Friday, December 18, 2009

Bad Boys, Whatchu Gonna Do?

It's Friday morning, a balmy 30 degrees in Chicago, and, as usual, I am reading the disciplinary actions that FINRA has taken recently. Today I skipped over the firms that have been fined and sanctioned and jumped straight to the "Individuals Barred and Suspended." So far this month that category takes about 13 pages to cover . . . with almost two weeks more to go in December.

The first gentleman apparently decided to start entering trades using his discretion, the only problem being that the customer never gave him that discretion, and the firm never accepted the account as a discretionary account. Oopsie. The results? 60-day suspension from any FINRA firm in any capacity, $7,500 fine, and "disgorgement" of the $2,300 or so he made in commissions. The next guy up apparently thought FINRA and his compliance officers were kidding about the requirement to notify the firm of any outside business activities. I mean, I take my hat off to the guy for making $251,616.18, but I'm wondering if it was actually worth it, what with the whole four-month suspension and $10,000 fine that will now go into "broker check," the publicly available part of CRD, indefinitely. Then again, compared to the next guy on the list, that gentleman actually got off easy. The next individual only earned $13,950 through outside business activities, but through AWC (acceptance, waiver, and consent) was permanently barred from any association with any member firm.
Ever. Of course, he didn't help himself any by refusing to comply with FINRA's requests for information. Here's a tip--it's always better to cooperate with FINRA, no matter how much you have screwed up.

I guess the title of this post is a little off, with the "boys" reference, as Ms. Damon up there in Minnesota there showed by exercising discretion that she didn't actually have. She's also a walking test question, as she "only" used "time and price discretion," but, she used it the day after the order was entered. An order such as, "Buy me 1,000 shares of MSFT" is a "market not held order," but it's only good for that particular day. If not, some poor customer could have put in an order to buy 1,000 shares of Google when it was trading for $90 and then getting confirmation 10 months later that he just got filled at $555 a share. Of course, I think she'll remember that next time, after the 10-day suspension and $10,000 fine.

The next guy, in upstate New York, received a harsh $25,000 fine and one-year suspension for posting electronic communications on an Internet message board about a stock that his broker-dealer makes a market in. As the notice points out, "The findings stated that Dunne posted the advertisements without a registered principal’s prior approval and none of the advertisements named the firm or reflected Dunne’s relationship with the firm. The findings also stated that the advertisements constituted purchase recommendations for the company and failed to provide, or offer to furnish upon request, available investment information supporting each recommendation; failed to disclose that Dunne’s firm was a market maker in the company; that the firm and/or its officers or partners had a financial interest in the company, the nature of the
financial interest; and failed to provide a fair and balanced assessment, referring only to the company’s upside without any disclosure of the risks."
Oh well, it would take too much time to go through all these disciplinary actions in a blog post, but you are advised to go through them yourself at
Have a nice weekend, and STAY OUT OF TROUBLE.

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