An irreverent Wall Street Blog
I Scream, You Scream, FINRA Screams for Ice Cream
July 18, 2017
It's been hot in New York City the last several days and, well, you know, prominent industry lawyer Bill Singer has been sent into a paroxysm over the Financial Industry Regulatory Authority's recent regulatory settlement involving the purveyor of a purportedly world famous premium frozen custard. Bill likes ice cream. Frankly, he likes it too much. Wouldn't kill him to drop a few pounds but we don't think that this is a particularly good week to bring up his chubbiness. You ask Bill, those are not love handles. Those are massive amounts of rock-hard abdominal muscles in a relaxed state, ready to be called up on a second's notice for feats of strength. It seems something of a vicious cycle. FINRA aggravates Bill. Bill self medicates his anger with dessert. Bill puts on weight. The extra weight makes Bill even crabbier, which given his baseline crabbiness isn't that good a thing. All of which means that Bill is easily upset by what he views as FINRA's nonsense. You have any idea how vulnerable Bill is these days to a sale in the frozen section of Talenti gelato, sorbetto, or ice cream?
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, David G. Gott submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of David G. Gott, Respondent (AWC 2015047392002, July 12, 2017).
The AWC asserts that Gott entered the securities industry in 1988, and from November 2012 until October 16, 2015, he was registered with FINRA member firm Ausdal Financial Partners, Inc.
Gott Ice Cream?
The AWC asserts that in 2013, Gott founded Gott Ice Cream? LLC (''GIC") to manufacture and distribute premium frozen custard under the brand name "David's Famous."
SIDE BAR: Yeah, the AWC characterizes the product as "premium frozen custard." Not just your old run-of-the-mill frozen custard but the premium stuff. Nice to know that FINRA still aspires to the American entrepreneurial spirit and while bashing Gott still had the decency to characterize his ice cream as "premium frozen custard." Of course, I'm still wondering why David's premium frozen custard is so famous but I never heard of it.
Upon joining Ausdal in November 2012, Gott requested and received written permission by the firm to engage in GIC as an outside business activity ("OBA"). The AWC concedes that "Gott also asked his supervisor whether Ausdal would consider assisting GIC in raising capital. However, Ausdal did not thereafter participate in any capital raise on behalf of GIC."
PST
The AWC alleges that during all times relevant to this matter, Ausdal's policies and procedures regarding private securities transactions ("PST") prohibited its registered representatives from engaging in such transactions without the the associated person providing prior written notice of their intention to participate in any PST and, thereafter, obtaining from the firm its prior express written permission.
The AWC asserts that between November 2014 and July 2015, without providing written notice to Ausdal, Gott obtained from four individuals at least $546,000 private equity and debt investments for GIC. The AWC concedes that Gott did not receive selling compensation for arranging these investments but alleges that GIC benefited from the investments.
Form U5
On November 24, 2015, Ausdal filed an Amended Uniform Termination Notice for Securities Industry Registration ("Amended Form U5") in which the firm asserted that it had "determined that Mr. Gott did not give proper notification to the firm of investors who invested in his [outside business activity]."
FINRA Sanctions
FINRA deemed Gott's conduct to constitute a violation of NASD Rule 3040 (superseded by FINRA Rule 3280 on September 21, 2015) and FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon Gott a $5,000 fine and a six-month suspension in all capacities.
Bill Singer's Comment
Online FINRA BrokerCheck records for Gott as of July 18, 2017, disclose under the heading of "Other Business Activities":
1) DBA DAVID'S FAMOUS GOURMET; NORTH LIBERTY, IA; WHOLESALE FOOD; MANAGING MEMBER; BEGAN 01/01/2012; APPROX 150 HOURS PER MONTH, 100 HOURS DURING TRADING HOURS; NOT INVESTMENT RELATED; GOTT ICE CREAM? - DBA DAVID'S FAMOUS GOURMET - 655 LIBERTY WAY SUITE 1, NORTH LIBERTY, IA - WHOLESALE ICE CREAM SALES-MANAGING MEMBER-1/2012-40-20-MANAGE ALL ASPECTS OF THE COMPANY; COMPENSATION 12,000 PER MONTH.
I don't know about you but I'm sure going to sleep better knowing that this scourge of Wall Street, this dastardly purveyor of premium frozen custard, will be on the sidelines for six months. I mean, geez, what has the securities industry come to when a brokerage firm employee can whip up gallons of ice cream with impunity and, at the same time, entice four human beings into investing in his company? Gott's time would have been far better spent pushing over-priced annuities on the public or non-publicly traded REITs. I can see it now: Gott drives around your neighborhood in a white truck and rings a bell and gently yells into the evening "Get yer ice cold financial planning here." Now don't get me wrong. I don't mean to downplay the seriousness of Gott's dessert-related transgression or the need for Wall Street's cops to drive over to his place, get a cup of coffee, order some donuts, dunk the donuts into said coffee, and, afterwards, get a couple of ice cream sandwiches, a vanilla custard cone dipped in chocolate, two chocolate cones (one in a waffle cone, please), and I'll take a peach custard but if you don't have that, I'll take strawberry, and if that's out, anything but chocolate. I fully appreciate the arch seriousness of FINRA making sure that this growing gang of out-of-control ice cream ne'er-do-wells don't take over the very heart and soul of Wall Street (which purportedly has a somewhat small blackened heart and, by a few accounts, rents a soul from a rent-a-center funded by private equity). I mean, you know, we can't have the industry's registered persons diverting their time from the serious task at hand -- he says with dripping sarcasm that is green in color and, oddly, tastes like pistachio ice cream but not any pistachio ice cream, something like a premium frozen custard pistachio ice cream sent down from Olympus and generously infused with Ambrosia, the nectar of the gods!