#ABKLaw BLOG by Michael Jaccarino: Arrested Stockbrokers and Wall Street Employees – FINRA Collateral Consequences and Reporting Requirements

Stockbrokers, financial analysts, and other people who work on Wall Street or in the financial industry, like everyone else, are subject to the laws of New York State and New York City. When a stockbroker or financial industry employee violates one of these laws, whether it occurs in or outside of their employment, they will be arrested. However, unlike normal citizens, these professionals must deal with not only the arrest itself and the crimes charged, but more importantly, the effect that the arrest and the prosecution will have on their job and career. Unfortunately, the consequences can be felt immediately and well before the case has a chance to make its way through the criminal justice system.

Brokers, traders, bankers, financial advisors, and other financial professionals typically have to be licensed through FINRA, the Financial Industry Regulatory Authority. Some of the most common licenses include Series 7 and Series 63, but there are many others. For those licensed professionals, criminal arrests and convictions may trigger updating of the U4 FINRA form. Employers may also require disclosure of criminal arrests. Most importantly, FINRA Rule 4530 states as follows:

1. a) Each member shall promptly report to FINRA, but in any event not later than 30 calendar days, after the member knows or should have known of the existence of any of the following:

(1) the member or an associated person of the member:

(A) has been found to have violated any securities-, insurance-, commodities-, financial- or investment-related laws, rules, regulations or standards of conduct of any domestic or foreign regulatory body, self-regulatory organization or business or professional organization;

(B) is the subject of any written customer complaint involving allegations of theft or misappropriation of funds or securities or of forgery;

(C) is named as a defendant or respondent in any proceeding brought by a domestic or foreign regulatory body or self-regulatory organization alleging the violation of any provision of the Exchange Act, or of any other federal, state or foreign securities, insurance or commodities statute, or of any rule or regulation thereunder, or of any provision of the by-laws, rules or similar governing instruments of any securities, insurance or commodities domestic or foreign regulatory body or self-regulatory organization;

(D) is denied registration or is expelled, enjoined, directed to cease and desist, suspended or otherwise disciplined by any securities, insurance or commodities industry domestic or foreign regulatory body or self-regulatory organization or is denied membership or continued membership in any such self-regulatory organization; or is barred from becoming associated with any member of any such self-regulatory organization;

(E) is indicted, or convicted of, or pleads guilty to, or pleads no contest to, any felony; or any misdemeanor that involves the purchase or sale of any security, the taking of a false oath, the making of a false report, bribery, perjury, burglary, larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or misappropriation of funds, or securities, or a conspiracy to commit any of these offenses, or substantially equivalent activity in a domestic, military or foreign court;

FINRA dictates reporting requirements for certain crimes and procedures that can devastate, freeze, or end the career of a broker or financial professional. As such, the FINRA requires that reporting in a specific manner within a specific time frame. It is absolutely essential for a broker or financial professional to consult with a Manhattan or Brooklyn criminal defense attorney who understands and can guide them through these reporting requirements.

It is common that most brokers and financial industry employees who are arrested have clean criminal records and the reality is that there are potentially severe collateral consequences for them that are associated with certain pleas and criminal convictions. Important questions such as what will happen to their license, ability to work in the industry and employment must be addressed before accepting even a great sounding plea offer from the District Attorney’s Office. It is important to consult with your Manhattan or Brooklyn criminal defense attorney to review these consequences, applicable statutes, laws, and regulations associated with arrests.

Brokers have the fiduciary duty to act in good faith with respect to investments, stocks, securities and other commodities. When this good faith is questioned in an alleged breach of fiduciary duty, there are steps that can be taken to protect the broker’s rights. The criminal defense attorneys at Aidala, Bertuna & Kamins are experienced in the various charges that can be filed.   Our firm represents brokers, including stockbrokers, mortgage brokers, investment brokers, financial brokers, commodities brokers, and real estate brokers. Our clients trust us when they have been charged with broker fraud. Our team of former prosecutors and judges are also uniquely qualified to assist FINRA professionals facing criminal charges, as we have extensive experience defending them and have won major victories for FINRA professionals.  We truly understand the unique considerations facing financial professionals charged with criminal matters, and have had significant success in helping many clients keep their jobs and careers. Our criminal defense attorneys can defend your criminal case in court, represent you in an employment arbitration before a FINRA panel, and/or advise you as to your FINRA disclosure requirements.

At Aidala, Bertuna & Kamins, our criminal defense lawyers have a wealth of experience in both Federal and State Court, and have defended some of the most high profile cases in the country.  Contact us today if you or someone you know is facing criminal charges of any kind.

Michael Jaccarino, and the criminal defense attorneys at Aidala, Bertuna & Kamins, PC, have decades of experience. 

For more information or more fact-specific discussions, call our office and ask to speak with attorney Michael Jaccarino.