There are so many potholes that a registered representative needs to avoid. I have represented any number of brokers who had committed an offense on the level of a parking ticket and you would have thought that they kidnapped the Lindbergh baby. I had one client who was “on the beach” for nearly two years before he was allowed to relicense. I have written about the impact that items like this have on a broker’s U-4 and U-5 when I was writing The Law Planet blog.
Now, Investment News has published a “man bites dog” story about two brokers who are going after the State of Utah, its governor and some current and former regulators. The brokers are complaining about the heavyhanded treatment they received from their state’s regulators, including requesting copies of communications with their church. And this got me thinking…
When I was writing The Law Planet, I discussed, more than once, that I thought that Equity Index Annuities needed to be regulated as securities. I felt that they looked and smelled like securities and, eventually, the SEC agreed with me. At least one reader did not. She actually called my office to tell me I was wrong. But I wasn’t.
The Investment News article describes some infractions that were serious and some that were incidental. But what appears to have really ticked off one of the brokers is that the press release announcing resolution of the regulatory matter is allegedly wrong and defamatory. Oops.
When I review broker’s records, it’s kind of like sitting by the side of the road getting a speeding ticket. You were going 10 miles per hour over the speed limit while others are whizzing by you at 20 miles over. And you wonder to yourself, “Why did I get stopped?” It might be the red sports car you’re driving. One of the Utah plaintiffs was a big donor to the Salt Lake City Olympics in 2002. Might that have put him on radar?
There’s no predicting what puts a broker on the regulator’s radar screen. But drawing public attention usually helps.
That’s the view of one lawyer from Jupiter, Florida – I’m Marc Dobin