Katherine Lapidoth of Aventura, Florida, a stockbroker with Wells Fargo Advisors, has been suspended for two years from association with any Financial Industry Regulatory Authority (FINRA) member and fined $15,000 in connection with an Office of Hearing Officers Order Accepting Offer of Settlement that contained findings that Lapidoth provided false information to regulators and failed to comply with a FINRA investigation into her potential misconduct. Department of Enforcement v. Lapidoth, No. 2013039650502 (Jan. 16, 2016). Public disclosure records reveal that Wells Fargo Advisors permitted her to resign amid concerns of her involvement in an outside financial institution.
According to the Order, in December 2011, while Lapidoth was registered with Morgan Stanley Smith Barney, Lapidoth and a marketing consultant had created and sent an email to a prospective client promoting investments in exchange traded funds (ETFs). Lapidoth reportedly sent the email to over seventy prospective clients containing a video in which Lapidoth referred to an investment advisory firm that she was not affiliated, and where she offered to employ hedging strategies against ETF positions to help clients reduce their overall volatility in the positions. The Order indicated that Lapidoth was terminated after Morgan Stanley had learned of her communications that took place without the company’s approval.
The Order indicated that when Lapidoth eventually became associated with Wells Fargo Advisors, she had sent four state regulators (Arizona, Arkansas, Hawaii, and Missouri) a statement concerning her termination with Morgan Stanley that FINRA alleged was false.
Specifically, FINRA found that Lapidoth’s statement to regulators was false because of how it attempted to suggest that she only sent an email to one client who requested information from her, when in fact she sent seventy potential customers the email(s) on her own initiative. FINRA also found that Lapidoth lied about the nature of being in a hurry for a departure out of the country; lied about cutting and pasting the comment (in the email) from a website she found; and lied about obtaining comments from her marketing consultant. FINRA also found that Lapidoth had provided an altered copy of her communication to regulators that omitted certain language and the link to a video. FINRA found that by submitting false information and altered documentation, Lapidoth violated FINRA Rule 2010.
The Order further indicated that on December 20, 2013, Wells Fargo had terminated Lapidoth as a result of failing to disclose her ongoing relationship with a firm, Pioneer International Group and its affiliates. FINRA began to investigate Lapidoth in relation to her termination, where on March 24, 2014, FINRA requested that she provide information and documentation pursuant to Rule 8210.
According to the Order, FINRA made several requests which Lapidoth did not fully respond to, although Lapidoth did provide some information to regulators. The Order indicated that on December 9, 2014, FINRA notified Lapidoth that she would be suspended pursuant to Rule 9552 for non-production of documents in response to certain items of the request. Lapidoth was suspended on January 5, 2015.
Although Lapidoth eventually provided certain documents to FINRA, resulting in her suspension being lifted on February 19, 2015, FINRA found that Lapidoth ultimately failed to comply with requests for information in a timely and complete manner, in violation of Rules 8210 and 2010.
FINRA stockbrokers like Lapidoth who do not cooperate with FINRA’s investigations often face a permanent bar from practicing in the securities industry as such lack of cooperation violates FINRA’s Rule 8210 – requiring that no member or person shall fail to provide information or testimony or permit an inspection and copying of books, records, or accounts pursuant to the rule. FINRA typically accompanies a Rule 8210 violation with a Rule 2010 violation when individuals, according to FINRA, do not appear to observe high standards for commercial honor and just and just and equitable principles of trade.
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