Definition of Disqualification

Sec. 4.  A person is subject to a "disqualification" with respect to membership, or association with a member, if such person is subject to any "statutory disqualification" as such term is defined in Section 3(a)(39) of the Act.

Application for Registration

Sec. 2.  (a) Application by any person for registration with the Corporation, properly signed by the applicant, shall be made to the Corporation via electronic process or such other process as the Corporation may prescribe, on the form to be prescribed by the Corporation and shall contain:

(1) an agreement to comply with the federal securities laws, the rules and regulations thereunder, the rules of the Municipal Securities Rulemaking Board and the Treasury Department, the By-Laws of the Corporation, NASD Regulation, and NASD Dispute Resolution, the Rules of the Corporation, and all rulings, orders, directions, and decisions issued and sanctions imposed under the Rules of the Corporation; and
(2) such other reasonable information with respect to the applicant as the Corporation may require.

(b) The Corporation shall not approve an application for registration of any person who is not eligible to be an associated person of a member under the provisions of Article III, Section 3.

(c) Every application for registration filed with the Corporation shall be kept current at all times by supplementary amendments via electronic process or such other process as the Corporation may prescribe to the original application. Such amendment to the application shall be filed with the Corporation not later than 30 days after learning of the facts or circumstances giving rise to the amendment. If such amendment involves a statutory disqualification as defined in Section 3(a)(39) and Section 15(b)(4) of the Act, such amendment shall be filed not later than ten days after such disqualification occurs.

No member or person associated with a member shall file with FINRA information with respect to membership or registration which is incomplete or inaccurate so as to be misleading, or which could in any way tend to mislead, or fail to correct such filing after notice thereof.

Financial Disclosure

14K. Within the past 10 years:
(1) have you made a compromise with creditors, filed a bankruptcy petition or been the subject of an involuntary bankruptcy petition?
(2) based upon events that occurred while you exercised control over it, has an organization made a compromise with creditors, filed a bankruptcy petition or been the subject of an involuntary bankruptcy petition?
(3) based upon events that occurred while you exercised control over it, has a broker or dealer been the subject of an involuntary bankruptcy petition, or had a trustee appointed, or had a direct payment procedure initiated under the Securities Investor Protection Act?
14L. Has a bonding company ever denied, paid out on, or revoked a bond for you?

14M. Do you have any unsatisfied judgments or liens against you?

such person . . . has willfully made . . . in any application for membership or participation in, or to become associated with a member of, a self-regulatory organization, . . . any statement which was at the time, and in light of the circumstances under which it was made, false or misleading with respect to any material fact, or has omitted to state in any such . . . report . . . any material fact which is required to be stated therein."

[A] willful violation of the securities laws means "intentionally committing the act which constitutes the violation."16 The laws do not require that the actor "also be aware that he is violating one of the Rules or Acts."17 If McCune voluntarily committed the acts that constituted the violation, then he acted willfully.

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Footnote 16: Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965); see also Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (citing Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)); Craig, 2008 WL 5328784, at *4 (finding that respondent willfully violated IM 1000-1 and NASD Rule 2110 by providing false answers on his Form U4).

Footnote 17: Wonsover, 205 F.3d at 414 (citing Gearheart & Otis, Inc. v. SEC, 348 F.2d 798 (D.C. Cir. 1965)).

I understand that this settlement includes a finding that I willfully omitted to state a material facts on a Form U4, and that under Section 3(a)(39)(F) of the Securities Exchange Act of 1934 and Article III, Section 4 of FINRA's By-Laws, this these omissions make me subject to a statutory disqualification with respect to association with a member.

$43,352,74 IRS lien recorded February 28,2007;

$16,546.36 IRS lien recorded February 23, 2009;

$179,234.06 and $206,490.15 IRS liens recorded August 6, 2009;

$370,539.54 IRS lien recorded September 2, 2009;

$206,741.30 IRS lien recorded September 10, 2010;

$5,131 and $55,728.54 IRS liens recorded on September 14, 2010;

$95,863 IRS lien recorded on July 14, 2011; and

$25,938 State of Connecticut lien recorded on January 18, 2013;

$52,750.62 IRS lien recorded September 10, 2013;

$146,984.78 IRS lien recorded November 7, ,2013; and

$3,841.28 New York State lien recorded on November 13, 2013.

Terminated subsequent to initiation of customer-related arbitration claim alleging fraud, negligence, unjust enrichment.

In February 2013, Graetz filed an inaccurate and misleading Form U4 that failed to disclose numerous, unsatisfied state and federal tax liens that had been entered against him.

Specifically, in early February 2013, when he filed an initial Form U4 to register with Paulson, Graetz failed to disclose ten unsatisfied federal and state tax liens that had been entered against him between February 2007 and January 2013.

After he became was associated with Paulson, Graetz failed to amend his Form U4 to disclose any ofthe tax liens that had been filed against him, until May 2014. In addition, amendments were filed to Graetz's Form U4 in February 2013, January 2014, and February 2014, that inaccurately and misleadingly indicated that Graetz was not subject to any unsatisfied tax liens, when in fact, he was subject to at least ten and as many as twelve unsatisfied state and federal tax liens, totaling over $1 million, when he filed these Form U4 Amendments.

At least as early as June 2013, Graetz willfully failed to timely update his Form U4 to disclose that he was subject to, at various times, between ten to twelve unsatisfied state and federal tax liens, totaling over $ 1 million, despite knowing that tax liens had been filed against him and knowing his obligation to disclose liens on his Form U4.

By filing inaccurate and misleading Form U4 and Form U4 Amendments and/or willfully failing to amend his Form U4 in a timely manner to disclose the unsatisfied tax liens that had been entered against him between February 2007 and November 2013, Graetz violated Article V, Section 2(c) of the FINRA By-Laws of the Corporation and FINRA Rules 1122 and 2010.

Based on the foregoing, Respondent willfully omitted to state material facts on Forms U4 in violation of Article V, Section 2(c) of the FINRA By-Laws of the Corporation and FINRA Rules 1122 and 2010.

And now we arrive at my point: The AWC should have indicated why it did not deem Greenberg's non-disclosures to rise to the level of "willful." The defense bar and pro se respondents need every bit of insight and every bit of information they can get from the self-regulatory organization when one case goes against the grain in such stunning fashion.

Let Me Refer You To The Thoughts Of Veteran Industry Lawyer Alan Wolper, Esq. "Statutorily Disqualified? FINRA Says 'Deal With It'" (Broker Dealer Law Corner, By Alan Wolper, Esq. November 18, 2016):

The problem is, it is difficult to figure out exactly when FINRA will deem a failure to report a tax lien in a timely manner to be willful, and when it will not. I can personally attest that I have had a variety of clients tell essentially the same story to FINRA - I did not know about the lien, or I did not know I had to report the lien - yet come away with widely different outcomes.  On one end of the spectrum, I have had FINRA take no formal action, and choose to content itself by issuing a Cautionary Action letter.  In the middle, I have had FINRA take formal action, but agree the violation was not willful.  Finally, on the other extreme end of the spectrum, FINRA has taken formal action and deemed the violation to be willful. It can be extremely frustrating to make the same argument over the same set of facts, but get different results.

Finally, one more thing about statutory disqualification: FINRA could care less that a finding of willfulness renders a registered representative SD'd.  As the Department of Enforcement recently put it in a brief it filed in one of my cases, 

statutory disqualification is not a FINRA sanction; it is a status that flows as a matter of course from predicates enumerated in the Exchange Act. If [Respondent] believes that statutory disqualification is an unduly harsh outcome for willfully violating U4 reporting requirements, he should address his grievances to the SEC and Congress. The SEC and the NAC surely would not want FINRA hearing panels to engage in the equivalent of jury nullification by declining to find willfulness where it has been proved.

What an outrageously callous remark for the staff to make. At least one hearing panel, over a decade ago, had the courage to state the obvious:  "A finding of willfulness, though not an element of the offense under Rule 2110, has serious collateral consequences."  That FINRA staff consciously disregards these consequences, however, potentially career-ending consequences, just blows me away.