Scott Mathis, Exchange Act Rel. 61120, December 7, 2009
Time since appeal – 10 months 17 days
Time since last brief – 5 months 16 days
NASD found that Mathis (a registered rep and general principal) failed to disclose IRS tax liens on his Form U4 disclosures. The liens totaled almost $600,000. For this he was fined $10,000 and suspended for 3 months. As a result of failing to disclose a customer complaint and a customer law suit he was fined $2,500 and suspended for 10 days with the suspensions to run concurrently. The NASD found the violations to be willful. This finding triggers the "statutory disqualification" in Exchange Act §§ 3(a)(39) and 15(b)(4)(A) that prohibits any broker from allowing Mathis to associate with it. Thus Mathis is barred from associating with a broker or dealer regardless of the length of the specific Finra suspensions.
Finra rules specifically require the disclosure of tax liens. In order to invoke the statutory disqualification, the willful violation must involve a material fact. The Commission found the liens to be material under the TSC Industries Inc. v. Northway, Inc. test. It held that investors would find the information material in determining whether to place confidence in him. It found that the liens were material to regulators and potential employers who would likely judge his ability to handle his own financial obligations as significant.
This case is significant as it highlights the very important collateral effect resulting from the statutory disqualification where there is a finding that someone has willfully filed a materially false form U4.
Lexisnexis
Showing posts with label FINRA sanctions. Show all posts
Showing posts with label FINRA sanctions. Show all posts
Finra Fine For Broker's Failure To Prepare General Ledger and Trial Balance Upheld - Original Records Not Sufficient
North Woodward Financial Corp., Douglas A. Troszak, Exchange Act Rel. 60505, August 14, 2009
Time since appeal filed - 7 months 9 days
Time since last brief filed - 4 months 6 days
Summary
North Woodward, a registered broker-dealer and its principal owner Troszak were found by Finra to have failed to prepare and maintain a proper general ledger and trial balance for two months in 2005. They were fined $2,500 jointly and severally. The Commission upheld the findings and sanctions.
Troszak gave Finra examiners various financial records of the firm during an exam, but refused to produce a general ledger and trial balance. He claimed that he had given the examiners all raw data that would otherwise be included in a general ledger. He claimed that the firm's bank account statements and his handwritten notes were the equivalent of a trial balance. The examiners concluded that Woodward understated the firm's net capital by $6,900 and had thereby submitted an inaccurate FOCUS report to Finra.
The Commission rejected the claim that the underlying records satisfied the substantive requirement of Finra and Exchange Act rule 17a-3. Finra has specifically defined the requirements of a broker-dealer's ledger and trial balance since at least 1996. Among other reasons, this is because broker-dealers are required to use accrual accounting and source documents are not prepared using accrual accounting methods.
In upholding the fines, the Commission noted that they were at the lower end of the Finra penalty guidelines.
Comment
Appeal of a $2,500 fine? Not surprising that the appeal was pro se. At least the Commission didn't labor for too long on this one.
Time since appeal filed - 7 months 9 days
Time since last brief filed - 4 months 6 days
Summary
North Woodward, a registered broker-dealer and its principal owner Troszak were found by Finra to have failed to prepare and maintain a proper general ledger and trial balance for two months in 2005. They were fined $2,500 jointly and severally. The Commission upheld the findings and sanctions.
Troszak gave Finra examiners various financial records of the firm during an exam, but refused to produce a general ledger and trial balance. He claimed that he had given the examiners all raw data that would otherwise be included in a general ledger. He claimed that the firm's bank account statements and his handwritten notes were the equivalent of a trial balance. The examiners concluded that Woodward understated the firm's net capital by $6,900 and had thereby submitted an inaccurate FOCUS report to Finra.
The Commission rejected the claim that the underlying records satisfied the substantive requirement of Finra and Exchange Act rule 17a-3. Finra has specifically defined the requirements of a broker-dealer's ledger and trial balance since at least 1996. Among other reasons, this is because broker-dealers are required to use accrual accounting and source documents are not prepared using accrual accounting methods.
In upholding the fines, the Commission noted that they were at the lower end of the Finra penalty guidelines.
Comment
Appeal of a $2,500 fine? Not surprising that the appeal was pro se. At least the Commission didn't labor for too long on this one.
Fraud Charges and Sanctions Based On Recklessness Sustained Following Circuit Remand - Reps Can Not Rely Solely On Issuers And Must Do Due Diligence
Alvin W. Gebhart, Jr., Donna T. Gebhart, Exchange Act Rel. 58951, November 14, 2008
Time since remand - 9 months 30 days
Time since last brief - 5 months 1 day
Pages - 21
Footnotes - 51
Summary
The Ninth Circuit affirmed the Commission's earlier finding that respondents engaged in "selling away" (private securities transactions) without giving prior written notice to or obtaining prior approval from a FINRA member firm. The Court remanded for further findings on whether they acted with scienter in connection with fraud charges involving sales of securities. The Commission held respondents acted with scienter and committed fraud. FINRA's bar against Alvin Gebhart was upheld as was the one year suspension and $10,000 fine imposed on Donna Gebhart.
Discussion
The Gebharts sold $2.4 million of unregistered promissory notes to forty investors between 1997 and early 2000 receiving $110,000 in commissions. NASD found they had not given notice to their firm or obtained permission to sell the notes. It further found that their sale was an unregistered offering in violation of Section 5 of the Securities Act. NASD also found the Gebharts violated the anti-fraud provisions. Alvin was barred and Donna was suspended for one year and fined $5,000 for the selling away and sales of unregistered securities. For the fraud Alvin was also barred and Donna received another one year suspension (concurrent with the other suspension) and a $10,000 fine. The Gebharts appealed to the Commission, but did not contest the charges involving sales of unregistered securities. The Court of appeals affirmed the Commission's decision so far as it applied to selling away. However, it remanded to the Commission the fraud charges for further findings on whether or not the Gebharts acted with sufficient scienter to sustain the fraud charges and sanctions.
The Gebharts sold primissory notes issued by MHP which planned to finance the conversion of mobile home parks to residential ownership. It raised money ostensibly to buy mobile home parks. The Gebharts had only a vague understanding of MHP's business plan and operations. MHP falsely represented that the notes would be secured by first deeds of trust. They made no effort to investigate whether the offering documents prepared by MHP were correct. Their only due diligence was contact with another sales agent, and visiting two of the trailer parks. They had no substantive contact with MHP. They concluded the business was a success solely because they heard no complaints from earlier investors. They had no information about the management or financial condition of MHP. They sold the MHP notes to unsophisticated investors with limited means who needed secure fixed income investments. One was a recent widow with young children and a part time job who they convinced to invest one third of her life insurance proceeds in MHP notes. Investors were told by the Gebharts that the notes were secured by first deeds of trust on the parks and that there was no risk in the investment. In fact, when MHP collapsed it turned out that of $3.7 million in notes sold, only $600,000 were secured by deeds of trust. The Gebharts did take various court actions to assist investors in recovering their losses, including a suit against their liability insurer to pay damages to note holders who had sued them. Ultimately investors recovered 84% of their investments.
Sales agents have an absolute duty to engage in appropriate due diligence before recommending an investment. The Gebharts acted with scienter due to their reckless behavior. The Ninth Circuit has adopted the recklessness definition in Sundstrand Corp. v. Sun Chem. Corp., 553 F.2d 1033, 1045 (7th Cir. 1977)("a highly unreasonable omission, involving not merely simple, or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have been aware of it."). There is a an objective component - whether a reasonably prudent securities professional under the circumstances would have done. The subjective component looks at the actor's actual state of mind at the time.
The Commission held that the Gebharts were reckless. They made representations about the safety of the notes without having performed any meaningful investigation into whether the notes were actually secured. They simply had no evidence that in fact deeds of trust had been recorded for all the notes. Nor did they have any knowledge of the actual value of the parks that MHP was purporting to buy.
The Gebharts argued that it was reasonable for them to rely on the unverified offering materials prepared by MHP. This does not establish good faith as the Gebharts ignored facts that should have alerted them to the risk they were misleading clients. As the Circuit noted "the SEC is entitled to infer from circumstantial evidence that a defendant must have been cognizant of an extreme and obvious risk and reject as implausible testimony to the contrary." The Gebharts' complete lack of investigation and due diligence made it impossible for them to know whether the representations they made to their clients were true. They are liable not because they failed to learn of the fraud, but because they told investors the notes were risk free without verifying the facts upon which those conclusions rested.
Comment
The Commission here holds that extreme recklessness supports a finding of scienter. Given the duty of sales agents to conduct appropriate due diligence it is fraudulent to represent that an investment is completely secure and safe when literally no investigation has been conducted to determine whether that is true. Total reliance on an issuer doesn't cut it. This is especially true here as it would not have been difficult to determine whether the issuer was in fact recording deeds of trust to secure the notes. This case doesn't plow any new ground, but it is a nice restatement of the due diligence obligation of sales agents.
Time since remand - 9 months 30 days
Time since last brief - 5 months 1 day
Pages - 21
Footnotes - 51
Summary
The Ninth Circuit affirmed the Commission's earlier finding that respondents engaged in "selling away" (private securities transactions) without giving prior written notice to or obtaining prior approval from a FINRA member firm. The Court remanded for further findings on whether they acted with scienter in connection with fraud charges involving sales of securities. The Commission held respondents acted with scienter and committed fraud. FINRA's bar against Alvin Gebhart was upheld as was the one year suspension and $10,000 fine imposed on Donna Gebhart.
Discussion
The Gebharts sold $2.4 million of unregistered promissory notes to forty investors between 1997 and early 2000 receiving $110,000 in commissions. NASD found they had not given notice to their firm or obtained permission to sell the notes. It further found that their sale was an unregistered offering in violation of Section 5 of the Securities Act. NASD also found the Gebharts violated the anti-fraud provisions. Alvin was barred and Donna was suspended for one year and fined $5,000 for the selling away and sales of unregistered securities. For the fraud Alvin was also barred and Donna received another one year suspension (concurrent with the other suspension) and a $10,000 fine. The Gebharts appealed to the Commission, but did not contest the charges involving sales of unregistered securities. The Court of appeals affirmed the Commission's decision so far as it applied to selling away. However, it remanded to the Commission the fraud charges for further findings on whether or not the Gebharts acted with sufficient scienter to sustain the fraud charges and sanctions.
The Gebharts sold primissory notes issued by MHP which planned to finance the conversion of mobile home parks to residential ownership. It raised money ostensibly to buy mobile home parks. The Gebharts had only a vague understanding of MHP's business plan and operations. MHP falsely represented that the notes would be secured by first deeds of trust. They made no effort to investigate whether the offering documents prepared by MHP were correct. Their only due diligence was contact with another sales agent, and visiting two of the trailer parks. They had no substantive contact with MHP. They concluded the business was a success solely because they heard no complaints from earlier investors. They had no information about the management or financial condition of MHP. They sold the MHP notes to unsophisticated investors with limited means who needed secure fixed income investments. One was a recent widow with young children and a part time job who they convinced to invest one third of her life insurance proceeds in MHP notes. Investors were told by the Gebharts that the notes were secured by first deeds of trust on the parks and that there was no risk in the investment. In fact, when MHP collapsed it turned out that of $3.7 million in notes sold, only $600,000 were secured by deeds of trust. The Gebharts did take various court actions to assist investors in recovering their losses, including a suit against their liability insurer to pay damages to note holders who had sued them. Ultimately investors recovered 84% of their investments.
Sales agents have an absolute duty to engage in appropriate due diligence before recommending an investment. The Gebharts acted with scienter due to their reckless behavior. The Ninth Circuit has adopted the recklessness definition in Sundstrand Corp. v. Sun Chem. Corp., 553 F.2d 1033, 1045 (7th Cir. 1977)("a highly unreasonable omission, involving not merely simple, or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have been aware of it."). There is a an objective component - whether a reasonably prudent securities professional under the circumstances would have done. The subjective component looks at the actor's actual state of mind at the time.
The Commission held that the Gebharts were reckless. They made representations about the safety of the notes without having performed any meaningful investigation into whether the notes were actually secured. They simply had no evidence that in fact deeds of trust had been recorded for all the notes. Nor did they have any knowledge of the actual value of the parks that MHP was purporting to buy.
The Gebharts argued that it was reasonable for them to rely on the unverified offering materials prepared by MHP. This does not establish good faith as the Gebharts ignored facts that should have alerted them to the risk they were misleading clients. As the Circuit noted "the SEC is entitled to infer from circumstantial evidence that a defendant must have been cognizant of an extreme and obvious risk and reject as implausible testimony to the contrary." The Gebharts' complete lack of investigation and due diligence made it impossible for them to know whether the representations they made to their clients were true. They are liable not because they failed to learn of the fraud, but because they told investors the notes were risk free without verifying the facts upon which those conclusions rested.
Comment
The Commission here holds that extreme recklessness supports a finding of scienter. Given the duty of sales agents to conduct appropriate due diligence it is fraudulent to represent that an investment is completely secure and safe when literally no investigation has been conducted to determine whether that is true. Total reliance on an issuer doesn't cut it. This is especially true here as it would not have been difficult to determine whether the issuer was in fact recording deeds of trust to secure the notes. This case doesn't plow any new ground, but it is a nice restatement of the due diligence obligation of sales agents.
FINRA Sanctions Upheld Including Restitution and Consecutive Suspensions
Michael Frederick Siegel, Exchange Act Rel. 58737 (October 6, 2008)
Time since appeal filed - 9 months 3 days
Time since last brief - 5 months 13 days
Pages - 25
Footnotes - 66
Summary
Siegel, formerly a registered rep appealed a NASD disciplinary action. NASD found he made unsuitable recommendations to two customers and failed to give his firm written notice of private securities transactions (selling away). He was fined $30,000, ordered to make restitution of $400,300, assessed $7,900 of costs, and ordered to serve consecutive six month suspensions from all association with a member firm. The Commission sustained the sanctions.
Discussion
Siegal became a director of a private company in late 1997. He requested permission from his firm to be a director and represented that he would not recommend the company's securities to his customers. Permission as granted subject to a condition that he not effect transactions in the company's securities. Siegal then entered into a written agreement with the company to sell the company's securities for compensation. The agreement was sent to Siegel's home address, not his business address at the BD which opened all incoming mail. Siegel also loaned the company $42,000. He was never paid for his services as a director and the loans were never repaid.
Siegel had discretionary authority over the account of a married couple. Their account had fixed income products, mutual funds, and stocks. Their primary investments were bank CDs. They had a net worth of $1.5-$2 million excluding their home. The husband was a lawyer and the couple's total income was about $150,000. Siegel in late 1997 sold the customers $300,000 of debentures in the company of which he was a director. Even though the company offered the investors an opportunity to rescind shortly after the purchase Siegel advised them to stick with the purchase which they did.
Siegel also had discretion over another couple's $1 million account. In early 2008 Siegel sold them $100,000 of debentures in the company of which he was a director.
The company lost the rights to sell its primary product in in 2002 and its corporate charter was revoked in 2004. Both investors suffered a total loss.
Siegel admitted at the hearing that one couple invested because he told them he was personally going to invest in the company. He also admitted that the sales documents he used with both couples were deficient because they had contradictory or confusing information about the details of the investment terms such as maturity dates, interest rates, and repayment terms. He admitted that these deficiencies made the investment unsuitable for any investor. Amazingly he testified "[t]his is one of the worst set of offering documents I have ever seen in my life." His defense was that he had not studied the offering documents before discussing the investment with his customers.
Siegel did not dispute his violation of NASD rule 3040 that prohibits "selling away" without obtaining written permission from the firm he was registered with. NASD rules require that securities recommendations to customers be suitable. Whether or not a recommendation has been made must be determined on a case by case basis. The standard is whether the communication with the customer was a "call to action" and "reasonably would influence an investor to trade . . . ." The Commission found Siegel's defense that he orally advised his supervisor of his selling away was unavailing because his claimed verbal notice insufficiently described the investment and sales activities.
The Commission found that Siegel indeed did recommend the investments based on an analysis of: 1) the relationship between Siegel and his customers; 2) their reliance on him; 3) the specific content of the conversations between them; and 4) Siegel's initiation of the subject of investing in the company.
The Commission rejected Siegel's defense that one couple were extremely sophisticated investors, noting in the process that sophistication alone does not mean that a communication is not a recommendation.
Also, the Commission found the recommendations to be unsuitable. Here Siegel admitted that due to the deficient offering documents the investments were not suitable for any investor. He also admitted he had not read the documents before discussing the investment with his clients. Thus it was impossible for him to reasonably evaluate the potential risks and rewards of the investment.
The Commission upheld the sanctions. One of the primary factors that supported this conclusion was Siegel's conflict of interest due to the fact that he was a director of the company and had disclosed that to only one of the couples. In addition he violated a directive from his firm that prohibited him from selling investments in the company after he became a director.
The Commission upheld the consecutive suspensions imposed by NASD. NASD rules allow such sanctions when the violations involve "different kinds of misconduct and raise separate and serious regulatory concerns."
Siegel argued that while he caused the customers to invest, he did not cause the loss and therefore restitution was inappropriate. The Commission rejected this claim, noting that restitution is appropriate where the investor loss is a result of the misconduct. It noted that here the investor loss was the result of Siegel's inappropriate recommendations. It also noted that the fact that Siegel did not profit was no bar to restitution.
Comment
The obvious recent trend is for Commission decisions to be entered much more quickly than has been the pattern in recent years.
The Commission continues to find that selling away is a very serious violation as it lessens the protection of investors inherent in firm compliance procedures and threatens firms with potential liability.
In an interesting footnote (39), the Commission used the "prudent man" definition of recklessness found in Restatement (Third) Of Torts.
The Commission also ruled that selling away and unsuitable recommendations are sufficiently distinguishable violations to justify separate consecutive suspensions.
Finally, restitution is appropriate even if the violator received no personal gain from the conduct.
Rep Forges Customer Authorization For Increased Account Fees - FINRA Bar Upheld
Geoffrey Ortiz, Exchange Act Rel. 34-58416 (August 22, 2008)
Time since appeal filed - 9 months, 8 days
Time since last brief - 5 months, 6 days
Pages - 14
Footnotes - 35
Summary
FINRA found that Ortiz, a former registered rep forged or caused to be forged customer initials on two account applications authorizing increased management fees and provided false information to the NASD. He was separately barred for each offense. FINRA’s bar of Ortiz was upheld by the Commission who was pro se.
The customers (husband and wife) opened managed accounts at Ortiz’s firm, but insisted that they would pay no more than 1.5% annual management fees. After the firm refused to open the accounts unless the fee were higher (due to firm policy that linked fees to the size of accounts) it required Ortiz to obtain initials from the customers on the new account forms that reflected an increased annual fee. Ortiz later submitted revised new account forms which reflected the higher fee and purported to be initialed by the customers. Although copies of the purportedly initialed forms faxed to the firm’s operations office were located, the documents with the original initials were never found despite the fact that it was firm policy to retain original account opening documents.
Approximately one year later the customers noticed the increased fees and complained to the firm. The customers denied approving the higher fees or initialing the revised new account forms. After NASD began an investigation Ortiz in writing and sworn testimony claimed that the customers had approved the higher fees and initialed the account forms in his presence at their home. The wife testified and produced documents supporting her claim that she was on an out of town business trip on the days when her initials could have been placed on the documents. Both NASD and Ortiz produced handwriting experts at the hearing. Because there were no original documents, neither expert could testify that Ortiz had made the initials, but the NASD expert found that the customers had not written them. The NASD hearing panel found the customers to be credible and Ortiz "tentative and unconvincing." It also found the NASD handwriting more credible based on the comparison methods he used.
The Commission reiterated its practice of giving "great weight and deference to credibility determinations" by the initial fact finder which it will overturn only "by substantial record evidence." One of the customers erroneously testified he had done business with Ortiz since 1977 when Ortiz was in high school. The Commission refused Ortiz’s invitation to reject all his testimony because this was an error "on a collateral event occurring years before the events at issue." Ortiz argued that the sanctions could not be upheld as the firm failed to produce the original initialed documents. The Commission refused this invitation, noting that firm policy was to keep such originals in the registered rep’s individual files to which Ortiz had access.
NASD sanction guidelines provide for a bar in egregious cases of forgery or falsification and up to two years suspension if there are mitigating factors. The guidelines require analysis of two factors - 1) the nature of the forged documents, and 2) whether there is evidence of good faith but mistaken belief the customer gave express or implied authority. Here the forgery was egregious because it involved account opening documents that authorized a higher fee than the customers had originally agreed to. Nor did Ortiz claim the customers had authorized him to initial the fee increase approval. In addition, Ortiz stuck to his story after documentary evidence demonstrated proved that one of the customers was on a business trip when he claimed she had initialed the forms.
The Commission noted that "the public interest demands honesty" from registered reps and that "anything less is unacceptable." It agreed with the NASD analysis that noted that Ortiz’s actions had caused financial harm to his customers. Finally, the Commission found that the industry simply cannot operate if firms cannot trust documents submitted by associated persons. Accordingly, it found the bar properly served the goal of general deterrence by indicating that forgery "is treated as serious misconduct and receives severe sanctions."
The Commission also upheld the bar based on Ortiz's claim during the NASD investigation that the customers had initialed the new account forms. It noted that it has upheld bars in the case of a complete failure of a rep to provide information and found the providing of false information to have the same undesirable effect.
Comment
This was a routine case with a prompt opinion. Given the credibility findings of the NASD hearing panel and the documentary evidence demonstrating that Ortiz's story was false the outcome was not in doubt.
Time since appeal filed - 9 months, 8 days
Time since last brief - 5 months, 6 days
Pages - 14
Footnotes - 35
Summary
FINRA found that Ortiz, a former registered rep forged or caused to be forged customer initials on two account applications authorizing increased management fees and provided false information to the NASD. He was separately barred for each offense. FINRA’s bar of Ortiz was upheld by the Commission who was pro se.
The customers (husband and wife) opened managed accounts at Ortiz’s firm, but insisted that they would pay no more than 1.5% annual management fees. After the firm refused to open the accounts unless the fee were higher (due to firm policy that linked fees to the size of accounts) it required Ortiz to obtain initials from the customers on the new account forms that reflected an increased annual fee. Ortiz later submitted revised new account forms which reflected the higher fee and purported to be initialed by the customers. Although copies of the purportedly initialed forms faxed to the firm’s operations office were located, the documents with the original initials were never found despite the fact that it was firm policy to retain original account opening documents.
Approximately one year later the customers noticed the increased fees and complained to the firm. The customers denied approving the higher fees or initialing the revised new account forms. After NASD began an investigation Ortiz in writing and sworn testimony claimed that the customers had approved the higher fees and initialed the account forms in his presence at their home. The wife testified and produced documents supporting her claim that she was on an out of town business trip on the days when her initials could have been placed on the documents. Both NASD and Ortiz produced handwriting experts at the hearing. Because there were no original documents, neither expert could testify that Ortiz had made the initials, but the NASD expert found that the customers had not written them. The NASD hearing panel found the customers to be credible and Ortiz "tentative and unconvincing." It also found the NASD handwriting more credible based on the comparison methods he used.
The Commission reiterated its practice of giving "great weight and deference to credibility determinations" by the initial fact finder which it will overturn only "by substantial record evidence." One of the customers erroneously testified he had done business with Ortiz since 1977 when Ortiz was in high school. The Commission refused Ortiz’s invitation to reject all his testimony because this was an error "on a collateral event occurring years before the events at issue." Ortiz argued that the sanctions could not be upheld as the firm failed to produce the original initialed documents. The Commission refused this invitation, noting that firm policy was to keep such originals in the registered rep’s individual files to which Ortiz had access.
NASD sanction guidelines provide for a bar in egregious cases of forgery or falsification and up to two years suspension if there are mitigating factors. The guidelines require analysis of two factors - 1) the nature of the forged documents, and 2) whether there is evidence of good faith but mistaken belief the customer gave express or implied authority. Here the forgery was egregious because it involved account opening documents that authorized a higher fee than the customers had originally agreed to. Nor did Ortiz claim the customers had authorized him to initial the fee increase approval. In addition, Ortiz stuck to his story after documentary evidence demonstrated proved that one of the customers was on a business trip when he claimed she had initialed the forms.
The Commission noted that "the public interest demands honesty" from registered reps and that "anything less is unacceptable." It agreed with the NASD analysis that noted that Ortiz’s actions had caused financial harm to his customers. Finally, the Commission found that the industry simply cannot operate if firms cannot trust documents submitted by associated persons. Accordingly, it found the bar properly served the goal of general deterrence by indicating that forgery "is treated as serious misconduct and receives severe sanctions."
The Commission also upheld the bar based on Ortiz's claim during the NASD investigation that the customers had initialed the new account forms. It noted that it has upheld bars in the case of a complete failure of a rep to provide information and found the providing of false information to have the same undesirable effect.
Comment
This was a routine case with a prompt opinion. Given the credibility findings of the NASD hearing panel and the documentary evidence demonstrating that Ortiz's story was false the outcome was not in doubt.
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