Bill Singer Pans FINRA AWC Peeps Protocol
March 7, 2017
I am formally calling upon the august Wall Street self-regulatory organization, the Financial Industry Regulatory Authority, to stop putting Peeps into vacuums -- and to stop putting Peeps into Oreo cookies. As three recent FINRA regulatory settlements show, the regulator's Peeps protocol produces putrid policies.
Case In Point I
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, Diana Lynne Stamborski submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Diana Lynne Stamborski, Respondent (AWC 2015044783403, February 14, 2017).
The Diana Stamborski AWC asserts that she was first registered in 1984, and by 1995, she was registered with FINRA member firm LaSalle St. Securities, LLC.
Husband's OBA
While working at LaSalle, Stamborski and her direct supervisor were involved in various outside businesses, one of which was a financing and factoring company owned by Stamborski's husband, who was also registered with LaSalle and supervised by the same supervisor.
The Diana Stamborski AWC asserts that:
In 2008, based on a recommendation made by Stamborski's supervisor at LaSalle, a large, religiously-affiliated institutional customer began providing funds to finance deals arranged by the outside business owned by Stamborksi's husband . . .
In attempting to explain how Stamborski and her supervisor were compensated via their role in introducing the customer, the Diana Stamborski AWC offer this:
[S]tamborski received approximately $3,800 in compensation from her husband's company related to the customer's financing activities which was a portion of the finder's fees paid to her supervisor when the firm customer provided funds to participate in deals through her husband's company.
SIDE BAR: Whoa --- that's one tortured sentence; let's see if we can slowly parse our way through that morass.
Apparently the husband's company paid an unspecified referral fee to the unnamed supervisor: Why FINRA hides that information escapes me. Although the Diana Stamborski AWC asserts that she "received approximately $3,800 in compensation from her husband's company," those funds are also characterized as "a portion of the finder's fees paid to her supervisor." Consequently, it's not clear as to whether she earned her own referral fee and was paid that ($3,800) directly by the husband's company, or, in contradistinction, the supervisor earned the referral fee and by some unstated agreement, she was paid (either from by the supervisor or her husband's company) her share of the supervisor's fee.
Customer Complaint
Following her voluntary termination in December 2014, the Diana Stamborski AWC asserts that her Uniform Termination Notice for Securities Industry Registration ("Form U5") was amended on March 16, 2015 to disclose a customer's written complaint of an unsuitable investment. Online FINRA BrokerCheck records for Diana Stamborski as of March 7, 2017, disclose under the heading "Customer Dispute - Pending" that in July 2015, a customer filed a Complaint involving a fixed annuity and alleging:
UNSUITABLE INVESTMENTS NOVEMBER 2013 - MARCH 2014
The Complaint is characterized as seeking $2,329,000 in damages and having "Evolved into Arbitration/CFTC reparation (the individual is a named party)."
FINRA Sanctions
FINRA deemed Stamborksi's conduct to have constituted violations of NASD Rule 3030 (in effect before December 15, 2010) and FINRA Rules 3270 (in effect since December 15, 2010; and of FINRA Rule 2010. In accordance with the terms of the Diana Stamborski AWC, FINRA imposed upon Stamborski a $5,000 fine and a two-month suspension from association with a FlNRA member firm in any capacity.
Unnamed But Not Forgotten
Not referenced or named in the Stamborski AWC was whether her unnamed husband or the unnamed mutual supervisor were investigated by FINRA or named as respondents in any regulatory matter. As BrokeAndBroker.com Blog readers know, publisher Bill Singer never sleeps and is indefatigable when it comes to ferreting out the hidden mysteries of Wall Street regulation. As such, Bill uncovered the following FINRA regulatory settlements (neither of which was even remotely hinted at or referenced in the Diana Stamborski AWC):
Case In Point II
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, Thomas E. Stamborski submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Thomas E. Stamborski, Respondent (AWC 2015044783401 April 4, 2016 ).
OBA
The Thomas Stamborski AWC asserts that he was first registered in 1984, and by 2005 (ten years after his wife Diana), he was registered with LaSalle. Online FINRA BrokerCheck records for Thomas Stamborski as of March 7, 2017, disclose under the heading of "Employment Separation After Allegations" that Thomas Stamborski voluntarily resigned from LaSalle on December 31, 2015 (about one year after his wife Diana) based upon allegations that:
Representative failed to update an Outside Business Activity with his firm when a material change occurred.
FINRA Investigation
The Thomas Stamborski AWC asserts that on January 5, 2016, FINRA was investigating the circumstances of his resignation and demanded that he produce documents and information. After being granted an extension of time to respond beyond January 26, 2016, his attorney notified the self-regulatory organization that his client declined to respond and would not testify.
FINRA Sanctions
In considerations of Thomas Stamborski's failure to cooperate in its investigation, FINRA deemed his conduct in violation of FINRA Rules 8210 and 2010. In accordance with the terms of the AWC, FINRA impose a Bar upon Thomas Stamborski from associating with any FINRA member in any capacity.
Case In Point III
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, Joel Martin Weiner submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Joel Martin Weiner, Respondent (AWC 2015044783402 December 21, 2016).
Loan Funding
The Weiner AWC asserts that Weiner was first registered in 1987, and by 1995, he was registered with LaSalle. The Weiner AWC asserts that:
In late 2007, Weiner recommended that a large, religiously-affiliated institutional customer commit funds to an outside business owned by a LaSalle registered representative whom Weiner supervised. The outside business facilitated high-risk loans to small and start-up businesses. Based on Weiner's recommendation, his customer began providing funds to the outside business to finance such loans in amounts ranging from $300,000 to $1.2 million, eventually aggregating to $2.6 million in outstanding loans by late 2014. Weiner helped the customer set up the bank account it used to fund the loans, and he maintained signature control over that account as well as discretion to commit the funds. Over several years, Weiner received approximately $65,000 in aggregate finder's fees in connection with his customer's loan-funding transactions.
In late 2014, Weiner's customer changed its internal management, ended its loan-funding activities, and demanded repayment of its outstanding loans. By February 2015, only half of those loans had been repaid.
OBA
The Weiner AWC asserts that he did not provide the requisite OBA notice to LaSalle; and that he provided inaccurate responses about the OBA on the firm's ACQ from 2009. Pointedly, the Weiner AWC alleges that he:
responded "no" to a question asking whether he maintained control over any accounts outside of LaSalle and did not disclose his control over his customer's above-referenced bank account used to finance loans. . .
The Weiner AWC asserts that he voluntarily terminated his association with LaSalle in October 2014.
Online FINRA BrokerCheck records for Weiner as of March 7, 2017, disclose under the heading "Customer Dispute - Pending" that in July 2015, a customer filed a Complaint involving a fixed annuity and alleging:
UNSUITABLE INVESTMENTS NOVEMBER 2013 - MARCH 2014
The Complaint is characterized as seeking $2,329,000 in damages and having "Evolved into Arbitration/CFTC reparation (the individual is a named party)."
FINRA deemed Weiner's conduct to constitute violations of NASD Rules 3030 and 2110 and FINRA Rules 3270 and 2010. In accordance with the terms of the Weiner AWC, FINRA imposed upon him a Bar from associating with any FINRA member in any capacity.
Law Offices
Diana Stamborski's BrokerCheck records disclose under the heading of "Other Business Activities" that she had been employed starting April 2007 by the "Law Offices of Joel M. Weiner, LLC as a paralegal. Weiner's practice is characterized in this disclosure as "estate planning, wills, trusts, real estate and securities law." Weiner's BrokerCheck records similarly disclose his outside law practice.
Peeps In A Vacuum / Peeps In An Oreo
In the Diana Stamborskis AWC, the most recent FINRA regulatory settlement presented among today's three matters, there is no mention of her husband's name (Thomas Stamborski) or the name of their mutual supervisor (Joel Wiener). There is no mention in the Diana Stamborskis AWC of the dollar amount of the pending customer complaint. There is no mention in the Diana Stamborskis AWC of the prior Thomas Stamborskis AWC or the Weiner AWC. Similarly, there is no similar disclosure of names or amounts in the two earlier AWCs involving the husband and the supervisor (which, in fairness, may partially be excused given ongoing developments).
The events involved in the three AWC are related. They did not occur in a vacuum. Nonetheless, FINRA placed these three cases into three separate vacuums. Putting AWCs into a vacuum is like putting Peeps in a vacuum. Things implode. In the end, things look much smaller than they really are.
Putting Peeps into Oreos also has some odd side effects!
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