FINRA Upholds Disciplinary Sactions; Protects Investors

In a May 9th., 2013 article from Reuters, Suzanne Barlyn writes about the three men, who made a living in the U.S. securities industry, and how it's not easy to successfully reverse disciplinary sanctions from FINRA. Penalties are likely to stick, and the consequences can drag out for years.

According to the Financial Industry Regulatory Authority (FINRA), the decisions to revoke or suspend the licenses were appropriate, because the alleged wrongdoing - from allegedly lying on regulatory forms to improperly trading an account - played out repeatedly over months or years.

While the three facing the sanctions may feel FINRA was too harsh, the outcome is a reminder to those who make their living in the securities business that it is best to avoid being at the mercy of FINRA. The record shows that reversing or reducing FINRA's sanctions on appeal, especially the most severe penalties, is unusual.

FINRA's appellate body, the National Adjudicatory Council (NAC), reviewed sanctions imposed against 37 individuals and firms from October 2010 through March 2012. The NAC, which hears appeals filed by parties or selects decisions to review, upheld or increased sanctions for about 70 percent, or 26 of them.

Suzanne Barlyn writes that these are three lessons to be learned from the stories behind April's appellate decisions:

*COME CLEAN ABOUT OUTSIDE ACCOUNTS:

Jeff Ng, who worked in a compliance role for AllianceBernstein Investments Inc, allegedly failed to tell the firm about four brokerage accounts he had at other firms, according to an April 24 NAC opinion. Ng, whose job involved monitoring whether clients' portfolios were in synch with their investing plans, also did not tell the other firms that he worked in the securities business. Ng, on one account application, wrote that he was a "landscaper."

FINRA requires licensed securities professionals to tell their firms about outside accounts. They must also tell the outside brokerage where they open the account that they work in the securities industry. That is because brokerages must monitor employees' securities transactions - even those employees make through other firms - to prevent wrongdoing, such as engaging in risky private securities transactions with customers. Some firms prohibit employees from having accounts elsewhere.

*DON'T HIDE THE PAST, 36 TIMES

The regulatory problems during the 1980s came back to haunt Joseph Amundsen in 2011, when FINRA permanently barred him from the industry for those alleged offenses. He appealed the FINRA sanction twice, including most recently, to the U.S. Securities and Exchange Commission. Amundsen, failed to tell FINRA that California had revoked his accounting license in 1986, according to an April 18 SEC opinion. Earlier, a court prohibited Amundsen from practicing before the SEC for allegedly issuing a false company audit report.

Amundsen, of Easton, Pennsylvania, later became relicensed as an accountant and obtained several types of securities industry licenses. But he did not mention his earlier troubles in response to questions on a form submitted to FINRA 36 different times through various employers.

The NAC, which upheld the bar last year, wrote that "Amundsen lacks the integrity and fitness" to work in the securities industry. The SEC upheld the bar and said his failure to disclose was "egregious."

*EXCESSIVE TRADING STANDS OUT:

Taking too many liberties with a new client's account led to a permanent bar by FINRA for Alan Davidofsky, a former Oppenheimer broker in Delray Beach, Florida. The 57-year-old client had conservative investment goals for a $127,000 account when Davidofsky became her adviser in 2007. Davidofsky allegedly recommended a riskier strategy, according to a NAC opinion on April 26. Her account sank 90 percent after a 2008 market dive. She paid more than $31,000 in commissions during the previous 10 months. Davidofsky made 104 trades during that time, including 90 without the client's permission, according to the NAC, which selected the case for review. Oppenheimer terminated Davidofsky for the conduct in 2008 and reimbursed the client $100,000.

"Serious sanctions are needed to protect the investing public," the NAC wrote.

Soreide Law Group, PLLC, represents clients nationwide before FINRA. Call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552.