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FINRA Bars RR for Silent Treatment

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May 11, 2010 12:25 pm



Giving FINRA the Silent Treatment -- And Getting Barred for It. 


On October 28, 2008, M.L. Stern & Co., LLC ("M.L. Stern"), a former Financial Industry Regulatory Authority (FINRA) member firm, filed a Uniform Application for Securities Industry Registration (the "Form U4") with FINRA on behalf of Gregory S. Profeta (Profeta). M. L. Stern amended Profeta's Form U4 on December 23, 2008.  Among other things, the Form U4 asks whether an applicant had been charged with any felony.  The U4 also inquires as to certain misdemeanors, among which would be a misdemeanor involving the wrongful taking of property. Profeta did not disclose anything on his Form U4 in response to these questions.   


M.L. Stern terminated Profeta on January 14, 2009 for failure to pass the General Securities Representative Examination. 


A Five-Letter Man -- And We're Not Talking High School Sports


FINRA conducted a background search on Profeta and discovered three criminal matters that Profeta may have been required to disclose on the Form U4.


Two Requests for Responses


 FINRA Rule 8210 requires individuals associated with a FINRA member firm to provide information upon request with respect to any matter involved in an investigation. On April 16, 2009, FINRA sent Profeta a letter (the "First Letter") pursuant to FINRA Rule 8210 requesting certain information regarding his non-disclosure of criminal matters. The First Letter sought related charging documents, documents evidencing sentencing or disposition, and why such matters were not disclosed by Profeta on the Form U4. The First Letter asked for Profeta's response by April 30, 2009. FINRA sent the First Letter to Profeta's address of record in the Central Registration Depository (the "CRD"). Profeta does not contest receipt of the First Letter and did not respond to it.


On May 1, 2009, FINRA sent Profeta a second letter (the "Second Letter"), which was returned to FINRA marked "unclaimed" on May 19, 2009.


Warning of Suspension


On August 5, 2009, FINRA sent Profeta a third letter (the "Third Letter") notifying him that pursuant to FINRA Rule 9552(a), he would be suspended on August 31, 2009 if he did not provide FINRA with the information requested in the First and Second Letters. FINRA Rule 9552(a) permits FINRA to suspend the association of an individual with a FINRA member firm upon twenty-one days' notice if such individual does not provide FINRA with information requested pursuant to FINRA's rules. The Third Letter further notified Profeta of his right to request a hearing in connection with this matter prior to August 31, 2009 pursuant to FINRA Rule 9552(e). Profeta does not contest receipt of the Third Letter and did not respond to it.


Notice of Suspension


On August 31, 2009, FINRA sent Profeta a fourth letter (the "Fourth Letter") notifying him of his suspension effective that date and notifying him that he would be barred from associating with a FINRA member in any capacity on February 8, 2010, pursuant to FINRA Rule 9552(h) if he did not provide FINRA with the requested information and request termination of his suspension pursuant to FINRA Rule 9552(f). FINRA sent the Fourth Letter to Profeta's CRD address and to five other addresses associated with Profeta that FINRA had obtained through a search of public records. Profeta does not contest receipt of the Fourth Letter and did not respond to it.


Notice of Bar


On February 8, 2010, FINRA sent Applicant a fifth letter (the "Fifth Letter") notifying him that he was barred from associating with a FINRA member firm in any capacity effective that date. The Fifth Letter also notified Applicant of his right to appeal the disciplinary sanction to the Commission within thirty days. Applicant timely filed this application for review.


SEC Appeal


On March 8, 2010, Gregory S. Profeta ("Applicant") filed with the Securities and Exchange Commission (SEC) an application for review of disciplinary action taken by the Financial Industry Regulatory Authority, Inc.