From time to time, I have lamented that FINRA does not hold itself to the same lofty standards to which it holds its members. I realize I am painting with a broad brush, as there are lots of folks at FINRA who do a great job, who are easy and reasonable to deal with, and who don’t play games. But, that is not the case across the board. And every once in a while, FINRA does something that is so staggeringly unfair that it almost leaves you speechless. My end of the year present to you is this post, about a case that serves as well as any to highlight the occasional madness of dealing with securities regulators.
Devin Wicker, who was the “the majority owner, chief executive officer, chief financial officer and chief compliance officer of former FINRA member firm Bonwick Capital Partners, LLC,” was named in a FINRA Enforcement complaint back in 2018, accusing him of “misusing and converting $50,000 of an investment banking customer’s funds.”
The matter went to hearing, and in March 2019, FINRA issued its final Decision. Mr. Wicker was found to have violated the FINRA rules, and, as a result, the hearing panel permanently barred him from associating with a FINRA member firm, and, to boot, required that he pay $50,000 in restitution.
If you look up Mr. Wicker on BrokerCheck, however, it reveals that the Enforcement action is still “pending.” Indeed, there is no mention of the final Decision. Well, that’s unusual, right? Normally, when FINRA issues its decisions, it immediately files a Form U-6, which serves to capture the results of the decision and add them to the respondent’s CRD for the world at large to see. So, if the Decision came down in March, why hasn’t Mr. Wicker’s CRD been updated?
It seems that FINRA made an error in its handling of the hearing. Just one, but it was enough to cause FINRA to vacate the Decision, and give Mr. Wicker a do-over, with an entirely new hearing panel.
And what was this error? Well, as you know, a FINRA Enforcement case is presided over by a Hearing Officer from FINRA’s Office of Hearing Officers. The Hearing Officer is a FINRA employee, but, as FINRA extolls in its own website, “Hearing Officers are attorneys employed by FINRA and assigned to the Office of Hearing Officers. The only function of that Office is to serve as an adjudicator; it is entirely independent of the Department of Enforcement.” At least it’s supposed to be independent. Turns out that in Mr. Wicker’s case, there was a little glitch when it came to that supposed independence.
Turns out, as reported by the Wall Street Journal, that, in fact, the Hearing Officer assigned to preside over Mr. Wicker’s case, Jennifer Crawford, was actually interviewing with FINRA at the time of the case to take a job in the Department of Enforcement. Yes, Ms. Crawford was trying to get a job with the very group that was prosecuting the action against Mr. Wicker.
You don’t need to be a rocket scientist to figure out the ridiculously obvious conflict of interest that Ms. Crawford had. And there simply is no reasonable way to conclude that it didn’t occur to her that she had a conflict. She is a lawyer, and, given that, operates pursuant to standard group of ethical rules that govern her conduct, including rules about conflicts, both actual and potential. Yet, she not only chose not to recuse herself from the case, it appears that she didn’t bother even to disclose to anyone that she had this conflict.
You would never confuse a FINRA Hearing Officer with a federal judge, but they both are supposed to be impartial, so a comparison is still apt. The Code of Conduct for United States Judges recites that judges should avoid not just impropriety but the mere “appearance of impropriety.” I think it’s clear that line got crossed here.
So FINRA vacated the Decision. But it hasn’t dropped the case against Mr. Wicker; rather, he is going to have to go through the entire thing again, spending more time, more money, more effort, because FINRA failed to provide him with the impartial forum to which he is entitled. No factfinder, no forum, is perfect, and I don’t expect perfection from any jury, or arbitration panel, or judge. But, I do expect fairness, and that is not too much to ask of FINRA, or anyone.
I have no idea whether Mr. Wicker did what FINRA accuses him of doing, but he was certainly entitled to have his case heard by an impartial panel, one willing to give him the benefit of the presumption of innocence, and one which would hold the Department of Enforcement to its burden to prove the case by a preponderance of the evidence. Even FINRA concluded that the optics of Mr. Wicker’s case were so bad it had no choice but to throw out the decision. But, this case does more than make you question the propriety of a single result; it makes you wonder what else goes on that you will never know about. If you can’t trust the very process by which FINRA adjudicates its cases, then the entire system is subject to crumbling down.