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: January 22, 2003
Redacted SD Decision
No. 04005

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

X subsequently appealed this decision to the SEC, and then withdrew the appeal. Accordingly, the NAC decision is the final decision in this matter.

November 2003, a subcommittee ("Hearing Panel") of NASD's Statutory Disqualification Committee held a hearing

Filed Under: Felony, DUI, Recency, Treatment/Rehabilitation, Age of Applicant, Denial
SD Event
In August 2002, X pled guilty in State1 court to the felony offense of operating a motor vehicle while under the influence of alcohol ("DUI"), and to the misdemeanor offense of aggravated, unlicensed operation of a motor vehicle. The DUI conviction is a felony because it was X's third DUI offense: he was previously convicted in May 2000 and March 2001. For his most recent conviction, X was assessed (for the felony) a $1,000 fine and was sentenced to 12 consecutive weekends in jail, placed on probation for five years, and had his driver's license revoked for one year; on the second count (misdemeanor), X was sentenced to three years' probation and assessed a fine of $500.
Sentence Expiration
2007 (five years probation)
Prior Industry Activity
RR since 1998
Also licensed insurance representative. No regulatory history during 10 years in industry. Three customer complaints.1995 Chapter 13 bankruptcy filing resulting in 1999 discharge.

1.  "Permitted to Resign" from Firm #1 in June 2000. The Uniform Termination Notice for Securities Industry Registration ("Form U5") states that a customer had alleged that she received a fraudulent confirmation from X. X contends that Firm #1 added this statement to the Form U5 as retribution for his having left the firm. 

2. "Discharged"/"Resigned" from Firm #2 in April 2002. X resigned his position at Firm #2, which initially reported on the Form U5 that X had been "discharged." X filed a complaint with NASD Dispute Resolution against Firm #2, contending that he resigned his position after Firm #2 began to make deductions from his salary, without his authorization, to settle a customer complaint. The arbitrator awarded X $1,500 and ordered Firm #2 to change the Form U5 language under "reason for termination" from "discharged" to "voluntary." 

3. Four customer complaints have been filed against X. 

1. April 2000. The customer alleged that a margin trade had not been authorized. The alleged compensatory damages were $30,000. The Central Registration DepositoryŽ ("CRD") record does not indicate any further action on this complaint. 

2. April 2000. The customer alleged unauthorized use of margin, misrepresentation, and that X failed to follow instructions. The alleged compensatory damages were $7,500. The CRD record does not indicate any further action taken with regard to this complaint. 

3. May 2000. The customers alleged that X failed to execute orders in various securities and that he executed one unauthorized transaction. The2 .- 3 - alleged compensatory damages were $8,500. CRD does not indicate any further action taken with regard to this complaint. 

4. February 2002. The customer alleged that X failed to execute completely the sell side of a day trade. The firm settled the complaint with a payment of $70,000 to the customer. X stated that the complaint was settled without his authorization and that the firm deducted monies from his paycheck without his authorization. X took this matter to NASD Dispute Resolution; the arbitrator ruled in his favor and awarded him $1,500.

Sponsoring Firm
NASD member since 1993.. General securities business. 3 OSJs and 3 branches. Employs 115 unregistered persons, 18 registered principals, and 100 RRs. Does not employ and statutorily disqualified individuals.  2002 branch examination concluded with no actions.  Firm had previously employed one statutorily disqualified individual, who is not presently employed.  Four arbitration matters are presently pending with NASD Dispute Resolution.
Proposed Activity
General securities rep to work in the Firm's home office in State1. He would continue to be engaged in selling individual stocks to relatively active traders. 
Proposed Supervisor
Registered principal and the Firm's Director of Investment Banking, and he has been employed by the Sponsoring Firm since October 2002. Entered the securities industry in 1993. Registered as a general securities representative (Series 7) in April 1997 and as a general securities principal (Series 24) in July 1997. Does not supervise any other individuals. No disciplinary history. 
Member Regulation Recommendation
X was convicted of a recent, serious criminal offense. Moreover, he is a repeat offender, having had three DUI convictions between May 2000 and August 2002, all by the age of 23. In addition to the third DUI conviction being a felony, he was convicted of aggravated, unlicensed operation of a motor vehicle. This pattern demonstrates that X may be unable to conform his behavior to applicable laws and regulations.

Impressed with the 

  • evidence that X presented at the hearing that he has been involved with Alcoholics Anonymous since early 2002, following his last DUI arrest, and has completed intensive inpatient and outpatient programs. 
  • testimony given by the individuals from the Court Intervention Project about X's so far successful rehabilitation and therapy. 

However, X has only treated his chronic alcohol problem for less than two years. Insufficient time has passed for him to demonstrate that the change in his behavior pattern is fundamental and long lasting and that he can conduct himself in a responsible and compliant fashion in the securities industry. This is particularly true given that X's proposed business activities, the sale of individual stocks to active traders, will involve higher professional risks than selling other product offerings to different investors. 

Lack of disciplinary history for the Firm and the Proposed Supervisor are noted, but these facts do not outweigh the seriousness and recency of X's offense, his history of customer complaints, the relatively short period of his sobriety and the certain pressure that will inhere in pursing the same business activities as those he pursued before the felony conviction. 

Not in the public interest and that it creates an unreasonable risk of harm to the market or investors, to permit X to continue his employment in the securities industry.

Frank Kufrovich, Exchange Act Rel. No. 45437 (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