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Chile Client Cases Chill FINRA
March 16, 2017FINRA gave a chilly reception to two associated persons from the same member firm who had received finders fees for their referrals of clients to the same Chilean accounting firms. Given the oddity of that fact pattern, it sort of seems -- maybe one could argue that it is strongly implied -- that the two respondents were working together? Given the oddity of FINRA's approach to regulating Wall Street, we're left with more questions than answers.
Case In Point: Echeverria AWC 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, Luis Echeverria submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Luis Echeverria, Respondent (AWC 2016050607001, March 8, 2017). The Echeverria AWC asserts that he entered the securities in 1998 and first became registered in 1999. By May 2015, Echeverria was associated as a Corporate Securities Representative with FINRA member firm Global Investor Services, L.C. The Echeverria AWC asserts that he does not have any prior disciplinary history. Echeverria and "His Colleague" The Echeverria AWC asserts that in May 2015, Echeverria and an individual referred to in the settlement document only as "his colleague" began referring GIS clients to a Chilean accounting services firm referred to in the settlement document only as "AF." The purported reason for these referrals was to enable clients to obtain advice concerning newly enacted Chilean tax laws. The Echeverria AWC asserts that Echeverria and his unnamed colleague expected to receive referral fees from AF. Proposed OBA Disapproved by Firm The Echeverria AWC specifically alleges that:In November 2015, after a review of e-mails concerning AF, GIS Santiago Branch Supervisor informed Echeverria and his colleague that an Outside Business Activity ("OBA") Disclosure Form was necessary and approval should have been received prior to engaging in the AF referrals. Subsequently. Echeverria's colleague contacted GIS Chief Administration Officer, and verbally informed her of the proposed OBA with AF and provided her with a proposed written contract with AF. On March 1, 2016, GIS Chief Administration Officer specifically notified Echeverria and his colleague that this OBA was not approved.Notwithstanding the OBA disapproval, the Echeverria AWC asserts that he received and deposited about $4,634 in referral fees. Sanctions FINRA deemed Echeverria's conduct to constitute a violation of FINRA Rules 3270 and 2010. In accordance with the terms of the Echeverria AWC, FINRA imposed upon him a $5,000 fine and a 45-calendar-day-suspension from associating with any FINRA member firm in any capacity. Case In Point: Santa Maria AWC 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, Pedro Santa Maria submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Pedro Santa Maria, Respondent (AWC 2016050606301, March 8, 2017).
In November 2015, after a review of e-mails concerning AF, GIS Santiago Branch Supervisor informed Santa Maria that an Outside Business Activity ("OBA") Disclosure Form was necessary and approval should have been received prior to engaging in the AF referrals. Subsequently, Santa Maria contacted GIS Chief Administration Officer, and verbally informed her of the proposed OBA with AF and provided her with a proposed written contract between Santa Maria and AF. On March 1, 2016, GIS Chief Administration Officer specifically notified Santa Maria that this OBA was not approved.Notwithstanding the OBA disapproval, the Santa Maria AWC asserts that he received and deposited about $19,621 in referral fees. Sanctions FINRA deemed Santa Maria's conduct to constitute a violation of FINRA Rules 3270 and 2010. In accordance with the terms of the Santa Maria AWC, FINRA imposed upon him a $5,000 fine and a 45-calendar-day-suspension from associating with any FINRA member firm in any capacity.
Subsequently. Echeverria's colleague contacted GIS Chief Administration Officer, and verbally informed her of the proposed OBA with AF and provided her with a proposed written contract with AF. On March 1, 2016, GIS Chief Administration Ofiicer specifically notified Echeverria and his colleague that this OBA was not approved.Echeverria AWC
Subsequently, Santa Maria contacted GIS Chief Administration Officer, and verbally informed her of the proposed OBA with AF and provided her with a proposed written contract between Santa Maria and AF. On March 1, 2016, GIS Chief Administration Officer specifically notified Santa Maria that this OBA was not approved.Santa Maria AWC Was Santa Maria the unnamed "colleague" in the Echeverria AWC ? It seems so. But, you know, seeming so just doesn't strike me as the goal for a formal regulatory settlement. We know that Echeverria didn't contact the GIS Chief Amdinistration Officer and verbally inform her of the proposed OBA because the Echeverria AWC ascribes that conduct to his "colleague." Further, the Echeverria AWC asserts that on March 1, 2016, the officer notified "Echeverria and his colleague" of the firm's disapproval of their proposed OBA. For those same predicate facts in the Santa Maria AWC, on March 1, 2016, the officer only notifies Santa Maria of the firm's disapproval. Does that distinction between notifying two persons versus one indicate that we're talking about three different human beings or only the two respondents in the two AWCs?I logged on the FINRA's Disciplinary Actions Online website and did a search for "'AF' and Chile" and, go figure, two and only two results came up: the Echeverria and the Santa Maria AWCs. Go ahead. Take your best shot. Explain to me why there is no cross-referencing of the two cases in the respective AWCs. Yes, you're right, perhaps the "his colleague" referenced in the Echeverrai AWC is some other human being (the third person) other than Santa Maria. That may be - after all, the Santa Maria AWC doesn't even reference another "his colleague." On the other hand, you know, what can I tell ya? Seems to me that these are the only two guys involved in this OBA involving GIS client referrals to a Chilean accountancy. Once again I wonder: Does anyone at FINRA engage in any quality control over the self-regulatory organization's published docket? There is intelligence at FINRA but it often seems to be asleep. VISIT the BrokeAndBroker.com Blog OBA Cases Archive DOWNLOAD a PDF Copy of Bill Singer, Esq.'s OBA Rule Analysis