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Newborn Baby, Paternity Leave, Away Account, Loss of Job, and the FINRA Fine and Suspension
December 15, 2022
In a recent FINRA regulatory settlement, I'm willing to give the regulator and the Respondent's former broker-dealer employer credit for being in the right. So there. I'm even prepared to concede that the Respondent rep was in the wrong. So double there. Notwithstanding all of that crediting and conceding, something doesn't sit right with me. We got a newborn baby. We got a father on paternity leave. We have a world locked down under the unrelenting onslaught of a killer virus. Did any of that get factored into FINRA's imposition of both a fine and a suspension?
Paternity Leave and Away Account
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, Michael Samuel Hakim submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted.
In the Matter of Michael Samuel Hakim, Respondent (FINRA AWC 2022075516101)
https://www.finra.org/sites/default/files/fda_documents/2022075516101
%20Michael%20Samuel%20Hakim%20CRD%205780296%20AWC%20va.pdf
The AWC asserts that Michael Samuel Hakim was first registered in 2010, and from January 26, 2015, through June 24, 2022, he was registered with Deloitte Corporate Finance, LLC. As alleged in part in the AWC:
Hakim took a paternity leave from DCF from mid-June 2021 until mid-September 2021. On July 13, 2021, without obtaining DCF's prior written consent, Hakim opened a personal brokerage account with another firm. On the new account form, Hakim stated that he was unemployed, listed 'none' for employer name and answered 'no' to the question of whether he was employed by a registered broker dealer. These statements were inaccurate as Hakim was still employed by DCF. Hakim did not disclose the account prior to DCF's discovery of its existence in May 2022. Therefore, Hakim violated FINRA Rules 3210 and 2010.
FINRA Sanctions
Bill Singer's Comment
There is no indication among the signatures at the end of the AWC that Respondent Hakim was represented by a lawyer, so I will infer from the absence of any disclosure to the contrary that Hakim was pro se.
So . . . what's going on here?
In the midst of the scourge of the Covid, which was first flagged in March 2020 as a pandemic and by December 2022 has caused some seven million reported deaths, Hakim took a paternity leave from his brokerage firm. That paternity leave started in June 2021 and lasted three months into September.
About one-third of the way into his three-month paternity leave, in July 2021, Hakim opened a personal brokerage account at a firm other than his employer. He did NOT open account(s) for customers at the other firm. He opened a so-called Away Account in his own name -- for better or, obviously, worse. The salient fact for both Hakim's broker-dealer employer and FINRA is that he stated on the other firm's New Account Application that he was unemployed and that he was not employed by a registered broker dealer.
Fast forward to May 2022. We're still dealing with the Covid pandemic. Hakim has been back at Deloitte Corporate Finance since mid-September 2021 -- if you do the math, he had been back at his employer for about eight months. The AWC alleges that Deloitte discovered the existence of the Away Account in May 2022 and that Hakim had failed to make prior disclosure of the account to his employer. All of which may explain why Deloitte permitted Hakim to resign on May 27, 2022. This is how the matter was set out on FINRA's online BrokerCheck database as of December 15, 2022:
Following a review by DCF, it was determined that the identified registered representative had opened a personal brokerage account and conducted trading of certain securities within that account without seeking or obtaining prior approval as required by FINRA Rule 3210 and DCF's Written Supervisory Procedures. During the review, it was also determined that the individual had violated certain DCF and Deloitte confidentiality protocols.
Even if I give everyone credit for being in the right (with the exception of Hakim) this AWC still doesn't quite sit right with me.
We got a newborn baby.
We got a father on paternity leave.
We have a world locked down under the unrelenting onslaught of a killer virus.
We got some shlub who is on paternity leave from Deloitte and for reasons that aren't explained in the AWC, he decides to open an Away Account without disclosure to Deloitte and apparently did some trading in that account.
Okay, Hakim is permitted to resign for all of his purported transgressions. I can live with that. Not sure why Deloitte couldn't have simply slapped the proud papa on the wrist but, like I said, I can live with the PTR -- at least they didn't terminate him for cause.
As to FINRA's $5,000 fine and two-month sit-down, I'm not so disposed to live with it.
Hakim lost his job. FINRA knows he has a new baby and all of this went on during Covid. Who the hell knows what Hakim was or wasn't thinking in 2021 -- and who knows who he may have thought of calling in Compliance, who was or wasn't working from home or simply not returning calls.
In the end, I'm not quite sure that FINRA's fine and suspension are sanctions in the interest of investor protection. FINRA's sanctions come off as a couple of unwarranted shots under a pile of bodies. I know that many of you will feel differently. That too is fine with me. This is a close call. I'll give you that. On the other hand, haven't we all been through enough the last couple of years? Couldn't FINRA have just waived the fine or imposed a 30 day suspension?
I will reiterate what I always note in these settlement matters: It's not my place to second guess any Respondent's decision to enter into a regulatory settlement. I don't know what I don't know. If Hakim is satisfied with the outcome of this case, so be it. For me, there's just something here that seems a bit over the top.