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FINRA Cites Firm and Director For Email Supervision
March 18, 2016
BrokeAndBroker.com Blog publisher Bill Singer is known as an unabashed critic of both Wall Street self-regulation and of the industry's leading self-regulatory organization FINRA. To his fans, Bill is a principled voice of reason who is unafraid of pointing out the shortcomings of what he views as a conflicted and overly-bureaucratic regulator that too often promotes the agenda of its large member firms. To his detractors, Bill is a pain-in-the-ass gadfly who simply harps about everything and anything FINRA does or doesn't do. If you ask Bill, his response would likely be that whether you are friend or foe, why don't you simply click on all the Google Ads on his blog so that he generates more income? Yes . . . Bill is a sarcastic cynic who relishes his role as one of those rare industry characters. Getting back to today's blog, you will find Bill in the rare posture of complimenting and agreeing with FINRA on a recent regulatory settlement. You might wish to print this one out and save it. Bill is even willing to autograph today's article for FINRA and its employees at the modest charge of $15 per autograph (a personalized message will be added for an additional $10).
This offer is void where prohibited. Limit one per FINRA household. Not available in Guam or North Dakota. The terms of this offer may seem larger in your rear-view mirror. This offer does not constitute an offer, which may only be made pursuant to a written statement or via those impossible-to-read messages at the bottom of most television commercials. Brought to you by the "Harold Stassen for President Political Inaction Committee."
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, Titus Rockefeller, LLC, and Richard Stoyeck submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Titus Rockefeller, LLC, and Richard Stoyeck, Respondents (AWC 2015045794201, March 14, 2016).
According to the AWC, Titus Rockefeller LLC ("TRL") has been a FINRA registered member firm since 1997 and currently employs eight registered individuals.
The AWC further asserts that Richard Stoyeck first became registered with FINRA in 1978 and is currently TRL's Managing Director. Although not disclosed in the AWC, online FINRA BrokerCheck records as of March 18, 2016, disclose that Stoyeck has a "Percentage of Ownership" of TRL of "50% but less than 75%." The AWC asserts that in November 1992, Stoyeck entered into a prior AWC with FINRA based upon allegations that he had placed orders containing excessive sales credits. The AWC imposed a Censure, $5,000 fine, five-day suspension, and ordered $17,025 restitution to customer.
Personal Email Addresses
According to the AWC, from December 2012 through May 2015, acting through Stoyeck, TRL knew that certain registered representatives were using personal email addresses to conduct firm business in violation of the firm's written supervisory procedures. Despite having said awareness, TRL and Stoyeck allegedly failed to establish, maintain, and enforce an adequate supervisory system to ensure that business-related emails to/from the cited personal email addresses were retained and subjected to supervision. Finally, the AWC alleges that Respondents had failed to preserve all business-related email communications.
The AWC deemed the conduct at issue to constituted violations by TRL and Stoyeck of NASD Conduct Rule 3010 and FINRA Rules 3110, 4511, and 2010; additionally, TRL was found to have violated SEC Rule 17a-4 and Stoyeck was found to have violated FINRA Rule 2010 by causing the firm's Rule 17a violation.
Sanctions
In accordance with the terms of the AWC, FINRA imposed upon:
- Stoyeck: $5,000 fine and a 15-business-day suspension in a Principal-only capacity
- TRL: Censure and $15,000 fine
FINRA imposed a lower fine in this case after it considered, among other things, the Firm's revenues and financial resources. See Notice to Members 06-55.
Bill Singer's Comment
A staunch a FINRA critic as I am, nonetheless, I will concede that the purported non-compliant timeframe from December 2012 to May 2015 is a substantial period of time for any FINRA member firm to get its arms around one of the basic requirements of Wall Street supervision: the review of incoming and outgoing business-related correspondence. Keep in mind that FINRA has cited TRL and Stoyeck for two lapses. First, for about 2 1/2 years, the respondents were allegedly on notice (or, worse, actually aware) that registered reps were using their personal email addresses to communicate business-related matters. Second, there was a failure to preserve "all" business-related communications. Given that the respondents entered into the settlement with FINRA, we are going to have to assume that the allegations and facts are accurate and, accordingly, the sanctions seem fair and balanced in light of those factors.
An interesting aspect to this matter is the explanation in the AWC that the $15,000 fine upon TRL was below the FINRA Sanctions Guidelines and represented a consideration of TRL's revenues and resources. NASD Notice to Members 06-55 is entitled "GUIDANCE / Sanction Guidelines / NASD Revises Sanction Guidelines to Further Address
Consideration of a Firm's Size" (NASD NTM 06-55, September 2006) explains in its "Executive Summary":
[I]n particular, as revised, the Guidelines state that, in determining sanctions for violations that are not egregious and do not involve fraud, adjudicators should take into account a firm's revenues, as well as other factors indicative of firm size. The revisions also state that, as a result of adjudicators' consideration of size and available resources, a fine that is below the minimum level otherwise recommended in the Guidelines may be imposed . . .
There are a number of points that I would normally opt to make at this point about FINRA's policies when it comes to when it decides to conduct an investigation, who it decides to investigate, and how the initial demand for sanctions is composed. Regular readers of the BrokeAndBroker.com Blog know that such commentary is often critical of the self-regulatory organization's "politics" of regulation. That being said, I truly don't have much, if any, reason to take any shots concerning today's AWC, which presented the facts and rationale in a fairly balanced manner. As such, let me compliment FINRA on this effort and offer a rare tip of my hat.