David Francis Brochu (Principal) and Jill Schlesinger (Principal) - AWC/2006005242501

Enforcement Actions

Financial Industry Regulatory Authority (FINRA)

CASES OF NOTE

2009

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.

March 2009 - View all for this month

David Francis Brochu (Principal) and Jill Schlesinger (Principal)
AWC/2006005242501

Brochu and Schlesinger sold Class B units pursuant to a private placement memorandum containing inaccurate financial projections. Brochu and Schlesinger worked on the private placement memorandum, and Brochu supervised registered representatives who worked on the memorandum’s financial projections. Brochu discovered inaccuracies in the financial projections contained in the memorandum and reported them to firm managers, but incorrectly determined that the inaccuracies were not material and did not disclose them to customers who had purchased the securities. Schlesinger accepted the determination that the inaccuracies were not material and should not be disclosed. Brochu and Schlesinger continued to use the inaccurate private placement memorandum to sell additional units. Acting through Brochu, a member firm failed to establish, maintain and enforce a reasonably designed supervisory system and written procedures regarding its registered representatives’ private securities transactions.

David Francis Brochu (Principal): Fined $20,000; Suspended 15 business days in all capacities

Jill Schlesinger (Principal): Censured; Fined $10,000

Bill Singer's Comment

Sorry, but I don't like this case because the facts as presented by FINRA don't seem to support the sanctions. Let's break this case down into a fairly simple fact pattern: Brochu discovered inaccurate financial projections and reported his findings to management. For whatever reason, Brochu "incorrectly determined" that the inaccuracies were immaterial and continued to use the representations.

Seems to me that we have a fairly diligent Principal who actually read the memo and said: Hmmm, this doesn't look right, let me bring it to my boss' attention. Since FINRA doesn't tell us that the firm's management decided that the projections were materially inaccurate, I'm going to assume that such did not occur (why? Well, because, as FINRA says, that fact would be a material fact in this case and the regulator would certainly disclose that.) Similarly, since FINRA doesn't explain to us the nature of this material inaccuracy, I'm again going to assume that it's just not such a clear-cut error or the regulator would have taken the time to elucidate. So, Brochu is fined a whopping $20,000 and suspended for half a month because he found a mistake, told his firm, and mistakenly assumed that the goof was immaterial. C'mon -- since none of this appeared to be intentional, why the hell did FINRA load up on this guy? And don't even begin to get me started as to why Schlesinger got fined $10,000.

Bottom line: Why wouldn't a simple cautionary letter have been just as meaningful as the dollars and downtime in this specific case, with these specific facts. An unintentional mistake is not going to be prevented by such a fine or suspension. This just strikes me as an excuse to ring the cash register and act like a tough guy.

Please see an interesting Blog discussion of this case at

http://www.brokeandbroker.com/index.php?a=blog&id=154

and then an unexpected revelation at

http://www.brokeandbroker.com/index.php?a=blog&id=155

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It's All Over Now: My 42-year Wall Street Journey by Bill Singer, Esq.

January 30, 2024

Before my second career as a lawyer, I was the third generation of my family in the wine and liquor industry. In 1981, I started law school; and in 1982, I was hired as a law student in Smith Barney, Harris & Upham's Legal Department. After I graduated law school, I was a regulatory lawyer with the American Stock Exchange and then with the NASD (now... Read On

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