The Following Disciplinary Actions were taken by FINRA in 2019 that included the use of texting:
Dennis Allen Hayes (CRD #4403550, Charlotte, North Carolina) March 22, 2019 – An Offer of Settlement was issued in which Hayes was barred from association with any FINRA member in all capacities. Without admitting or denying the allegations, Hayes consented to the sanction and to the entry of findings that he participated in private securities transactions without providing prior written or any other notification to his member firm. The findings stated that Hayes recommended that investors, most of whom were firm customers, invest a total of $2.7 million in five companies, and facilitated those investments. The investors suffered losses of at least 10 Disciplinary and Other FINRA Actions May 2019 $2.3 million, after one of the companies filed for bankruptcy and the other companies ceased operations. The findings also stated that Hayes used personal email addresses to correspond with customers about their firm accounts and communicated via text message with a firm customer about her account. Hayes did not provide these communications to the firm. Therefore, the firm failed to review or retain this securities-related correspondence as books and records, as required. The findings also included that Hayes failed to provide documents and information requested by FINRA related to customer complaints received regarding his handling of the customers’ investments. (FINRA Case #2016050883001)
Sam Aziz (CRD #1721932, 1932, Powell, Ohio) March 27, 2019 – An AWC was issued in which Aziz was barred from association with any FINRA member in all capacities. Without admitting or denying the findings, Aziz consented to the sanction and to the entry of findings that he refused to appear for on-the-record testimony requested by FINRA in connection with its investigation into his sales practices at his member firms. The findings stated that FINRA was investigating allegations of excessive trading and unsuitable recommendations involving the use of margin, whether Aziz attempted to settle a customer’s complaint away from his firm, and whether he used an undisclosed personal email account and text messages to conduct securities business, among other allegations.
Farrukh Shazad Kazmi (CRD #2855915, Moorestown, New Jersey) March 22, 2019 – An Offer of Settlement was issued in which Kazmi was fined $20,000, suspended from association with any FINRA member in all capacities for five months, and is required to disgorge a portion of the commissions he received, which is ordered to be paid in the amount of $10,350.71, plus interest. Without admitting or denying the allegations, Kazmi consented to the sanctions and to the entry of findings that he used unapproved communications methods to conduct securities business. The findings stated that after learning that Kazmi had been using instant messaging to communicate with a customer, Kazmi’s supervisor verbally informed him that his member firm’s procedures strictly prohibited its registered representatives from using instant messaging to conduct securities business. That same day, Kazmi confirmed in writing to his supervisor that he would no longer use instant messaging. Despite the firm’s admonition and his own explicit agreement to cease using instant messaging to communicate with customers, Kazmi continued to use instant messaging in conducting securities business. In addition, Kazmi regularly corresponded with firm customers via text messaging regarding securities activity in their accounts. Kazmi did not inform the firm that he used text messaging or instant messaging to conduct securities business, nor did he provide copies of these communications to the firm. In doing so, Kazmi prevented the firm from reviewing and retaining correspondence with the public and making and preserving books and records. The findings also stated that Kazmi exercised discretion over customer accounts without written authorization. Although Kazmi received the customers’ verbal authorization, he never sought or obtained written authorization from them to exercise discretion in any of their accounts at the firm, and the firm never approved any of these customer accounts as discretionary accounts. The findings also included that Kazmi made false statements to the firm regarding his use of instant messaging, and provided false answers to FINRA regarding his use of instant and text messaging and use of discretion. FINRA found that Kazmi sold initial equity public offerings to a restricted person. Kazmi received a total of $10,350.71 in commissions on the purchases and the subsequent sale transactions by the restricted person.
Raymond John Pirrello Jr. (CRD #2782019, Sparta, New Jersey) November 20, 2018 – An AWC was issued in which Pirrello was fined $20,000 and suspended from association with any FINRA member in all capacities for 18 months. Without admitting or denying the findings, Pirrello consented to the sanctions and to the entry of findings that he caused his member firm to fail to comply with its recordkeeping obligations by using text messaging and his personal email account to engage in businessrelated communications with a customer. The findings stated that these communications included a written complaint by a customer alleging that Pirrello failed to follow the customer’s instructions, which the customer alleged caused him to suffer approximately $300,000 in damages. Pirrello did not take steps to retain or provide his firm with any of the text messages or emails he exchanged with the customer, all of which were deleted. The findings also stated Pirrello provided misleading on-the-record testimony to FINRA stating that he did not send text messages to his customers, which Pirrello later corrected in subsequent testimony. The findings also stated that Pirrello willfully failed to disclose the above-referenced customer complaint on his Form U4. FINRA also found that Pirrello attempted to settle away two customer complaints and did not tell his firm about the complaints or his efforts to settle them. FINRA also found that Pirrello further hid his actions from his firm by signing compliance attestations falsely attesting that he used only firm-sanctioned electronic communication methods to communicate with firm customers, complied with his obligation to update his Form U4, reported all customer complaints to the firm, and that he had not settled away any customer complaints. The suspension is in effect from December 3, 2018, through June 2, 2020.
Once again, FINRA has made it very clear that organizations must have a solution in place for capturing and archiving text messages. It is no longer acceptable to simply state that your firm does not allow text messaging.
They know advisors and clients are texting, and they expect organizations to acknowledge such by having a solution.
Here is the exact language:
Communications via Digital Channels – Firms’, registered representatives’ and customers’ use of an increasingly broad array of digital communication channels (e.g., texting, messaging, social media or collaboration applications) may pose challenges to firms’ ability to comply with obligations related to the review and retention of such communications.
FINRA may consider the following, among other factors, when reviewing firms’ use and supervision of digital channels:
- Does your firm have a process in place to evaluate new tools available to your registered representatives to determine whether there are digital communications channels that should be captured, included in your firm’s routine electronic communications supervisory reviews and stored in accordance with books and records requirements?
- Is your firm periodically testing its systems to ensure these communications are being captured for review and retention?
- Do your firm’s supervisors know the “red flags” they should keep in mind during their routine supervisory reviews and which indicate a registered representative may be communicating through unapproved communication channels? Are your firm’s supervisors following up on such red flags, which include, but are not limited to:
- email chains that include non-approved email addresses for registered representatives;
- references in emails to communications with a registered representative that occurred outside approved firm channels; or
- customer complaints mentioning such communications?10
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It’s a question every small business owner has to answer regularly: “How can you provide me with value when your company is this size?” As a society, we want to put more value into the quality of service a company provides, but most often we choose to work with the larger, more well-known option. It’s amazing how people have accepted being treated like a commodity just to save an extra dollar here or there.
“Please,” “Thank You,” and “How Can I Help You?” have been replaced by “Leave a message and we’ll return your call in 24 – 48 hours.” We hate calling a company and having to press numbers for five minutes just to talk to a person, but we tolerate it. And even worse, as a society we are telling corporations that this customer service model is okay because we continue to spend our time, money, and energy on these company’s services and products.
The biggest difference between success and failure for any small businesses ultimately comes down to marketing and the attention you can bring to your product or service. Some businesses do such a great job of building a loyal fan base that spreads the word right away. For many, they never have the chance to build that following and since they can’t spend the money on TV commercials and online advertising, they never have the chance to realize their full potential.
Supporting an up and coming business, or a small business has become something we encourage once a year (November 25th, 2017 was last year’s Small Business Saturday), but why can’t we support small businesses all the time?
Regardless of what line of business you’re in or what personal decisions you make in life, try to support the “little guy” when you get the chance. Try to recognize that nothing that’s big today was big to start off, and even for the largest corporations it took time to get to where they are today. Most large companies don’t want the little guy to win because they may lose a couple dollars to their bottom line, but let’s be honest, most of the people running the big companies didn’t build it from the ground up so they have no idea how hard it was at the beginning.
So, why can’t a higher quality of service be the norm again? Why can’t people learn to hold their time and energy as a premium, and make their decisions based on how they are valued and treated as customers?
At MyRepChat, we think great customer service can come first, but as a consumer society, our entire line of questioning and thought has to change first.
- “How many customers do you have currently” should be replaced “what inspired you to get into this business?”
- “What are your annual sales” should be replaced by “what is your vision for the future?”
- The internal question of “why would I pay more to buy the same thing” should be replaced by “who else could benefit from knowing that you can buy this product here?”
When we recognize quality of service and put it at the front of the line, instead of making our buying decisions based on the size of the company, everyone wins. The customer ends up with a quality product, and real access to people who can help when they have questions. Local jobs and opportunity are more likely to open up for local people. Those people spend their hard-earned money at local stores and on local services. It’s a better way to put our dollars back into the local economy, build a stronger community, and at the end of the day, help more people – instead of big business – thrive.
MyRepChat is committed to helping advisors communicate with clients more effectively and of course compliantly. The National Society of Compliance Professionals is one of the greatest think-tanks and grouping of professionals dedicated to serving the financial services industry. MyRepChat is proud to be an approved vendor for such a great organization.
MyRepChat is the only tool created by a Registered Principal and a Financial Advisor for the benefit of the entire financial services industry. Compliance professionals can feel confident that their advisors are communicating compliantly and advisors can move forward using a tool that was created by a fellow advisor.
To find learn more about The National Society of Compliance Professionals, opens in a new windowCLICK HERE.