The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
January 4, 2021
Did You Hear The One About The Customer Who Sued Because He Didn't Know Insider Trading Was Illegal?
(BrokeAndBroker.com Blog)
(BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/5628/finra-expungement-borders/
It all started with a customer's complaint. Except the branch manager, who got named in the ensuing lawsuit, had no involvement in, or knowledge of, the activities at issue. Notwithstanding the no-involvement and no-knowledge aspects, FINRA still required that the manager's industry record be marked up by the inclusion of the customer's complaint. Worse, FINRA then collected a number of fees on its way to setting up an expungement arbitration by which the poor manager had to clear his name via a time consuming and somewhat expensive process. Thankfully, a FINRA Arbitrator found that the underlying customer lawsuit was meritless.
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Terry Tzagarakis submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC alleges that Terry Tzagarakis was first registered in 2000 with J.P. Turner & Company, L.L.C., then registered with six differement FINRA member firms, and by January 2013, he was registered with Spartan Capital Securities, LLC until his association with another firm in May 2020. The AWC alleges that Terry Tzagarakis "does not have any relevant disciplinary history." In accordance with the terms of the AWC, FINRA found that Tzagarakis willfully violated Article V, Section 2(c) of FINRA's By-Laws and FINRA Rules 1122 and 2010; and the self regulator imposed upon him a $5,000 fine and an three-month suspension from association with any FINRA member in all capacities. The AWC includes this paragraph:
Respondent understands that this settlement includes a finding that he willfully omitted to state a material fact on a Form U4, and that under Section 3(a)(39)(F) of the Securities Exchange Act of 1934 and Article III, Section 4 of FINRA's By-Laws, this omission makes him subject to a statutory disqualification with respect to association with a member.
As alleged in part in the AWC:
Between March 9, 2016 and March 21, 2017, the IRS filed two tax liens against Tzagarakis, in the amounts of $73,681.24 and $39,218.11, respectively. The IRS mailed notice of each lien to Tzagarakis's residential address within one day of filing the lien. Tzagarakis has not satisfied either of the tax liens. Nonetheless, Tzagarakis failed to amend his Form U4 to disclose the March 2016 tax lien until August 30, 2016, over five months after the lien was imposed, and failed to disclose the March 2017 tax lien until March 19, 2019, almost two years after the lien was imposed.The New York State Department of Taxation and Finance filed a tax warrant against Tzagarakis on February 17, 2017, which resulted in the imposition of a lien against Tzagarakis for $59,010.91. The tax warrant was mailed to Tzagarakis's residential address on or about the date of filing. Tzagarakis has not satisfied the New York State tax lien. Nonetheless, Tzagarakis failed to amend his Form U4 to disclose the New York State tax lien until February 13, 2018, approximately two years after the lien was imposed.Despite his knowledge of these liens and the need to disclose them on his Form U4, Tzagarakis failed to timely amend his Form U4.Therefore, Tzagarakis willfully violated Article V, Section 2(c) of FINRA's By-Laws and FINRA Rules 1122 and 2010
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Timothy Joseph submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC alleges that Timothy Joseph was first registered in 2001 with First Command Brokerage Services, Inc. The AWC alleges that Timothy Joseph "does not have any relevant disciplinary history." In accordance with the terms of the AWC, FINRA found that Joseph violated FINRA Rules 2010; and further violated Rule 2010 and Rule 4511, by causing First Command Brokerage to maintain inaccurate books and records, in violation of Section 17(a) of the Securities Exchange Act and Rule 17a-3 thereunder. Accordingly, the self regulator imposed upon him a 45-business-day suspension from association with any FINRA member in any capacity. In determining its sanctions, FINRA noted that it had "considered that First Command fined Joseph $10,000." As alleged in part in the AWC:
In August 2019, Joseph met with Customer A regarding opening two accounts with the Firm's investment advisor affiliate. After meeting with Customer A again in September 2019, Joseph electronically affixed the customer's signature to the account opening documents, causing assets to be transferred from her Firm account to the new advisory accounts. When Customer A learned that the advisory accounts were opened, Customer A immediately instructed Joseph to reverse the transactions. Joseph reported Customer A's complaint to First Command, and the Firm reversed the transactions.In September 2019, Joseph also electronically affixed the signatures of two other Firm customers to advisory account opening documents, one Firm customer's signature to four IRA distribution forms, and five Firm customers' signatures to ACH authorization agreements. The Firm used the documents to authorize and record the sale, transfer, or disbursement of cash or securities from the customers' accounts. Although these customers did not initially authorize Joseph to electronically affix their signatures, they subsequently approved the transactions.When First Command discovered Joseph's conduct, the Firm disciplined him by, among other things, fining him $10,000 and assigning Joseph additional training.