Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE
2010
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 2010
Michael D. Rhodes
AWC/2009018521601/March 2010

Rhodes failed to give notice to his member firm as required by the firm and FINRA rules that he was engaged in an outside business activity and was being compensated by an individual for providing financial services. The individual contacted Rhodes for financial advice on several businesses the individual owned and on a number of issues and Rhodes met with his firmís officers to develop a plan for working with the individual.

Rhodes firmís officers told him that he had to qualify and become registered as an investment adviser representative (Series 65) before he could provide the services the individual requested and be compensated for those services. Rhodes was paid $25,000 per month from one of the individualís businesses even though he was not registered as an investment adviser representative. The Firm learned about the compensation through other means.

Michael D. Rhodes : Fined $10,000; Suspended 30 days
Tags:  Investment Advisor    Unregistered Person     |    In: Cases of Note : FINRA
Bill Singer's Comment
I found this particularly interesting. He's getting paid $25,000 a month by a client for investment advice. Why the hell is he still working for a BD? He should just go into the consulting business because he's doing quite well!
Steven William Sauer
AWC/2008014156001/March 2010
Sauer's compensation arrangement with his member firm included a split of all investment advisor (IA) fees received, for which Sauer received 90% and the firm received the remaining 10%. Further, the firmís procedures required that all customer checks for payment of such fees be made payable to the firm. Sauer received checks totaling $51,500 in IA fees from customers made payable to him. Sauer deposited the checks into his personal and business checking accounts, did not timely inform his firm of these payments, but later confessed that he had improperly withheld the firmís portion of those payments, and repaid the firm $5,150.
Steven William Sauer : Barred
Tags:  Investment Advisor     |    In: Cases of Note : FINRA
Bill Singer's Comment

Amazing, isn't it, that all of a sudden we see this flurry of FINRA cases involving investment advisors. I am sure that it has absolutely nothing to do with FINRA's reported designs on becoming a self-regulatory organization in this space. Of course not. Never crossed anyone's mind.

Separately, this is yet another example of the "politics of regulation" that drives me up the wall -- and over it, down the other side, and, yeah, you guessed it, back up and over again. 

Sauer had a deal -- a compensation agreement -- with his firm.  He was supposed to get paid X and the firm Y.  Sauer kept X and Y without any apparent legal reason.  For his efforts to screw his member firm, he gets barred.

Fine. Got it. No problem.

Just explain this to me.  How is it that when the equation is reversed and a FINRA member firm fails to honor its compensation agreement with an individual RR that I never, ever see a FINRA regulatory action that slams the member firm -- much less expels it from membership?

Enforcement Actions
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