I’m thinking of leaving my firm. Before I do, I want to know what information I can take with me. I understand that, if my firm has signed on to the Broker Protocol, there are specific guidelines as to what I can take and how I have to go about it. How can I find out whether my firm is a signatory to the Broker Protocol?
The law firm that maintains the Broker Protocol is authorized to give out the list of firms only to signatories to the protocol. There is another law firm that does have a list of members that you can view on its website, and, while it appears to be current, I can’t confirm that with certainty. I checked with the firm that maintains the list, and it will provide it to any employee of a signatory.
The easiest answer is to request a copy of the list and if the law firm won’t give it to you, then your employer is not a signatory. Note that the protocol comes into play only if both firms are signatories. So if your current employer is a signatory, you should check with the prospective new employer to make sure it is as well.
When I joined my broker-dealer 20 years ago, I told officials about some real estate I owned and from which I received rental income. About a year ago, one of my clients approached me about forming a limited liability company to purchase some real estate together and rent it out. We agreed that I would manage the property and he would put up the money. My firm found out was unhappy. My manager suggested that, if I resigned, the firm would drop the matter. I did leave but the firm put down on my U5 that I resigned after allegations were made that accused me of “violating investment-related statutes, regulations, rules or industry standards of conduct.” What can I do?
A voluntary resignation from a firm does not automatically mean you’re in the clear if the firm has begun an inquiry into whether you’ve violated any rules. What happens next is that FINRA will most likely send you a letter asking you to provide information on the matter. Rest assured, it will have already asked your former employer to state why your U5 was marked that way, and FINRA will have all of your employer’s information.
When you respond, you should not try to say something that would directly contradict the information FINRA already has, as that will make a bad situation worse. Once FINRA has your side of the story, it will most likely make an offer to resolve the matter. This will be done by offering to enter into a letter of acceptance, waiver and consent.
If you agree to the offer, you will waive your right to challenge the allegations, and you will have a disclosable event on your CRD report. I would strongly urge you to consult with an attorney before you agree to the acceptance, waiver and consent letter. You may not want to go to a hearing, but, depending on the circumstances, FINRA is usually willing to negotiate for a lower sanction.
In your situation, the allegations are likely to be failure to disclose an outside business activity, taking a loan from a client and possibly selling away. The first stems from your failure to disclose the new business venture. It’s not enough that you told the firm of prior activities. You need to keep it apprised of new business enterprises. The second issue comes about because the client put up the money for the real estate. You could try to argue the money really went to the business and not to you personally, but I’d recommend you let your attorney make that argument. You could try to mitigate the last point by noting that the client approached you rather than the other way around, but again, it’s best to let your attorney make your case.
I was hired by a brokerage firm to be a FINOP. I thought I understood what was entailed, and had taken and passed the Series 27 exam, but honestly, I was in over my head, as my firm was very disorganized. As you can imagine, FINRA came in and fined the firm and suspended me from acting as a FINOP until I requalified. Truthfully, I’d prefer to go back to my old position, but the owner has had a hard time finding someone to replace me, and wants me to continue acting as FINOP until he finds a replacement. I’m not comfortable doing this, but I can’t say no to him. What should I do?
If you continue to act as a financial and operations principal when FINRA has specifically told you (and your firm) not to until you retake the exam, then you and the firm are likely to be hit with an even bigger fine next time.
In situations like this, it is not unusual for FINRA to return for a follow-up examination within six months or so to make sure the firm is complying with its order. When FINRA sees that it’s not, it will begin another disciplinary action and will most likely fine and suspend you and impose an even larger fine against the firm.
You need to tell the owner not only that you do not feel capable of doing the job (as evidenced already by FINRA’s findings) but also that you do not want to risk your career by violating a direct order from FINRA.
If he still requires that you perform as FINOP, you may need to resign and find employment elsewhere. I realize that’s a difficult decision, but you’re risking your career and finances by disregarding the FINRA ruling.
Alan J. Foxman is a contributing writer for On Wall Street, a partner in the law firm of Dew Foxman & Haugh and a senior consultant with National Compliance Services in Delray Beach, Fla.
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