I am often troubled by what I refer to as "involuntary" appeals whereby a respondent(s) do not seek appeal of an OHO decision but the NAC decides on its own to review the case.  Frankly, I think that the NFL's Instant Replay Rule should apply to such involuntary appeals -- only "incontrovertible" evidence shall overturn a call made on the field.  As such, I don't like it when the NAC modifies or over-turns the lower OHO's findings or sanctions simply because the NAC feels differently. After all, the OHO had the benefit of a plenary hearing replete with live testimony and the opportunity to weigh the credibility of all participants.  The NAC sits through no such full fledged hearing.

The tipping point in this case was a finding by the OHO that Vines conduct was negligent but not reckless or intentional; however, the NAC disagreed and deemed Vines' conduct to be "egregious."

I have reprinted a portion of the "Sanctions" discussion of the OHO Decision for your consideration (See, Pages 8-10 of the Decision):

III. Sanctions

For forgery or falsification of records, the Sanction Guidelines recommend a suspension of up to two years in cases where mitigating factors exist, and a fine of $5,000 to $100,000. In egregious cases, a bar is recommended.49 Enforcement has recommended sanctions of a suspension in all capacities for one year, a suspension in all principal capacities for eighteen months, and a fine of at least $25,000. Respondent has proposed a six-month suspension in all principal capacities and a fine of $5,000. Respondent’s conduct was not egregious, but his failure to consider the ethical implications of the action that he approved warrants sanctions sufficient to ensure that he is more attentive to the ethical implications of his actions in the future.

Several of the Sanction Guidelines’ principal considerations are relevant to the determination of the appropriate sanctions. The principal considerations specifically identified in the Sanction Guidelines are the nature of the documents falsified and whether the respondent had a good-faith, but mistaken, belief of express or implied authority.50 The nature of the documents falsified supports a lower sanction, especially since all customers had signed the previous version that had only recently become non-compliant. The amendment to Rule 3110(f) provided for “enhanced disclosure” about the arbitration process in response to concerns expressed by investor groups.51 Although the falsified documents contained clearer disclosures than the earlier versions, the revisions to the documents did not alter customers’ rights. The fact that FINRA did not require members to inform existing customers of the disclosures and postponed the implementation of the amendments that required the disclosures suggests that the disclosures were incremental, not fundamental, changes. Respondent did not believe that UVEST had express or implied authority from its clients to copy their signatures.

Other considerations also support sanctions on the lower end of the recommended sanctions. There was no pattern of misconduct. Respondent’s role in the falsification of records lasted only a few minutes on a single occasion, when he approved the copying of customer signatures. The falsification of records did not cause injury to anyone and had very little potential to injure.

Despite the fact that Respondent knowingly approved the falsification, his error was negligent rather than reckless or intentional. It was the result of making a decision in haste while preoccupied with other matters and not considering the nature or consequences of the act, rather than a conscious decision to act dishonestly. The copying of customer signatures had no potential to benefit Respondent, monetarily or otherwise, and Respondent did not benefit.52 Respondent’s self-interest would have led him to the same conclusion as considering the ethical interests involved – that copying customer signatures was a mistake. He had nothing to gain, but much to lose, by approving the falsification of customer signatures.

Respondent has acknowledged to FINRA and his employer that he approved the falsification of records. Respondent has expressed remorse for his actions and testified that he has learned a very “tough life lesson” from the experience.53 The parties agree that Respondent cooperated with FINRA in its investigation.54

The Hearing Panel was concerned that Respondent and UVEST decided not to send the correct forms to customers for signatures when the firm discovered that the records had been falsified. The decision was made in collaboration with other senior employees, including the head of compliance, and was based on the absence of customer injury. The Hearing Panel believes that the absence of customer injury was insufficient reason to continue to rely on records that were known to be falsified. This was, in effect, a collective act of concealment. The Hearing Panel has considered this response to be an aggravating factor. . . .

In contrast, consider this language from the NAC's Decision (See Page 9)

Based on the relevant facts, and the evidence of aggravation and mitigation in this case, we conclude that Vines’s misconduct was egregious. Nevertheless, we do not impose even higher sanctions in this case based on a balancing of all the factors. We note that none of the 60 affected customers filed a lawsuit or arbitration against UVEST while the falsified IRA adoption agreements were in the files. We also place some weight on the fact that the overwhelming majority of the affected customers —3 out of 60—signed and returned compliant forms when UVEST repapered the files in July 2006.15 . . .