|
| 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.
|
| 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license was revoked.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. |
| Background |
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 |
Approval |
| Considerations |
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.
UNDERTAKINGS
-
X will conduct business on behalf of the
Sponsoring Firm only from the office
where the Proposed Supervisor is physically located;
-
X will act in a marketing capacity and will
have no dealings with
the retail investing public;
-
X will
not maintain discretionary accounts at any time;
-
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;
-
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;
-
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;
-
The supervisory procedures of the Sponsoring
Firm shall be amended clearly to establish the Proposed
Supervisor's responsibility to supervise X;
-
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
-
At no time, in her capacity as a marketing
supervisor, will X supervise registered representatives.
|
| Citations |
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). |
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