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Financial Crimes and Financial Services Professionals: FINRA, U4s and New York Theft and Fraud Crimes

New York City, more than anywhere in the nation, is the venue for criminal prosecutions of financial professionals such as investment bankers, Wall Street traders, and compliance professionals. These kinds of cases might as well be considered a completely separate area of law from the more typical criminal practice involving the defense of charges such as Assault, Burglary, Criminal Possession of a Weapon, and the like. For one, understanding the financial markets and how they are regulated is often critical, as well as understanding the kinds of collateral consequences that such a person faces, as with FINRA, that may not be present in the context of the “average” arrest and criminal defendant. Whether you hold a series 3, series 6, series 7 or another certification, you, and more importantly your criminal attorney, must be aware of the legal and professional consequences before, not after, your case comes to a close.

One of the most important concerns for the accused and his or her criminal defense attorney is whether to plead guilty to a particular charge or a reduced offense being offered by a prosecutor, Specifically, what effect does such a plea have on the defendant’s future employment, licensure or certification. Is there a potential issue looming on a U4, with FDIC or FINRA regulations, or some other nebulous “fraud” concern? For instance, a person with no prior criminal record or convictions who now pleads guilty to a Petit Larceny, PL 155.25, may find themselves forever unable to work in a broker-dealer capacity even with countless “series” under his or her belt. Simply, a conviction, and even a mere arrest, may have a huge and irreversibly negative impact on that person’s life. While it is all relative, another way to see this issue is if instead of the financial sector, you worked as a commercial truck driver. While a fraud offense such as Second Degree Grand Larceny, First Degree Falsifying Business Records or Forgery would certainly be impactful, it would be less so than a DWI under VTL 1192.  At bottom, all crimes of the same class may be equal, but the direct and collateral consequences may differ depending on the careers, licenses, and training of the convicted.

As briefly noted, financial sector professionals often have unique reporting requirements and consequences upon arrest and conviction should the latter occur. Financial sector professionals who are subject to U4 disclosure requirements are mandate to not only disclose criminal convictions, but even criminal charges related to honesty or investing. This means that while a plea down to Disorderly Conduct, PL 240.20, from a Petit Larceny might be fine for most, that same disposition might, or might not, be disastrous for the financial professional who passed the Series 3, Series 6 or Series 7 exam. This can drastically change the calculus that goes into defense strategy, negotiations, and case preparation. It is imperative that any defendant in the financial sector as well as his or her defense attorney be keenly aware of these issues from day one.

Not only are the direct consequences of a conviction critical to a financial services professional, such as a statutory 10-year disqualification from working in the securities industry, but reputations are not subject to any timeline of distrust. No one needs to tell you, an accused, that not only can an otherwise minor criminal conviction cause direct and immediate harm through suspensions, but the collateral consequences for a financial services professional can stretch on indefinitely through reputational harm that is difficult to quantify.