An irreverent Wall Street Blog
Compliance Advisor Fined and Suspended For Falsifying Data
November 2, 2015
It's sort of a reasonable expectation, I would say, that
if you are hired to do a job, you have an obligation to do what you're being
paid to do. Of course, sometimes you
bite off more than you can chew and you're overwhelmed; and, sometimes, you
figure that if no one is looking over your shoulder, hell, I'll get to this
crap when I'm in the mood. In a recent FINRA regulatory settlement, we are confronted
with a respondent who didn't quite seem to be clocking in everyday and paying
attention to the details. Let's just say, we got a guy who may have gone
through the motions . . . if even
that.
Case In
Point
For the purpose of proposing a
settlement of rule violations alleged by the Financial Industry Regulatory
Authority ("FINRA"), without admitting or denying the findings, prior
to a regulatory hearing, and without an adjudication of any issue, John Walter
Ruggles submitted a Letter of Acceptance, Waiver and Consent ("AWC"),
which FINRA accepted. In the Matter of John Walter Ruggles,
Respondent (AWC 2015045211801, October 23,
2015).
Ruggles first became registered
in 1993 and was registered with six FINRA member firms during his career. From
May 5, 2014 to March 16, 2015, he was associated with FINRA member firm City
Securities Corporation as a General Securities Representative, Principal, and
Sales Supervisor. The AWC asserts that Ruggles had no prior relevant
disciplinary history.
The
MCDs
The AWC alleges that City
Securities hired Ruggles as a Compliance Advisor, and among his assigned tasks
was to generate monthly FINRA Municipal Continuing Disclosure Reports (the
"MCDs") in compliance with Municipal Securities Rulemaking Board ("MSRB")
and federal securities laws disclosure requirements. Ruggles was required to
populate the MCDs with customer transaction data and to email the
data to the management of the City Securities's Private Client Group ("PCG").
The AWC asserts that the PCG used the information in Ruggles' emails to
prepared customer satisfaction letters in which recent bond trading activity
was set forth.
Takin'
Care of Business?
The AWC asserts that on March 4,
2015, Ruggles' supervisor noticed that Ruggles had not yet run the February
2015 MCD and asked for documentation
evidencing the performance of necessary tasks back to June 2014. In response to
that query, the AWC alleges that on March 11, 2015, Ruggles provided
six printed copies of e-mails and the supporting trade details.
Fabricated
Documentation
Whatever raised the supervisor's
concerns, it turned out that Ruggles had fabricated the e-mails and falsified
the contents of both the six e-mails referenced above and their supporting
trade reports in order to give the false appearance that he had completed his
required compliance reviews.
Bad enough that he falsified the
supporting compliance documents, but the clumsiness of Ruggles efforts are
clearly spelled out in the AWC, which notes
that:
- although the falsified e-mails purported to date back to June 2014, the subject lines all made reference to either July or September of 2014;
- City Securities's electronic compliance files did not contain of any of the six e-mails Ruggles provided;
- two of the MCDs provided by Ruggles contained falsified and altered transaction data (pointedly, he had altered execution dates for certain customer bond trades); and
- between October 31, 2014, and March 2, 2015, Ruggles had not viewed the MCDs despite having marked the compliance task completed.
Over and
Out
Online FINRA BrokerCheck
records as of November 2, 2015, disclose that he was "Discharged" by City
Securities on March 16, 2015, based upon allegations
of:
FAILURE TO ADEQUATELY PERFORM JOB FUNCTIONS AND ALLEGED FALSIFICATION OF INTERNAL COMPLIANCE RECORDS
FINRA deemed Ruggles'
falsification of two MCDs and six e-mails as constituting violations of FINRA
Rule 2010. Moreover, by falsifying the MCD data, Ruggles was also deemed to
have entered false information in his firm's books and records, causing the
maintenance of inaccurate books and records in violation of Section 17(a) of
the Securities Exchange Act of 1934 and Rule 17a-4 thereunder, thus violating
FINRA Rules 4511 and 2010.
In accordance with the terms of
the AWC, FINRA imposed upon Ruggles a $5,000 fine and 14-month suspension from
association with any FINRA member in any
capacity.
Bill Singer's
Comment
According to the AWC, on March
4, 2015, Ruggles' supervisor was aware of the late filing/preparation of the
February 2015 MCD. The absence of the February report should have
troubled the supervisor but that hardly explains why that individual wanted
proof from Ruggles' of the subordinate's compliance with his job duties going
back to June 2014. Although we can all come up with any number of reasonable
explanations as to why any supervisor would request proof that a subordinate
had done his or her job in light of a failure to timely produce a required
monthly report, regulatory settlements should offer meaningful content and
context whenever possible. In that spirit, the AWC would have
performed a helpful service by informing industry compliance professionals as
to what the red flags were that motivated the supervisor to demand proof of
some eight months of job performance from Ruggles.
Kudos to the supervisor who smelled smoke and moved to put out a small fire before it became a conflagration. Job well done!