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After Credit Card Expense Suspension, Stockbroker Barred By Liens And Judgments
February 27, 2015
If you were lucky to dodge a regulatory bullet, don't count on your deft footwork to bail you out a second time. In a recent FINRA regulatory settlement, we have the circumstance of a registered person who improperly charged his firm's credit card for personal expenses and managed to resolve things via a relatively modest suspension and a fine. Unfortunately, it was a short-lived reprieve and the second time he was named as a Respondent in a regulatory matter, his career would end in flames.
Case In Point
For the purpose of proposing a settlement of rule violations alleged by the Financial dustry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, David Randolph Haase submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of David Randolph Haase, Respondent (AWC #2014039865701, February 24, 2015).
In 1994, Haase was first registered with a FINRA member firm and thereafter was registered with several firms. For purposes of this AWC, the following registrations are noted:
- April 2010 through June 2011: BMO Capital Markets Corp.;
- September 2011 until February 2012: Suntrust Robinson Humphrey, Inc
- June 2012 to January 14, 2014: White Oak Merchant Partners LLC
February 2014 AWC
Pursuant to online "Disciplinary and Other FINRA Actions" (February 2014, at pages 45 - 46) [Ed: highlight in yellow supplied]:
David Randolph Haase (CRD #2534907, Registered Representative, Wayne, Pennsylvania) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $20,000, suspended from association with any FINRA member in any capacity for six weeks, and required to remain current with required payments to his former member firm. Without admitting or denying the findings, Haase consented to the described sanctions and to the entry of findings that he improperly charged personal expenses to his firm-issued credit card and improperly used the firm's car service account for personal travel. The findings stated that the firm's WSPs prohibited employees' personal use of the corporate credit card and firm car service account. In Haase's department, in certain limited circumstances, employees were permitted to use the corporate credit card and firm car service for personal expenses and travel, as long as they reimbursed the firm within a reasonable time, usually within 30 days of the transaction date. Haase charged personal expenses on the corporate credit card but failed to timely submit expense reports to the firm, reconcile expenses or timely and fully reimburse the firm. The findings also stated that Haase entered into a written agreement with the firm to repay the agreed-upon amount of outstanding personal corporate credit card and car service expenses totaling approximately $40,000.The suspension is in effect from January 21, 2014, through March 3, 2014. (FINRA Case #2011028452902).
Pursuant to FINRA's online BrokerCheck records as of February 27, 2015, Haase was "Discharged" by BMO on June 8, 2011, based upon allegations:
USE OF CORPORATE CRDIT [sic] CARD AND CAR SERVICE FOR PERSONAL EXPENSES CONTRARY TO COMPANY POLICY
Judgments and a Bankruptcy
The current AWC alleged that between February 2010 and January 2014, Haase "willfully" failed to timely amend his Uniform Application for Securities Industry Registration or Transfer ("Form U4"). The AWC asserts that Haase was required to disclose the following events (the dates of the Form U4 disclosures are noted with the times in excess of timely notice set forth in parenthesis):
- January 14, 2010, Haase filed for Chapter 11 bankruptcy: April 20, 2010 (63 days);
- January 7,2011, a $238,000 civil judgment: January 10, 2014 (2 years and 11 months);
- March 12,2012, a $71,960 civil judgment: January 10, 2014 (2 years and 9 months); and
- February 12,2013, a $70,321 civil judgment: January 10, 2014 (10 months).
Additionally, between 2011 and 2013, the AWC alleged that Haase falsely attested on annual compliance questionnaires at BMO, Suntrust and White Oak that he did not have any unsatisfied judgments.
Article V of FINRA's By-Laws: Registered Representatives and Associated Person, provides as follows:
Application for RegistrationSec. 2. (a) Application by any person for registration with the Corporation, properly signed by the applicant, shall be made to the Corporation via electronic process or such other process as the Corporation may prescribe, on the form to be prescribed by the Corporation and shall contain:(1) an agreement to comply with the federal securities laws, the rules and regulations thereunder, the rules of the Municipal Securities Rulemaking Board and the Treasury Department, the By-Laws of the Corporation, NASD Regulation, and NASD Dispute Resolution, the Rules of the Corporation, and all rulings, orders, directions, and decisions issued and sanctions imposed under the Rules of the Corporation; and(2) such other reasonable information with respect to the applicant as the Corporation may require.(b) The Corporation shall not approve an application for registration of any person who is not eligible to be an associated person of a member under the provisions of Article III, Section 3.(c) Every application for registration filed with the Corporation shall be kept current at all times by supplementary amendments via electronic process or such other process as the Corporation may prescribe to the original application. Such amendment to the application shall be filed with the Corporation not later than 30 days after learning of the facts or circumstances giving rise to the amendment. If such amendment involves a statutory disqualification as defined in Section 3(a)(39) and Section 15(b)(4) of the Act, such amendment shall be filed not later than ten days after such disqualification occurs.
In addition to the above By-Law provision, FINRA Rule 1122: Filing of Misleading Information as to Membership or Registration, provides:
Finally, the Form U4 asks the following:No member or person associated with a member shall file with FINRA information with respect to membership or registration which is incomplete or inaccurate so as to be misleading, or which could in any way tend to mislead, or fail to correct such filing after notice thereof.
The Impact of WillfulnessFinancial Disclosure14K. Within the past 10 years:(1) have you made a compromise with creditors, filed a bankruptcy petition or been the subject of an involuntary bankruptcy petition?(2) based upon events that occurred while you exercised control over it, has an organization made a compromise with creditors, filed a bankruptcy petition or been the subject of an involuntary bankruptcy petition?(3) based upon events that occurred while you exercised control over it, has a broker or dealer been the subject of an involuntary bankruptcy petition, or had a trustee appointed, or had a direct payment procedure initiated under the Securities Investor Protection Act?14L. Has a bonding company ever denied, paid out on, or revoked a bond for you?14M. Do you have any unsatisfied judgments or liens against you?
The finding of willful (intentional) failure to timely disclose a material fact as required on the Form U4 will expose you to a statutory disqualification. For those of you who enjoy a good puzzle, here's the language from the cited section of the Securities Exchange Act:
(39) A person is subject to a ‘‘statutory disqualification'' with respect to membership or participation in, or association with a member of, a self-regulatory organization, if such person. . .(F) has committed or omitted any act, or is subject to an order or finding, enumerated in subparagraph (D), (E), (H), or (G) of paragraph (4) of section 15(b) of this title, has been convicted of any offense specified in subparagraph (B) of such paragraph (4) or any other felony within ten years of the date of the filing of an application for membership or participation in, or to become associated with a member of, such self-regulatory organization, is enjoined from any action, conduct, or practice specified in subparagraph (C) of such paragraph (4), has willfully made or caused to be made in any application for membership or participation in, or to become associated with a member of, a self-regulatory organization, report required to be filed with a self-regulatory organization, or proceeding before a self-regulatory organization, any statement which was at the time, and in the light of the circumstances under which it was made, false or misleading with respect to any material fact, or has omitted to state in any such application, report, or proceeding any material fact which is required to be stated therein.
Summing It Up
As noted in the February 2014 AWC, Haase undertook to remain current with the terms of a written agreement with BMO that required him to repay $40,000 to the firm in $1,000 monthly installments beginning October 2013. The 2015 AWC asserts that he honored the first five months of that undertaking to the amount of $5,000 but failed to make any further payments, in violation of the AWC and, accordingly, FINRA Rule 2010.
Additionally, Haase was deemed to have willfully failed to timely amend his Form U4 to disclose the three judgments and the bankruptcy in violation of he Between 2010 and 2014, Haase failed to timely amend his Uniform Application Article V, Section 2(c) of the FINRA By-Laws and FINRA Rules 1122 and 2010. In accordance with the terms of the 2015 AWC, FINRA imposed upon Haase a Bar from association with any FINRA member in any capacity.
As set forth in the 2015 AWC, Haase acknowledged the impact of the "willful" finding:
I understand that this settlement includes a finding that I willfully omitted to state a material fact on a Form U4, and that under Section 3(a)(39)(F) of the Securities Exchange Act of 1934 and Article III, Section 4 of FINRA's By-Laws, this omission makes me subject to a statutory disqualification with respect to association with a member.