Effective immediately, Thomas P Hyland will be approving all new and updates to Outside Business Activities. Please continue to submit OBA forms through the proper channels to your manager, but keep in mind this new step may result in additional queries from TFS Compliance or Tom himself.
Representatives should also take note that this new approval process may cause delays in approvals. Representatives should use good judgment when it comes to the timeliness of OBA submissions. All Outside Business Activities must be approved prior to engaging in the OBA. Failure to fully comply with this policy will result in immediate and swift disciplinary action.
Please direct any questions regarding this new procedure to myself or your designated Compliance Liaison.
Mostly, I have been sending items targeted to the registered reps in the field—- items that I identify as being on FINRA’s hot watch list. Today, I want to remind the staff in each of our offices that they need to be just as diligent as the reps and the principals. Here’s an example right out of the FINRA enforcement pages:
“X (CRD #1234567, Registered Representative, Los Angeles, California)
submitted a Letter of Acceptance, Waiver and Consent in which she was fined $7,500
and suspended from association with any FINRA member in any capacity for one month.
Without admitting or denying the findings, X consented to the described sanctions
and to the entry of findings that she falsely attested on her member firm’s document
verification forms and wire service request forms that she spoke with a customer, as well
as provided a fictitious purpose for the wire request. The findings stated that X was a registered sales assistant at her firm and was granted delegate access to a broker’s firm email account in order to respond to any customer inquiries while the broker was on vacation. A customer’s personal email address was hacked into by an imposter pretending to be the customer, who sent the broker an email requesting the balances in the customer’s accounts, as well as information concerning wiring funds from the account both domestically and internationally. The findings also stated that X provided the imposter the account balances for the customer’s accounts and attached a blank letter of authorization (LOA) form to complete and return to her for wire transfer requests. The imposter sent X another email from the customer’s email address requesting cash transfers totaling $85,000 from one of the customer’s accounts to his clients in Australia and faxed two LOAs to X. The imposter requested the wire transfer to occur the next day. The LOAs were for the transfer of a total of $85,000 from one of the customer’s accounts to third parties’ bank accounts in Australia. The imposter also provided the third parties’ account numbers and routing numbers at the Australian banks. The findings also included that the LOAs were purportedly signed by the customer, but were missing the account numbers, as well as the purpose for the wire transfers. X entered the missing account numbers and the purpose for the wires in the document verification forms for the LOAs. Notwithstanding the requirements of the firm’s written procedures, X falsely represented on the document verification forms that she spoke to the client to confirm the instructions and he advised that the funds should come out of the account and that the funds were being sent to his business partner in Australia. FINRA found that X forwarded the document verification forms for the LOAs to the firm’s operations department for review. Burton also entered into the comments field on Service Request for the LOAs that she confirmed the instructions with the customer that morning, who indicated that he was wiring funds to his partner in Australia to invest in property. X never spoke with the customer and the imposter never provided X with a purpose, i.e. investing in property, for the wire transfer requests or a business partner. FINRA also found that the imposter requested an additional $23,000 and $52,000 be wired from the customer’s account to a bank in Florida and another bank in Australia.
X became suspicious of the wire request activity and called the customer to verify the
requests. The customer informed X that he never made any wire transfer requests.
X’s firm was able to reverse the wire transfer instructions and return the $85,000 to
the customer’s account without any loss to the customer.
The suspension was in effect from July 1, 2013, through July 31, 2013.”
The Financial Industry Regulatory Authority (FINRA) has made the supervision of Outside Business Activities and Private Securities Transactions a top exam priority over the years. In 2011, the regulatory agency listed OBA’s on its Annual Regulatory and Examination Priority Letter, in 2012 FINRA made OBA’s a topic of interest at its annual conference, and already this year, the National Examination Program has announced that OBA’s will be an examination priority for 2013. Being a current obstacle facing the broker dealer community, it should come at little surprise that last month FINRA took targeted action against a list of individuals, due to OBA infractions.