Ex-Morgan Stanley Smith Barney Broker Settles with FINRA for Allegedly Failing to Notify Firm of Previous Arrest

Broker Bruce Parish Hutson has turned in a Letter of Acceptance, Waver, and Consent to settle allegations of Financial Industry Regulatory Authority rule violations involving his alleged failure to advise Morgan Stanley Smith Barney (MS) of his arrest for retail theft at a store in Wisconsin. FINRA has accepted the AWC, which Hutson submitted without denying or admitting to the findings and without adjudicating any issue.

The Ex-Morgan Stanley Smith Barney broker (and before that he worked for predecessor company Citigroup Global Markets Inc. ((ASBXL)), had entered a “no contest” plea to the misdemeanor charge in February 2010. He received a jail sentence of nine months, which was reduced to 12 months probation. On August 16, 2010, Hutson, turned in a Form UT (Uniform Termination Notice for Securities Industry Registration) stating that he was voluntarily let go from Morgan Stanley Smith Barney because the financial firm accused him of not properly reporting the arrest.

Also, although Form U4 (Uniform Application for Securities Industry Registration or Transfer) doesn’t mandate the disclosure of a mere arrest but does contemplate a criminal charge (at least), many industry members obligate employees to disclose any arrests. Yet when it was time to update this form by March 18, 2010, FINRA says that Hutson did not report the misdemeanor theft plea. Then, when he filled out Morgan Stanley Smith Barney’s yearly compliance questionnaire on May 19, 2010, he again denied having been arrested or charged with a crime in the past year or that he was statutorily disqualified.

FINRA contends that Hutson willfully violated its Article V, Section 2 (C) by-laws by not disclosing the criminal charge. The SRO also says that his later “no contest” plea to the misdemeanor theft violated FINRA Rule 2010 (when he made the false statement that he hadn’t been charged with any crime in the 12 months leading up to his completion of the compliance questionnaire) and he again violated this same rule when it was time to fill out the questionnaire. Per the AWC terms, Hutson is suspended from associating with any FINRA member for five months and he must pay a $5,000 fine.

“A broker can have a dozen complaints by investors and lose a half-dozen claims of wrongdoing, in which arbitrators reimburse these investors only part of their millions in collective losses, yet the broker is neither fined nor suspended,” said Shepherd Smith Edwards and Kantas, LTD, LLP founder and Securities Attorney William Shepherd. “A shoplifting charge in one’s past – very bad. Repeated misrepresentations to investors – so what. Perhaps FINRA should get its priorities straight.”

Broker Bruce Parish Hutson, Forbes, June 27, 2012

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