Bookkeeper Violates FINRA Rules 3270 and 2010

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Bookkeeper violates FINRA WSPs/OBAs

We write about registered representatives and broker-dealer oversight – but what about your office manager/bookkeeper?

On Valentine’s Day, Angela Marie Chatfield agreed to settle alleged violations regarding outside business activities (OBAs) and the lack of disclosure of the same, as well as a disregard of her employer’s written supervisory provisions (WSPs).

Must nonregistered securities representatives follow the same rules as registered reps?

Yes, they must. Chatfield entered the securities industry in January 2016 when she became associated with FINRA-regulated broker-dealer Thrivent Investment Management Inc. (BD No. 18387) as a non-registered fingerprint individual.

In June 2016, she registered as a general securities representative (GSR) with Thrivent, and on August 9, 2017, the firm reported her voluntary termination in keeping with a Uniform Termination Notice for Securities Industry Registration (Form U5). In a June 4, 2018 Amended Form U5, Thrivent reported it had launched an internal review less than a month prior after it had received a customer complaint alleging certain insurance contracts and Firm accounts were unauthorized.

The fingers pointed to Chatfield, who is not currently associated with any FINRA-regulated broker-dealer, but still subject to FINRA’s jurisdiction. Of note, Chatfield does not have any disciplinary history with the Securities and Exchange Commission (SEC), any state securities regulators, FINRA, or any other self-regulatory organization.

What happened? Undisclosed OBAs happened.

From January 2016 through July 2017, Chatfield provided accounting and bookkeeping services and acted as an office manager and trustee for three, non-Thrivent businesses, without providing prior written notice to Thrivent. By not informing her employer, she violated FINRA Rules 3270 and 2010, which rule that “no registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member, in such form as specified by the member.”

What happened to Thrivent’s WSPs?

They were there, but not observed.

Thrivent’s written supervisory procedures required its registered representatives (RRs) to submit a written request and receive company approval before engaging in any outside business activity. Thrivent’s WSPs defined outside activities as, among other things, positions that required the RRs to make financial or business decisions or direct another party to make such decisions.

Chatfield participated in three undisclosed outside business activities for which she received compensation. As the principal and owner of AA, a limited liability company she established in December 2008, Chatfield provided bookkeeping and accounting services to small businesses and individuals. As the office manager for DCH, a veterinary practice and animal hospital, Chatfield provided bookkeeping, accounting, real estate management, and/or personal management services to the hospital, its owner SH, and related entities. Chatfield also served as a director and treasurer for DCH. Finally, as trustee for SH’s estate, Chatfield facilitated the completion of the estate documents, including a will and trust document, for which she received trustee fees.

Although she was actively engaged in these outside business activities when she joined Thrivent as a GSR and knew she was required to disclose any outside activity, Chatfield did not, nor did she otherwise seek approval until March 2017, when she filed a request for approval of her service as DCH’s office manager.

However, even when she sought approval to work as DCH’s office manager, Chatfield did not disclose her other positions with DCH, her appointment as trustee, or the accounting and booking services she provided through AA. Hence the FINRA violations.

And, where was compliance?

In the dark. If employees, or RIAs, or GSRs do not disclose their outside business activities, what can compliance professionals do? Perhaps more due diligence and background checks. The lack of transparency cost Chatfield a three-month suspension from association with any FINRA member firm in any capacity and a $5,000 fine. Moreover, the FINRA Letter of Acceptance, Waiver, and Consent she signs will be included in her record.

For more than 25 years, Patrina has been helping uniquely committed compliance professionals stay on the “straight and narrow” efficiently and cost-effectively. So, let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective designated third-party services, our comprehensive 8-module compliance solution, and compliant data capture & file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered. Let’s talk.  

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