Street Legal: When Off the Clock is On the Record
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After hours, off the clock, in my spare time — those are all lovely concepts when it comes to the drudgery of any job; on Wall Street. But you may not have as much downtime as you think. According to a recent Financial Industry Regulatory Authority settlement, registered persons may need to reconsider some activities that go on outside of work.
Jenny Quyen Ta founded Titan Securities and served as its first president when it became a FINRA member firm in August 2004. After she sold Titan in 2006, Ta remained as a registered principal and representative through 2009. Unfortunately, FINRA took a look at a number of Ta's activities between Titan sale and her departure from the firm, and the regulator wasn't happy.
Without admitting or denying the FINRA findings, Ta entered into a settlement that imposed a one-year suspension and a $10,000 fine. (In the Matter of Jenny Quyen Ta, Respondent; FINRA Letter of Acceptance, Waiver and Consent, No. 2010021538701, Nov. 23, 2010.)
Outside Activities
In 2007, Ta received $50,000 in compensation from a foreign currency trading firm where she provided translation services. In 2009, Ta received $8,900 in cash and some restricted stock from a jewelry company where she served as vice president and director. Ta did not properly notify Titan of these outside business activities; the settlement charged that she violated NASD Conduct Rule 3030: Outside Business Activities of an Associated Person, and NASD Conduct Rule 2110: Standards of Commercial Honor and Principles of Trade.
But there was more. On her 2006 annual compliance attestation form, Ta denied having “away accounts” (personal brokerage accounts at other member firms); however, the settlement alleged, she had financial interests and/or trading authority in at least 13 brokerage accounts at two other broker-dealers. Most of those accounts were held by Ta and/or close family members. Exacerbating the issue, on at least six new account applications, Ta answered “no” to questions about whether she was affiliated with another member firm.
The settlement also alleged that Ta had created two websites, “jennyta.com” and “JC Concorde Securities.com,” without obtaining the requisite written approval of a Titan principal, violating NASD Conduct Rules 2210: Communications with the Public and NASD Conduct Rule 2110. The websites purportedly represented JC Concorde Securities (which the settlement describes as Ta's business) as a full-service, FINRA broker-dealer. That wasn't exactly the case; in 2009 and 2010, JC Concorde had FINRA new member applications pending, but approval was not forthcoming and the application apparently was withdrawn in 2010.
Ta's Internet dealings went further. In 2009, she had a Twitter account with 1,400 followers, and she posted at least 372 tweets, 32 of which referenced Advanced Micro Devices (NYSE: AMD). The settlement alleges that in violation of NASD Conduct Rule 2210 and FINRA Rule 2010, Ta failed to inform a Titan principal about the account and the AMD tweets, which frequently made projections about future share price increases without disclosing that Ta and her family held over 100,000 shares (Ta did not personally sell her AMD position during the relevant time.) FINRA deemed the AMD tweets to be unbalanced and lacked the necessary disclosure about the “substantial positions” held in the stock by Ta and her family.
Practice Pointers
OK, a little refresher course.
Outside Business Activities: Registered persons who intend to accept compensation (or have the reasonable expectation of such); or who intend to become an employee, independent contractor, sole proprietor, officer, director or partner of another person/entity, must provide prior written notice to their member firm (typically on a required form).
Away Accounts: Prior to opening an account or placing an initial order for the purchase/sale of securities with another member, an associated person must notify in writing both the employer member and the executing member of the association with the other member. For accounts existing prior to association, such notice must be undertaken promptly after becoming so associated.
WRITER'S BIO:
Bill Singer is the publisher of RRBDLAW.com and BrokeAndBroker.com.
