What started out as a simple favor to a friend, ended up with a FINRA suspension, and a 15-month Federal jail sentence. How could things go so very wrong?
The road to hell is paved with good intentions.

That is what former Registered Representative James Van Doren must be thinking, because late last month, the Financial Industry Regulatory Authority (FINRA) barred him from the securities industry for unethical conduct involving money laundering and a scheme to deceive a friend’s creditors. To add insult to injury, the Feds also charged him with conspiracy to commit bankruptcy fraud.

Those pesky outside business activities…

As Chief Compliance Officer, what you don’t know about your firm members’ outside business activities can hurt them and you. Van Doren’s decent down the slippery slope of noncompliance started small-ish… He invested in several real estate deals with a friend’s company in an outside business activity. When that company could not meet its obligations, creditors pursued Van Doren’s friend’s assets.

This is where things got messy because on three separate occasions, Van Doren accepted a total of $244,000 from his friend, including $30,000 in cash in a briefcase, with the purpose of concealing those assets from his friend’s creditors. While he later returned most of the money to his pal, he did retain some cash to offset his own financial losses. Then he dug himself a deeper hole — making one-time, false representations to his own bank in an effort to obtain additional funds.

Prior to FINRA’s disciplinary proceeding, federal prosecutors indicted Van Doren, charging him with bankruptcy fraud, money laundering, and other crimes. He pled and was sentenced to 15 months in prison. The FINRA action continued while he was already in jail. So it is no surprise that in its decision, FINRA called Van Doren “a grave risk to customers, firms and other participants in the industry,” and is “unfit to be in the securities industry and should be barred.”

Could this happen in your shop?

Hopefully not. But how can you keep a watchful eye on every member of your firm? You can’t watch everybody. But the regulators expect you to try…hard. And that includes implementation of a compliance infrastructure to:

• fully support reporting requirements;
• pre-empt tracking and addressing compliance breaches; and
• anticipate regulatory requirements, new markets, investments and so on. Are you regulator ready?
• You can be, if you know your options and plan ahead. Regulatory compliance requirements are getting more all-consuming and complying can often times feel like an undertaking without end. If your compliance function is under pressure to do more with less, what are the options?
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Let’s talk (212-233-1155). Ask about Patrina’s comprehensive compliance solutions and compliance recordkeeping specifically designed for the financial services community.

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