Texas Broker Suspended As Finra Sharpens Focus on Outside Activities
The Financial Industry Regulatory Authority continues to aggressively scout out violations related to brokers’ unreported outside business activities.
In a recent example, Finra on July 16 suspended a former Morgan Stanley Texas broker from the industry for three months and issued a $5,000 fine against him for allegedly setting up a company to help raise money for small businesses without telling the firm.
The letter sanctioning the broker, who was with Morgan Stanley in its Dallas office for only one year, follows a string of disciplinary actions that Finra has taken recently in the wake of allegations that brokers engaged in unreported business activities, barred by its Rule 3270.
Finra year-to-date has issued 41 sanctions related to brokers who allegedly engaged in outside business activities, as compared to 31 similar sanctions for the same time period in 2020, and 23 in the same time period in 2019, its database shows.
Finra officials have made no secret about their interest in enforcing its rule about unreported outside business activities, particularly as brokers were working remotely during the Covid-19 shutdown.
Robert Colby, Finra’s chief legal officer, underscored at the regulator’s annual conference in May that it was on the lookout for those types of violations. Compliance officials at firms also say they have stepped up monitoring, including use of Google Alerts and email tracking, to spot potential issues.
“We’re trying to do what we can to track them, and bring them into line,” Colby said.
Finra also disclosed plans to examine some registered representatives who took aid program funds, including forgivable Paycheck Protection Program (PPP) loans for coronavirus relief, to determine if the recipients had violated federal securities laws or Finra rules, particularly its prohibition on undisclosed outside business activities.
The most recent case appears to have crossed Finra’s radar following Morgan Stanley’s discovery of the issues and termination of the broker, Christopher M. Evans.
Morgan Stanley terminated Evans in 2019 after allegations arose “relating to employee’s involvement in undisclosed outside financial services related activity,” according to his BrokerCheck record.
Evans, who began his career one year earlier with Highland Capital Funds Distributor, declined to comment. He agreed to the sanctions without admitting or denying the findings and is not currently registered in the industry, according to BrokerCheck.
Between July 2018 and August 2019, Evans had set up an LLC, created a marketing campaign and emailed potential clients about the venture and compensation, according to the Finra allegations. He had also falsely attested that he was not involved in any outside activities on annual Morgan Stanley compliance surveys, Finra said.
A Morgan Stanley spokesperson declined to comment on this story.