Statutory Disqualification Index
NOTE: Stipulations of Fact and Consent to Penalty (SFC); 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 & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.

In the Matter of the Continued Association of X as a General Securities Representative with The Sponsoring Firm 
MC-400: May 5, 2002

Redacted SD Decision
No. 03002

APPROVED by Hearing Panel of the NASD's Statutory Disqualification Committee/ National Adjudicatory Council

No hearing held.

Filed Under: Felony, DUI, Approval w/o hearing
SD Event
In 1999 X was charged with a misdemeanor but due to the injuries sustained by the passengers in the car she struck, the charged was changed to a felony.  State1 court convicted her in 2002 of the felony of Aggravated Driving Under the Influence of Alcohol ("DUI"), and she was sentenced to two years' probation, ordered to perform 240 hours of public service, fined her $1,000, and her driver's license was  revoked. The court discharged her from probation in 2002. X completed early intervention counseling as part of her rehabilitative efforts, but the counselors did not recommend continued treatment and X was deemed to be "fully capable of preventing any further alcohol related difficulties." X's driving privileges have been reinstated, but only on a restricted basis. She currently holds an occupational driver's license that allows her to drive only to and from work during designated times.
Sentence Expiration
2002 ( early discharge by court . . . 2004 was original date)
Prior Industry Activity
Investment company products/variable contracts representative since 1988. Uniform securities agent since 1988, and as a uniform investment adviser and general securities representative since 1997.
She has been employed by Company 1, a "sister" company to the Sponsoring Firm, as the Senior Vice President of Marketing since June 2001. 

A customer complaint was filed against X in 1999, while she was employed with a second member firm. The complaint alleged that the customers, husband and wife, had not been informed that they were purchasing insurance policies with monthly charges. X was the agent who sold the policy to the customers. The complaint was settled for $12,546.22, with the firm rescinding the policy and returning the total premiums paid by the customers. 

No other regulatory actions taken against X in any capacity.

Sponsoring Firm
The Sponsoring Firm became a member of NASD in 1996. A retail broker/dealer business, with 11 offices of supervisory jurisdiction ("OSJs") and 60 branch offices. The Firm employs a total of 1,932 registered representatives and 209 registered principals. The home office in State 2 employs 38 employees, 15 of whom are registered principals and 10 of whom are registered representatives. 

NASD issued Letters of Caution ("LOC") to the Firm for its last three routine examinations in 1997, 2000, and 2002. 

  • The 1997 LOC noted problems with the Firm's written supervisory procedures and one recordkeeping violation. The Firm responded in a letter dated April 1997, stating that it had noted the deficiencies and had taken action to ensure future compliance. 
  • The 2000 LOC indicated that the Firm failed to provide required information to customers who purchased mutual funds and variable contracts. The Firm responded in a letter dated November 20, 2000, explaining that it had corrected its procedures. 
  • The 2002 LOC noted that the Firm had improperly calculated its net capital on one date. In a letter dated 2002, the Firm stated that its accounts had been adjusted to provide proper calculation in the future. 
  • A 1999 off cycle municipal examination was filed without action ("FWA"). 

No other complaints, disciplinary proceedings, or arbitrations against the Firm.

Proposed Activity

Currently employed with the Firm's parent and life insurance entity, Company 1, as a Senior Vice President of Marketing. Manages and supervises the Company 1 field executive team, which works with Company 1's brokerage agencies and agents. Company 1 characterizes X's position with the life company as a "high profile, senior level position." Due to the nature of X's position, the Sponsoring Firm proposes that X be registered as a general securities representative so that she may engage in training her marketing staff and be permitted to interact freely with other registered representatives to discuss products. The Firm is not proposing that X be engaged in the retail sales of securities or be involved with supervising registered representatives. X will continue to be compensated by Company 1 in the form of salary and bonus.

Proposed Supervisor
Proposed Supervisor will be X's primary, responsible supervisor. The Proposed Supervisor is the President and Chief Marketing Officer of the Sponsoring Firm. She was first employed in the securities industry with another firm in 1994. She registered as a general securities representative (Series 7) in 1995, a uniform securities agent (Series 63) in 1991, an investment company products/variable contracts representative (Series 6) in 1991, and a general securities principal (Series 24) in 1995. The Proposed Supervisor has been employed by the Sponsoring Firm since 2001, and she has no disciplinary history.
Member Regulation Recommendation

X committed her felony offense almost four years ago, and was released from probation in 2002. She completed all of the requirements imposed on her by the court for her offense, including the required alcohol counseling. Addiction counselors determined that X did not have an alcohol abuse problem and therefore she was not required to seek further rehabilitation. We also note that the felony conviction did not involve securities or financial products, nor did the court find that X acted dishonestly. Further, X has no formal disciplinary history and the Proposed Supervisor is a qualified general securities principal with no formal or informal regulatory history. Moreover, the Sponsoring Firm has been a member of NASD since 1996, and it does not have a significant disciplinary history that raises regulatory concern. 


  1. X will conduct business on behalf of the Sponsoring Firm only from the office where the Proposed Supervisor is physically located

  2. X will act in a marketing capacity and will have no dealings with the retail investing public

  3. X will not maintain discretionary accounts at any time;

  4. The Proposed Supervisor will review and initial X's incoming and outgoing correspondence, none of which will be with the retail investing public, at the time that they are either received or sent. No correspondence will be sent without the Proposed Supervisor's review and approval; 

  5. All complaints pertaining to X, whether verbal or written, will be immediately referred to the Proposed Supervisor for review, and then to the Firm's Director of Compliance. The Proposed Supervisor will prepare a memorandum to the file as to what measures she took to investigate the merits of the complaint (e.g., contact with the customer) and the resolution of the matter. Documents pertaining to these complaints should be kept segregated for ease of review; 

  6. X will be required to attend an annual compliance meeting, and evidence of her attendance will be kept segregated in a file for easy review; 

  7. The supervisory procedures of the Sponsoring Firm shall be amended clearly to establish the Proposed Supervisor's responsibility to supervise X; 

  8. For the duration of X's statutory disqualification, the Sponsoring Firm must obtain prior approval from Member Regulation if it wishes to change X's responsible supervisor from the Proposed Supervisor to another person; and 

  9. At no time, in her capacity as a marketing supervisor, will X supervise registered representatives.

See Frank Kufrovich, Exchange Act Rel. No. 45437, 2002 SEC LEXIS 357, at *16 (Feb. 13, 2002) 
(upholding NASD's denial of a statutory disqualification applicant who had committed non-securities related felonies "based upon the totality of the circumstances" and NASD's explanation of the bases for its conclusion that the applicant would present an unreasonable risk of harm to the market or investors).
Enforcement Actions