An irreverent Wall Street Blog
Borrowing From Customer, Tax Liens, Settling Away,Social Media, And More!
February 26, 2016
Sometimes a regulatory matter is stunning not for the seriousness of the misconduct or the dollars at issue but, more simply, because of the sheer number of violations addressed. In a recent Financial Industry Regulatory Authority settlement with a registered representative, we have just such a case. It's as if the stockbroker was a newly launched pinball that managed to hit virtually every bumper and every bonus-point device and, as it fell to the bottom of the field, you perfectly timed the flipper to send it all the way back up to the top, where all the bells rang and the lights flashed again.
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, Vincent A. Casillo submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Vincent A. Casillo , Respondent (AWC 2014041544201, February 22, 2016).
In 2005, Casillo first became registered with FINRA member firm MetLife Securities Inc. The AWC asserts that Casillo had no prior disciplinary history in the securities industry.
Borrowing From Customer
The AWC alleges that around July 2010, in order to pay for some personal expenses, Casillo borrowed approximately $2,000 from one of his MetLife customers, who is identified only as "LP" in the AWC. FINRA Rule 3240 prohibits registered persons from borrowing funds from their customers unless the borrowing arrangement satisfies certain exceptions or conditions; moreover, any borrowing must be subject to the employing member firm's written procedures. During the relevant times cited above in the borrowing by Casillo, MetLif'es written policies and procedures prohibited employees from borrowing funds from a customer.
As a result of Casillo's borrowing of $2,000 from LP, FINRA deemed that conduct to constitute a violation of FINRA Rules 3240 and 2010.
Liening Tower of IRS
The AWC alleges that in January and February 2012, the Internal Revenue Service ("IRS") filed, respectively, $3,126.81 and $7,761.25 tax liens against Casillo, which remained unsatisfied during his tenure at MetLife. The AWC asserts that Casillo was aware of the filing and persistence of the tax liens and also of his regulatory obligation to report those circumstances. Pointedly, Casillo was required to amend his Uniform Application for Securities Industry Registration or Transfer ("Form U4") within 30-days of his awareness of the filing of the liens. The AWC asserts that in June 2014, after MetLife had discovered the existence of IRS liens, that firm amended Casillo's Form U4 to disclose the events. FINRA deemed that Casilk's failure to amend his Form U4 was "willful."
As a result of Casillo's failure to timely disclose the IRS liens, FINRA deemed that he had willfully failed to make said disclosures in violation of Article V, Section 2(c) of the FINRA By-Laws and FINRA Rules 1122 and 2010.
Trust Me. This Is Your Account's Value
The AWC alleges that around August 2012, LP complained to MetLife that during discussions with Casillo, he had overstated the value of her and her husband's joint account by about $86,000. Following an investigation, MetLife informed LP around October 2012 that the firm had denied her complaint.
Not So "Social" Media
About four months after his firm conveyed its denial of LP's claims, Casillo sent (in February 2013) at least two communications via his social media to the customer in which he attempted to resolve her complaint. During the relevant times, MetLife's written policies and procedures purportedly prohibited registered representatives from discussing business-related matters through social networking websites, and all such communications were supposed to be transmitted via a firm-hosted email account. Pointedly, MetLife had not approved Casillo's social media account for customer communications.
FINRA deemed Casillo's social media conduct as preventing MetLife from effectively supervising his communications with the public, and from complying with its obligations to preserve such communications in accordance with NASD Rule 3010(d). Accordingly, Casillo was deemed to have violated FINRA Rule 2010.
Settling Away and Off-The-Radar
From about May 2013 through August 2013, the AWC alleges that in an effort to settle LP's complaint, Casillo provided her with seven checks in amounts ranging from $5,000 to $50,000 for a total of $155,000, which were made payable to LP or to "Cash." Upon attempting to deposit some of the seven checks, LP and/or her husband were purportedly informed that the checks were returned for insufficient funds. During the relevant times, MetLife's written policies and procedures purportedly prohibited registered representatives from paying, or offering to pay, a customer to settle a complaint. The AWC asserts that Casillo's payments were made without disclosure to Metlife.
As a result of his engaging in the undisclosed customer settlement activity, FINRA deemed that Casillo violated FINRA Rule 2010.
"NONE" But Maybe Not Exactly So
In submitting June 2012 and December 2013 compliance questionnaires to MetLife, Casillo allegedly answered "NONE" to queries about whether there were circumstances requiring the amending of his Form U4, of which "liens" were specifically noted as a disclosable item. Also, Casillo answered "NONE" to a December 2013 questionnaire query asking whether he had posted information referencing MetLife on a social networking/third-party website.
FINRA deemed Casillo's false statements on the questionnaires to constitute violations of FINRA Rule 2010.
Unfriended and Unemployed
Online FINRA BrokerCheck records as of February 26, 2016, indicate the MetLife "Discharged" Casillo on August 7, 2014, based upon allegations that:
THE REGISTERED REPRESENTATIVE DID NOT FOLLOW FIRM POLICY WITH RESPECT TO THE REPORTING AND RESOLUTION OF A CUSTOMER COMPLAINT.
FINRA BrokerCheck records further disclose that on June 3, 2014, MetLife Securities received a customer complaint alleging:
CUSTOMERS HAVE ALLEGED THAT FUNDS WERE PROVIDED TO THE REPRESENTATIVE FOR AN INVESTMENT, BUT THE INVESTMENT WAS NEVER MADE. CUSTOMERS DID NOT PROVIDE A DATE FOR THE ALLEGED ACTIVITY BUT IT MAY HAVE OCCURRED ON OR ABOUT JUNE 2011.
As of the last reported "Status Date" of August 1, 2014, Met Life had "Denied" the customers claim.
FINRA Sanctions
In accordance with the terms of the AWC, FINRA imposed upon Casillo a 12-month suspension from association with any FINRA member in any capacities. FINRA declined to impose any monetary sanction in consideration of Casillo's July 8,2015, discharge in bankruptcy.
The AWC contains this acknowledgment by Casillo that he is now statutorily disqualified:
Bill Singer's CommentI understand that this settlement includes a finding that 1 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 1 934 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.
Compliments to FINRA for a comprehensive AWC replete with content and context. A truly superb regulatory effort on the investigative front and in implementing a meaningful settlement.