The Blog Of The Securities Industry Professional Association

A World Governed by FINRA


How would other industries would handle playing in a brokers’ world ?

Over the years at conferences and cocktail parties I often hear Brokers and BD owners lament about the restrictions placed on them compared to other industries.  Indeed it is a very regulated world in the securities industry and the amount of rules, regulations, reports, disclosures and disclaimers that must be provided would make a mere mortal of a business man suck his thumb in the fetal position.  Toward that end we decided to look at several other industries and imagine what would happen if they had to play by our rules and what would the monthly disciplinary actions look like?   Although this is a facetious look at our industry, it should also be noted that some of these other industries are basically allowed to say and do as they please with little or no regulation.  While I am not calling for more government, aren’t some of these companies part of today’s problems?   So let’s take a look at a FINRA monthly Disciplinary notice if they were in charge of other industries:

Disciplinary and other FINRA actions

Reported January 2014


Firms Fined, Individuals Sanctioned

BP Amoco and Company (#8675301) Submitted and offer of settlement in which the Firm was censured and fined $35,000,000,000.00 for failure to supervise off shore drilling in the Gulf of Mexico.  Without admitting or denying the allegations in the complaint, BP consented to findings that if failed to properly supervise off shore oil rigs, did not have proper business contingency plans, failed to detect any weaknesses in its supervisory procedures for rig fires at sea and failed to keep adequate safety records to ensure compliance with applicable safety rules.  FINRA found the company was lax in its response to the oil spill and cited the fact they tried to cover it up by throwing golf balls, cement and sea trash into the blown well. (case#2013-87976777)

Trump Industries ( #555181) and Donald Trump (#234569) Submitted an offer of settlement in which the firm was censured and fined $50,000,000,000.00 for failing to disclose the risks of gambling and excessive churning of slot machines.  Separately Donald Trump was censured and fined $10,000,000.00 and will be suspended in all capacities for one year and as a supervisor /CEO of Trump, Inc for a two year period.  Without admitting or denying the allegations, the company and Trump consented to findings that the Casinos they operate failed to properly disclose the risk of gambling, that a player may lose all or part of their money and that you may lose more money then you came into the casino with if you decide to put the title to your home or car up as collateral.  Additionally, Donald Trump was suspended for knowingly not disclosing the risk of gambling and for inducing clients to gamble away large amounts of their life savings in games that were not suitable for their risk tolerance.  In an even more shocking twist, Trump served free alcohol to these gambling clients in an effort to make them lose their inhibitions and gamble even more money in an unsuitable fashion.  A FINRA spokesperson said: “this was an important victory for retired people who are continually targeted by the gaming world with free bus rides, buffets and drinks.  We made it known today that Casinos will now be required to explain in writing the risks of gambling and drinking.”.  In addition to the sanctions the Company agreed to update its Written Procedures to include disclaimers on every token and slot machine, agreed to serve only non alcoholic drinks and has agreed to put clocks on the wall in every casino.  Mr. Trumps suspension is to begin on April 1st 2014.(Case#2012-20001245655777)


Fannie Ma (#987654) JP Morgan (#987987) Hon. Congressmen Barney Frank Submitted an offer of settlement in which the two firms are  censured and fined $70,000,000,000,000.00 for failing to disclose the risks of buying a home you cannot afford, failure to tell home owners that they were paying interest only on their loan, failure to disclose that the real estate market may go down and for paying illegal compensation to property appraisers so they could force these loans through. Separately, Congressmen Barney Frank agreed to be barred from association with any FINRA member in any capacity.  Without admitting or denying the findings they agreed that it was dishonest to tell a person with a $25,000 per year job and no savings that they could afford a $500,000 home.  In addition, FINRA found that Mr. Frank used his influence with his FNMA and its CEO to push mortgages on the unsuspecting American public.  

Dr. Frank N. Stein (#000123) and Victory Hospital (#123654) New York, NY Dr. Fran Stein was barred from the medical industry in all capacities and is required to re take the medical board exam prior to submission of an application to become a member again.  Without admitting or denying the findings the Dr. agreed to the bar and a $2,000,000.00 fine for failing to update his record to show potential clients that there had been dozens of patient complaints against him over the years and that 7 out of his last 10 operations resulted in death.  The operations in question were at best cosmetic and consumers had no access to see the medical and behavioral history of the Doctor  or the hospital.   Separately the Victory Hospital agreed to pay a fine of $10,000,000.00 and to revamp its procedures to provide an on line database for the public to view any and all complaints against the hospital and to add transparency to the operating record of each and every doctor. In addition, the hospital was fined for price gouging and charging excessive mark ups to patients.  FINRA enforces a 5% markup guideline and in some cases will make exceptions.  However the investigation uncovered Hospital mark ups of anywhere from 200% to over 10,000%.  In one example, a patient’s insurance company was charged $60.00 for the administration of 2 Tylenol pills that had a market value of approximately $1.00 FINRA spokesmen said “Today is an important day in the medical world.  Consumers have a right to know if their doctor is competent or has the history of a butcher.  From expectant mothers to patients with heart problems, they will all be able to see each and every complaint lodged going back for a period of 20 years and will also be able to see the outcome of the last ten operations of a similar nature”.

The Law Firm of Dewy, Efrehm and Howe ( # 666) Submitted an offer of settlement today in which the firm was fined, censured and barred from the Legal industry in all capacities.  The Firm also agreed to a fine of $25,000,000.00 and to pay reparations to thousands of brokers and brokerage firms for behavior that FINRA concluded was fraudulent coercion through use of threats and intimidation.

The sanctions will go into effect February 1st 2014.  In its findings FINRA found that the law firm engaged in an egregious practice in which they knowing brought Arbitration cases against Firms and Brokers that they knew were false and or exaggerated and engaged in a campaign to intimidate and threaten the plaintiffs with threats against their Form U-4’s and threatened to put them out of business due to excessive legal fees unless they agreed to their strong armed demands.  In addition, FINRA found that this law firm and others didn’t not provide consumers with a detailed list of all customer complaints and or cases lost by the firm but rather hand picked winners o as to give the allusion of a better track record. As part of the settlement, the Bar Association of New York has agreed that if a Claimant loses in arbitration to a Firm or Broker that the claimant is responsible for legal; fees and damages of two (2) times the award sought and if Claimant is unable to pay such award, the law firm must make good on the award.


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January 29th, 2014



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