As Wall Street securities lawyers, we know what the law requires and what regulators expect from broker-dealers and we routinely advise industry representatives on compliance so that they can avoid potential problems traversing the vast regulatory schemes that govern the securities industry.
The consequences to a broker-dealer for failing to comply can be harsh. Losing the ability to work in the industry is one of the harshest blows one can experience. We report on cases in which industry members have been fined or barred so that others might ensure that they are in compliance and are reminded of some of the activities that can lead to major consequences.
In a recent case out of Chicago, a now-former registered representative has been barred by the Financial Industry Regulatory Authority (FINRA) for two major alleged breaches of industry rules and regulations: insider trading and failing to truthfully respond to questions by investigators in FINRA's Office of Fraud Detection and Market Intelligence (OFDMI).
The former representative has also been fined for the illegal profits gained during illegal transactions. He had served as a divisional vice president of Pacific Select Distributors, Inc. for a five-year period.
During this time, he obtained significant insider information about Boots & Coots, Inc. (WEL) that the company was about to be acquired. He then purchased 73,000 shares of the company prior to the acquisition by Halliburton, which resulted in nearly $70,000 in illegal gains. He then sold his shares and profited as a result. While working this case, FINRA found that this representative had "purchased shares of WEL while in possession of material, non-public information about the company's pending acquisition."
FINRA also found that he allegedly failed to comply with FINRA Rule 8210, requiring an individual who is under investigation to testify truthfully while under oath. Rather, it is alleged that the member gave untruthful statements to OFDMI investigators responding with false information that the WEL shares were purchased based on research that he had performed. He did not disclose that an insider provided him with information and denied knowing anyone "currently or formerly employed at WEL." But this allegedly turned out to be false.
This case underscores the fact that FINRA has made its intentions clear to members -- they will deal "aggressively with any individuals who lie to or mislead our investigators."
The New York securities regulation and enforcement attorneys at Gusrae Kaplan Nusbaum PLLC represent broker-dealers in regulatory and enforcement matters before FINRA and other regulatory agencies. Our lawyers advise and defend industry members in matters involving a broad spectrum of issues before regulatory bodies, including sales practice violations; Forms U4 and U5 reporting violations; Insider trading; Trading issues and many more areas of regulation and enforcement. Please contact our law firm to consult with one of our attorneys.
