Patrick Alan Deramus submitted a letter of Acceptance, Waiver and Consent (“AWC”), for the purpose of settling a rule violation alleged by FINRA.

Deramus first became registered in 1987 and in 2005 worked as a registered person at FSC Securities Corporation (“FSC”) until his May 11 voluntary resignation.

During FSC employment, Deramus was arrested for Driving Under the Influence (DUI). He was charged with a DUI felony count on May 28, 2009, and pled guilty to the charges on December 1, 2009. Deramus was then sentenced to a 30 day prison term and with 48 months of probation on January 27, 2010.

Deramus notified FSC on February 19, 2010, eight months after he was charged. On March 12, 2010, FSC reported Deramus’s felony charge and conviction. He was subject to statutory disqualification based on the felony conviction and on May 10, 2010, was permitted to resign.

Deramus’ conduct was contrary to several FINRA rules.

The Deramus issue touches upon DUI and DWI charges pleas and convictions. First, a felony charge does not lead to being statutorily disqualified- this sanction occurs in response to a felony conviction.  Nonetheless, any felony charge does require reporting, and many brokerage firms have internal disclosure rules that differ from industry laws. It is important to familiarize yourself with the employee handbook regarding disclosure.

Second, while a felony charge may not lead to becoming statutorily disqualified, a purposeful or willful failure to disclose a felony charge does incite statutory disqualification. This type, willful disqualification, is permanent, while a felony conviction disqualification only lasts ten years.

Another issue presents itself when defendants are surprised by the elevated level of a DUI, which was previously considered a misdemeanor but is now considered a felony. Those with prior DUI/DWI records are classified based on the frequency of such events. Depending on the state, prior offenders denote those who had pleaded guilty or were found guilty of alcohol related traffic offenses in a certain number of years. A persistent offender is one who has pleaded or been found guilty of two or more within 10 years. Again, this time frame varies from state to state.

Eccleston Law Offices counsel, represent and defend financial advisers nationwide in regulatory, compliance, disciplinary and employment matters in arbitration and litigation, and before regulatory bodies such as the SEC, FINRA and state securities regulators. We frequently defend forgivable loan collection actions, prosecute Form U-5 defamation actions, counsel advisers as to how to transition successfully from firm to firm and negotiate the best possible agreements with their new firm, and provide succession planning, buy-sell agreements and other exit strategies and strategic consulting, practice transitions, mergers, acquisitions and divestitures.

FINRA has sanctioned Gregory M. Viechnicki, a registered representative at BrokersXpress, LLC, for borrowing money from a client without seeking proper approval.

In April 2010, Viechnicki, who had no previous history of FINRA violations, borrowed $10,000 from a client. During the following months, between May 2010 and October 2010, Viechnicki repaid the loan in full, with interest, using an installment payment plan.

However, BrokerXpress’s regulations forbade representatives from borrowing money from customers, unless they received written approval from the firm. In light of alleged violations, FINRA fined Viechnicki $2,500 and suspended him from associating with any FINRA member for 10 days.

Eccleston Law Offices counsel, represent and defend financial advisers nationwide in regulatory, compliance, disciplinary and employment matters in arbitration and litigation, and before regulatory bodies such as the SEC, FINRA and state securities regulators. We frequently defend forgivable loan collection actions, prosecute Form U-5 defamation actions, counsel advisers as to how to transition successfully from firm to firm and negotiate the best possible agreements with their new firm, and provide succession planning, buy-sell agreements and other exit strategies and strategic consulting, practice transitions, mergers, acquisitions and divestitures.

FINRA has sanctioned broker Stuart Funke for “willfully failing” to amend his Form U4 after being sued for failing to repay a loan and subsequently filing for bankruptcy.

In September 2005, Funke, who had no previous history of FINRA violations, accepted a loan on his and his brother’s behalf for $500,000 in exchange for a promissory note, which had a 6 month maturity period and a 14% interest rate. The people from whom Funke borrowed the money then proceeded to sued him in March 2006 for failing to repay the loan within the agreed upon period of time. The parties were able to settle in January 2007, with Funke agreeing to pay $220,000, with an additional $120,000 promissory note. Funke later filed for bankruptcy in February 2010.

FINRA took the position that Funke “willfully failed” to amend his Form U4 with his civil litigation suit, the settlement of this suit and his bankruptcy filing. Due to this alleged failure, FINRA suspended Funke from associating with any FINRA member in any capacity for 15 months. However, in light of Funke’s bankruptcy filing, FINRA allowed him a bankruptcy discharge, which prevented him from being fined.

Nonetheless, the case highlights a dangerous trap for representatives. While the penalty seems severe, the fact that there was a “willful violation” also means that Funke will be “statutorily disqualified” from FINRA. For most representatives, this amounts to an end to their career in the industry.

Eccleston Law Offices counsel, represent and defend financial advisers nationwide in regulatory, compliance, disciplinary and employment matters in arbitration and litigation, and before regulatory bodies such as the SEC, FINRA and state securities regulators. We frequently defend forgivable loan collection actions, prosecute Form U-5 defamation actions, counsel advisers as to how to transition successfully from firm to firm and negotiate the best possible agreements with their new firm, and provide succession planning, buy-sell agreements and other exit strategies and strategic consulting, practice transitions, mergers, acquisitions and divestitures.

Former Wedbush Securities Inc. representative Randy LaCombe was awarded $93,819.72 in compensatory damages after a FINRA Arbitrator found that Wedbush failed to pay LaCombe commissions from July 1, 2010 until March 31, 2011.

LaCombe claimed that he resigned from his position at Wedbush after he was not paid properly according to his employment contract, which stated that he was to receive a 25% incentive compensation on all trading profits and sales to be paid quarterly. Therefore, LaCombe alleged breach of contract, failure to pay commissions, failure to pay compensation owed, and failure to honor an employment contract.

Although Webush denied all claims and put forward a number of defenses, the FINRA Arbitrator presiding over the case found the firm to be liable and instructed it to pay LaCombe an award.

Eccleston Law Offices counsel, represent and defend financial advisers nationwide in regulatory, compliance, disciplinary and employment matters in arbitration and litigation, and before regulatory bodies such as the SEC, FINRA and state securities regulators.  We frequently defend forgivable loan collection actions, prosecute Form U-5 defamation actions, counsel advisers as to how to transition successfully from firm to firm and negotiate the best possible agreements with their new firm, and provide succession planning, buy-sell agreements and other exit strategies and strategic consulting, practice transitions, mergers, acquisitions and divestitures.

The average age of a financial investor is 50. This means that many investors are preparing, or should be preparing, for changes relating to exiting the business by way of a sound succession plan. These changes can include merging or selling the business, transferring the clients to another investor or finding a successor. Deciding on the ideal plan of action to guarantee a smooth succession and maximize business equity takes careful consideration with critical input and advice from knowledgeable sources.

Eccleston Law represents financial advisers nationwide in transition and succession planning, regulatory, compliance, disciplinary and employment matters in arbitration, litigation, and before regulatory bodies such as the SEC, FINRA and state securities regulators.  If you are an advisor who is seeking a transition, please contact one of our attorneys at 312-332-0000 to discuss your move.