The Blog Of The Securities Industry Professional Association

FINRA Finally Protecting Brokers

Tommy BelesisJohn Thomas case could set precedent

 FINRA recently came out with a scathing and lengthy complaint against John Thomas Financial and its principals, including its owner Tommy Belesis.  While most of the charges were ugly to say the least however the part of the complaint that really caught my eye was the fact that JTF was accused of threatening and intimidating its registered representatives and also misrepresenting things to their reps and clients.   As you may recall, we published a story about this very subject several months ago in a piece called FINRA Needs to Protect Brokers

The JTF charges give me hope that FINRA might be making a collective effort to protect brokers who have done nothing wrong but end up having their pay withheld and their permanent records tarnished over nothing.  The charges of front running and failing to execute the customer orders on its own are very serious but FINRA actually took the time to explain in detail, lies and abuse that was directed at reps.  Everything from threats of physical abuse to verbal abuse was outlined in the complaint.  In an interesting twist though, FINRA alleges that the brokers were given misleading information as to why certain transactions could not be facilitated.  In years past the attitude has been don’t lie to your public clients but if you lie and screw over your brokers that’s between you two.

The use of false U-5 filings by a firm is nothing new and to a large extent the attitude toward this abuse was the same.  If a broker didn’t like the fact that his former employer falsely accused him of stealing and falsifying documents the broker could file an arbitration and spend tens of thousands trying to get it corrected.  In the JTF complaint it is alleged that multiple employees were continually threatened with false u-5 filings by the firm owner.   In truth, this practice has been going on for decades and it’s about time FINRA addresses this.  In addition to bringing charges, we believe its time FINRA reviews U-5 procedures/standards and issues guidance on what is acceptable and what is not.  For years I have seen brokers have permanent marks on their license because a branch manager or supervisor told the compliance director “he stole stuff we are still investigating”.  Three months later they then enter a disclosure on the broker’s record that the investigation is closed.  This practice needs to be stopped immediately and if you accuse some one of theft you should have two standards:

1) Proof and documentation of what was stolen.  A lot of time they claim “client lists” were taken so prove hoe he took them.  If you don’t have proof you can not claim this until you do.

2) Make Supervisors sign under penalty of perjury.   If you are claiming to your Compliance officer that there was stolen property or customer complaints that up until now were never disclosed, make the Supervisor of the broker sign that “under penalty of perjury this is true and correct”.  Now if it turns out to be total hogwash, that same manager will be facing FINRA charges himself for lying.

 We think if those two simple standards were in place many rogue managers like the ones outlined in this complaint would think twice about trying to ruin a broker’s career because he had the audacity to want to work for another firm.

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April 16th, 2013



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