Sportspicks.com Founder Loses FINRA Regulatory Wager

In and out. On and off. Registered and unregistered. There are points and counterpoints to many things in life and on Wall Street. There are things that you can do when unregistered that do not require any regulatory disclosures; but, should you return to the industry in a registered capacity, those past acts may require a current disclosure. Sometimes, things may slip your mind and you commit an inadvertent violation; other times, a regulator may not be convinced that your omission was simply caused by forgetfulness or misunderstanding. The difference between an inadvertent and an intentional nondisclosure may be the difference between staying in the business and being tossed to the curb. See how this all comes together in a recent FINRA settlement.

SIDE BAR: Online FINRA BrokerCheck records as of September 27, 2016, disclose the following registration history for Newman:

• Integrity Trading, Inc.: July 2004 to December 2004;
• TD Ameritrade, Inc.: June 2005 to November 2012; and
• E*TRADE Securities LLC: May 2014 to July 2014

[B]usiness that would: provide sports  handicapping information to its subscriber base; run sports contests for profit; and work with other third party businesses to generate additional revenue.

Customer Complaint/Arbitration/Civil Litigation Disclosure

14I. (1) Have you ever been named as a respondent/defendant in an investment-related, consumer-initiated arbitration or civil litigation which alleged that you were involved in one or more sales practice violations and which:

(a) is still pending, or;

(b) resulted in an arbitration award or civil judgment against you, regardless of amount, or;

(c) was settled, prior to 05/18/2009, for an amount of $10,000 or more, or;

(d) was settled, on or after 05/18/2009, for an amount of $15,000 or more?

(2) Have you ever been the subject of an investment-related, consumer-initiated (written or oral) complaint, which alleged that you were involved in one or more sales practice violations, and which:

(a) was settled, prior to 05/18/2009, for an amount of $10,000 or more, or;

(b) was settled, on or after 05/18/2009, for an amount of $15,000 or more?  

(3) Within the past twenty four (24) months, have you been the subject of an investment-related, consumer-initiated, written complaint, not otherwise reported under question 14I(2) above, which:

(a) alleged that you were involved in one or more sales practice violations and contained a claim for compensatory damages of $5,000 or more (if no damage amount is alleged, the complaint must be reported unless the firm has made a good faith determination that the damages from the alleged conduct would be less than $5,000), or;

(b) alleged that you were involved in forgery, theft, misappropriation or conversion of funds or securities?

Answer questions (4) and (5) below only for arbitration claims or civil litigation filed on or after 05/18/2009.

(4) Have you ever been the subject of an investment-related, consumer-initiated arbitration claim or civil litigation which alleged that you were involved in one or more sales practice violations, and which:

(a) was settled for an amount of $15,000 or more, or;

(b) resulted in an arbitration award or civil judgment against any named respondent(s)/defendant(s), regardless of amount?  

(5) Within the past twenty four (24) months, have you been the subject of an investment-related, consumer-initiated arbitration claim or civil litigation not otherwise reported under question 14I(4) above, which:

(a) alleged that you were involved in one or more sales practice violations and contained a claim for compensatory damages of $5,000 or more (if no damage amount is alleged, the arbitration claim or civil litigation must be reported unless the firm has made a good faith determination that the damages from the alleged conduct would be less than $5,000), or;

(b) alleged that you were involved in forgery, theft, misappropriation or conversion of funds or securities?

FINRA Conduct Rule 3270: Outside Business Activities of Registered Persons

No registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member, in such form as specified by the member. Passive investments and activities subject to the requirements of NASD Rule 3040 shall be exempted from this requirement.

*** Supplementary Material ***

01 Obligations of Member Receiving Notice. Upon receipt of a written notice under Rule 3270, a member shall consider whether the proposed activity will: (1) interfere with or otherwise compromise the registered person's responsibilities to the member and/or the member's customers or (2) be viewed by customers or the public as part of the member's business based upon, among other factors, the nature of the proposed activity and the manner in which it will be offered. Based on the member's review of such factors, the member must evaluate the advisability of imposing specific conditions or limitations on a registered person's outside business activity, including where circumstances warrant, prohibiting the activity. A member also must evaluate the proposed activity to determine whether the activity properly is characterized as an outside business activity or whether it should be treated as an outside securities activity subject to the requirements of NASD Rule 3040. A member must keep a record of its compliance with these obligations with respect to each written notice received and must preserve this record for the period of time and accessibility specified in SEA Rule 17a-4(e)(1).

• Sportspicks.com
• Newman
• Offer of Settlement
• FINRA
• OBA
• U4
• U5
• Form U4
• Rule 3270
• Rule 1122
• BrokeAndBroker
• Bill Singer