An irreverent Wall Street Blog
Drinking, Driving, Felonies, and a Wall Street Regulatory Head-On Collision
April 12, 2018
Drinking and driving is never a good idea. In today's BrokeAndBroker.com Blog, we cover yet another instance of the impact of drinking, driving, felony charges, and felony pleas on a registered representative's Wall Street career. It is a sobering message.
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, Bret Lee Niemuth submitted a Letter of Acceptance, Waiver and Consent
("AWC"), which FINRA accepted. In the Matter of Bret Lee Niemuth,
Respondent (AWC 2016051985001, April 3,
2018).
The AWC asserts that Niemuth was first registered in
1993, and that in 2004, he was registered with ING Financial Partners, Inc.
(now Voya Financial Advisors, Inc.) The AWC asserts that Niemuth resigned from
Voya in November 2012 and re-registered with the firm again in July 2014. The
AWC asserts that "Niemuth has no disciplinary history with the Securities and
Exchange Commission, any state securities agency, FINRA or any other
self-regulatory organization."
2010 Felonies
Charges
The AWC asserts that on November 24, 2010, while
associated with Voya during his first tenure with the firm, Niemuth was
arrested and charged with two felonies relating to operation of a motor vehicle
while intoxicated. The AWC alleges that Niemuth failed to disclose the charges
on his Uniform Application for Securities Industry Registration or Transfer ("Form U4") at any time during his first or second periods of employment
with the firm.
2011 Felony Guilty
Plea
The AWC asserts that on June 7, 2011, while
associated with Voya during his first tenure with the firm, Niemuth pled guilty
to one felony count of operating a motor vehicle while intoxicated. The AWC
alleges that Niemuth failed to disclose the conviction on his Form U4 at any
time during his first or second periods of employment with the firm. Further,
the AWC alleges that the felony conviction subjected Niemuth to statutory
disqualification, which resulted in his purported association with Voya for
about three years and eight months during which time he was allegedly statutorily
disqualified.
The Rulebook
Section 3(a)(39) of the Securities Exchange Act provides in pertinent part:
(39) A person is subject to a ''statutory disqualification'' with respect to membership or participation in, or association with a member of, a self-regulatory organization, if such person --
. . .
Statutory Disqualification for Willful Non-Disclosure(F) has committed or omitted any act, or is subject to an order or finding, enumerated in subparagraph (D), (E), (H), or (G) of paragraph (4) of section 15(b) of this title, has been convicted of any offense specified in subparagraph (B) of such paragraph (4) or any other felony within ten years of the date of the filing of an application for membership or participation in, or to become associated with a member of, such self- regulatory organization, is enjoined from any action, conduct, or practice specified in subparagraph (C) of such paragraph (4), has willfully made or caused to be made in any application for membership or participation in, or to become associated with a member of, a self-regulatory organization, report required to be filed with a self-regulatory organization, or proceeding before a self-regulatory organization, any statement which was at the time, and in the 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 application, report, or proceeding any material fact which is required to be stated therein.
In affirming a "willful" non-disclosure finding
by FINRA, the Securities and Exchange Commission ("SEC") offered a
definition of "willful" In the
Matter of the Application of Michael Earl McCune for Review of Disciplinary
Action Taken by FINRA (Opinion, SEC, '34
Act Rel. No. 77375; Admin. Proc. File No. 3-16768 / March 15,
2016):
[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.=====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)).
Article V of FINRA's By-Laws:Application for Registration, Section 2 in part states:
(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.
Article III of FINRA's By-Laws: Qualifications of Members and Associated Persons provides:
Definition of DisqualificationSec. 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.
AWC Settlement Understanding
I understand that this settlement includes a finding that I willfully omitted to state a material fact 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.
OHO Finding
If you do not opt to
settle and demand your day in court, a FINRA OHO Decision
may state the following:
For willfully failing to timely update his Form U4, in violation of Article V, Section 2(c) of NASD's and FINRA's By-laws, NASD IM-1000-1, NASD Rule 2110, and FINRA Rules 1122 and 2010, Respondent is suspended from associating with any FINRA member firm in any capacity for [insert dates] and fined [insert amount]. Because his misconduct was willful, and the information he failed to disclose was material, he is subject to statutory disqualification.
FINRA Rule 1122: Filing of Misleading Information as to Membership or Registration, provides:
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.
The Uniform Application for Securities Industry Registration or Transfer ("Form U4") asks:
Question 14A(1)(a): "Have you ever been convicted of or pled guilty or nolo contendere ("no contest") in a domestic foreign or military court to any felony?"
Question 14A(1)(b): "Have you ever been charged with any felony?"
Voya Discharge
The AWC asserts that on November 4, 2016, Voya filed a Uniform Termination Notice for Securities Industry Registration ("Form U5") stating that Niemuth had been discharged on October 31, 2016, for failing to disclose a felony charge and conviction.
FINRA Findings
FINRA deemed that while associated with FINRA member firm Voya, Niemuth failed to:
- amend his Form U4 to disclose that he was charged with and then pled guilty to a felony involving the operation of a motor vehicle while intoxicated; and
- disclose his two felony charges and one conviction during the time he was associated with Voya between June 2011 and November 2012, and again during the time he reassociated with Voya between July 2014 through October 2016. As a result, he was associated with Voya while he was subject to statutory disqualification.
FINRA further deemed
that during his second association with Voya, Niemuth was subject to
statutory disqualification pursuant to his 2012 felony guilty plea/conviction.
FINRA deemed Niemuth's conduct to constitute his willful violation of Article
V, Section 2(c) of FINRA's By-Laws, and FINRA Rules 1122 and
2010.
In accordance with the terms of the AWC, FINRA imposed upon Niemuth a $5,000 deferred fine and an eight-month suspension from association with any FINRA member in all capacities. As further explained in the AWC:
Download a PDF copy of the BrokeAndBroker.com Blog's "Willfulness and Statutory Disqualification" Analysis by Bill Singer, Esq.
In accordance with the terms of the AWC, FINRA imposed upon Niemuth a $5,000 deferred fine and an eight-month suspension from association with any FINRA member in all capacities. As further explained in the AWC:
The fine shall be due and payable either immediately upon reassociation with a member firm, or prior to any application or request for relief from any statutory disqualification resulting from this or any other event or proceeding, whichever is earlier.
I understand that this settlement includes a finding that I willfully omitted to state a material fact 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 omission makes me subject to a statutory disqualification with respect to association with a member.