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NOTE: Offers of Settlement (OS) and Letters of Acceptance, Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions and to the entry of findings. FINANCIAL
INDUSTRY REGULATORY AUTHORITY
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Katherine Patricia Kozub OS/2005003511203/June 2008 Kozub completed a Firm Element Continuing Education test on another registered representative’s behalf in violation of NASD rules. Katherine Patricia Kozub: Fined $5,000; Suspended 30 days |
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Kershner Trading Group, LLC AWC/2007007163501/May 2008 The Firm allowed registered representatives to conduct a securities business while their registrations were deemed inactive due to their failure to timely complete the Regulatory Element of the Continuing Education requirement. Kershner Trading Group, LLC: Censured; Fined $10,000 |
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Seslia Securities AWC/2007007154201/April 2008 The Firm failed to retain instant messages in violation of Securities and Exchange Commission (SEC) Rule 17a-4, and failed to maintain records documenting the content of its continuing education programs (firm element) and covered registered persons’ completion of the programs. Seslia Securities: Censured; Fined $17,500 |
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State Farm VP Management Representatives March 6, 2008 FINRA Press Release FINRA Fines, Suspends 16 State Farm Representatives for Test-Taking Irregularities in the Firm's Continuing Education Program/Supervisors Directed or Allowed Registered Representatives of State Farm VP Management Corp. to Take "Firm Element" Proficiency Tests for Supervisors or Other Representatives FINRA fined and suspended 16 current and former registered representatives of State Farm VP Management Corp. of Bloomington, IL (which is engaged in the business of selling mutual funds and variable products) for misconduct involving FINRA's Continuing Education requirements for registered representatives. The representatives engaged in this misconduct without any authorization from State Farm. State Farm reported the misconduct to FINRA after uncovering test-taking irregularities in one of its regions and conducting a preliminary investigation. State Farm then expanded its internal investigation nationwide and provided FINRA with its findings.The Continuing Education requirements consist of a Regulatory Element and a Firm Element. The Regulatory Element requires all registered persons to take computer-based training, devoted to industry rules and regulations, on the second anniversary of their initial securities registration and every three years thereafter. The Firm Element requires firms to administer appropriate training to their registered persons who have direct contact with customers, and to the registered persons' immediate supervisors, on an ongoing basis. The training must cover topics specifically related to their business, such as new products, sales practices, risk disclosure, and new regulatory requirements and concerns. The 2005 Firm Element designed by State Farm was an internal, computer-based system. Covered representatives were required to complete a two-hour training session and then pass a proficiency test with a minimum score of 80%. In order to access the Firm Element training session and proficiency test, the participant was required to sign on to the system using a user ID and password. The subordinate representatives who took the test for their superiors signed on as the superiors for whom they were taking the test, using the superiors' user IDs and passwords. One sanctioned representative, a former registered principal of the firm, Rebecca Sappington directed a subordinate to obtain the user IDs and passwords of at least four State Farm registered representatives working in her area, and complete the Firm Element program for these representatives by taking their proficiency tests. When Sappington learned that her directive had not been carried out, she instructed her subordinate to delegate the task to another person, who was an unregistered and newly hired employee of State Farm. This unregistered person then obtained the user IDs and passwords for at least four representatives, logged onto the system and completed the Firm Element program for the representatives by taking their proficiency tests. In concluding these settlements, the registered representatives neither admitted nor denied the charges, but consented to the entry of FINRA's findings. The individuals agreed to the following sanctions: Series 26 Principals who directed a subordinate to take their proficiency tests:
Series 26 Principal who directed subordinates to take the test for others:
Series 6 Representatives who directed or allowed a subordinate to take their proficiency tests:
Series 6 Representatives who completed the proficiency tests for their superiors:
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Fredricka Dale Watson 20060052704/February 2008 Watson took notes into a Regulatory Element of Continuing Education exam and looked at them before they were confiscated by an examiner, even though she had acknowledged that it was prohibited prior to the exam. Watson failed to respond to FINRA requests for information. Fredricka Dale Watson: Barred |
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Rebecca Rhoden Sappington (Principal) AWC/2005003511202/January 2008 Sappington directed individuals under her supervision to complete the computer-based Firm Element Continuing Education program on registered representatives' behalf without any notice to, or authorization from, her member firm . Rebecca Rhoden Sappington (Principal): Fined $10,000; Suspended 6 months; Barred in Principal capacity |
| Bill Singer's Comment: And the reason that Sappington gets 6 months and Curtis got 60 days is what? I'm not suggesting there isn't a valid reason, just pointing out that FINRA doesn't bother to offer one. |
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Kenneth Mark Doolittle (Principal) OS/#E0120040052-03/January 2008 Doolittle caused his member firm to respond untimely to FINRA requests for information and willfully omitted material information from his Form U4 by failing to timely amend it. Doolittle permitted a registered representative of his member firm to engage in conduct for which registration was required while inactive due to failure to complete regulatory element continuing education. Kenneth Mark Doolittle (Principal): Suspended 3 months |
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Karen Denise Curtis AWC/#2005003511201/January 2008 Curtis delegated a subordinate in her office to complete the computer-based Firm Element Continuing Education program on registered representatives' behalf. Karen Denise Curtis: Fined $5,000; Suspended 60 days. |
| Bill Singer's Comment: I have so many mixed emotions about this case. A straight reading of the facts seems to suggest that the subordinate was taking the exams for other RRs (plural). A professional athlete--say a baseball player-- could cheat by taking steroids and makes lots of bucks and then a former Senator would investigate and advise against any criminal prosecution. On, how this case reminds me of the "Newspeak" of Orwell's 1984. Isn't it charming how the act of CHEATING on a mandatory test is euphemistically transformed through the magic of regulatory language into the delegation to a subordinate of the completion of the test. I can just imagine some over muscled pro athlete claiming that he didn't take steroids but simply delegated the task of fitness conditioning to a trainer with a syringe. Omigod! Am I really lecturing a regulator to do the right thing and get tougher? Maybe I can delegate this task to someone else? |
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