that caused the SD status, the registered person was charged with felony child abuse and misdemeanor possession of marijuana.  On top of those criminal events, he was also named in five separate customer complaints. The firm sponsoring his registration was fined three times by NASD/FINRA from 1997 through 2004.  Did FINRA let him back him or keep the door shut?  You'll have to read the decisions to find out.