Street Legal: The Brokerage Industry's Darwin Awards

Sometimes the disciplinary cases that come before the NASD are as amusing as they are troubling.

If the organizers of the Darwin Awards, those famous tributes to human stupidity (the prizes go to people who die silly deaths, thereby cleansing the gene pool), were interested in expanding their scope, the NASD database of disciplinary actions would provide a fertile source for nominations.

An NASD disciplinary action is no laughing matter — particularly to the rep whose “rep” is on the line or to a client who has been harmed. Still, it's hard to keep from laughing at the circumstances surrounding some cases.

Indeed, the facts can be so bizarre on occasion that it's hard to fathom what the participants were thinking as they tried to perpetrate their shenanigans. Other times, the thought process is so obvious and, well, too stupid to be believed.

Either way, the securities workers listed below would be ineligible from winning a Darwin because none of them die as a result of their actions. (For more on the Darwin Awards, which are compiled and verified by a publicity-eschewing molecular biologist, visit darwinawards.com.) Still, since being barred from the industry can be viewed as a kind of professional death, does that qualify them in some way? You be the judge.

As hard to believe as it may seem, the following citations are actual NASD reported actions. The respondents enter into Offers of Settlement (OS) and Letters of Acceptance, Waiver and Consent (AWC) without admitting or denying the allegations, but consent is given to the described sanctions and to the entry of findings.

The Dog Ate My Homework

A registered rep drafted and submitted to his college professor a letter on his member firm's letterhead explaining that he could not attend his midterm examination because his presence was needed at a business event. The purported author of the letter was a fictitious person. Further, the referenced business event was made up. He was fined $5,000 and suspended for one year in all capacities.

Somebody Call Me a Doctor

A rep wanted to issue a research report about a public pharmaceutical company for which his member firm had issued stock. Using an assumed name and misrepresenting himself as a medical doctor, the rep tried to get confidential information from doctors about the effects of a drug under development by the company. After being confronted about his deception, he decided not to use the information. Nonetheless, NASD fined him $10,000 and suspended him for 2 weeks in all capacities.

Me and Madonna Are Like This

In an effort to woo new clients, one rep decided to try to really impress his prospects; alas, he did so by misrepresenting himself, including stating that celebrities were among his customers. He also failed to respond to a request to provide sworn testimony. He was barred in all capacities.

Maybe the Medication Affected His Math?

A registered rep submitted a claim to his member firm's health insurance carrier seeking reimbursements totaling $15,680. In doing so, he overstated the amount of money he had paid in connection with a medical procedure — by $15,543. He was barred in all capacities.

A Car Salesman You Can Trust

A registered rep forged the name of an official of his member firm on a corporate resolution that guaranteed the firm would stand behind automobile loans and leases entered into by an automobile dealership with professional athletes he hoped to attract as customers. He was barred in all capacities.

This One's Going to Kill You

A registered rep accepted unsolicited sell orders from the sole heir to a customer — although the power of attorney over the customer's account was no longer in effect due to the customer's death. When later questioned about the customer, the rep failed to inform her supervisor that the customer (whose account appeared on the firm's active account report) had died. NASD fined her $5,000 and suspended her for a year in all capacities.

Writer's BIO: Bill Singer is a partner with the law firm of Gusrae, Kaplan & Bruno. rrbdlaw.com

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