Expunged Felony Conviction...

16 replies [Last post]
semantik's picture
Joined: 2006-01-10

Back in 2001 I was charged AND convicted of a felony possession in the state of CA.  (I was arrested for more, but the charges were dropped in lieu of a possession).
I plead nolo contendiare (no contest) (SP?) to the count. 
The charge was one that could later be reduced to a misdemeanor and expunged from my record, which I had done in 2004.
After reading online, and through the 1934 SEC act, it appears that any felony conviction requires 10 year statutory wait until entering into the securities industry.
I'm assuming and hoping the fact that it is expunged, means i can disclose it, but it shouldnt be a problem with the NASD, U-4, and hopefully specific exchanges NYSE etc.
I spoke to someone i know that works for a major Firm and they contacted their head of recruiting and she said that on the firms application i could put "no" because it has been expunged.
Anyone have any personal experience, or law advice of what to do for my U-4 and exchange applications?
I always hear its better to disclose, because they will find the fingerprint arrest records, and prefer knowing than to have a liar on their hands.

Anonymous's picture

You might want to start here:
and then read some of these:
Here's a case you might consider:

Raymond BurtonSFC/NYSE Hearing Panel Decision 05-115/October 19, 2005 
On March 18, 2004, Raymond Burton was arrested and charged with one felony count of “Possession Narcotic/Cocaine,” one misdemeanor count of “Possession of Marijuana,” and one count of misdemeanor “Operating Intoxicated/Impaired/ Controlled Substance.” 
On April 26, 2004, Burton completed an Application for Employment with Morgan Stanley DW Inc. (the “Firm”). Question 5(a) of the application asked, “Have you ever been arrested, charged with, convicted of or plead no contest to any FELONY?” After Question 5(a), Burton placed an “X” in the "No" box. 7. Burton was required to place an “X” in the Yes box in response to Question 5(a) based on his felony arrest and charge for cocaine possession. The footnote to Question 5 stated “[a]rrests or indictments are not considered by Morgan Stanley in any employment decisions but records of such are required, by regulatory bodies, to be maintained. Further, in your response to Question No. 5, please include any arrests, charges or convictions which have been dismissed or expunged.” 
On April 27, 2004, Burton completed a Background Information Authorization Form. Question 6 of the authorization form asked, “Have you ever been charged with or convicted of a: Felony? Misdemeanor?” After both questions, Burton falsely placed an “X” in the "No" box. Based on the felony drug possession, misdemeanor drug possession and the misdemeanor driving while impaired charges, Burton was required to answer Yes in response to Question 6. 
July 9, 2004, Burton completed the Form U-4. Question 14A asked, “Have you ever: … (b) been charged with any felony?” In response to Question 14A, Burton falsely checked the "No" box. Based upon his March 2004 felony cocaine possession charge, Burton was required to answer Yes to the question. 
The Firm hired Burton on June 28, 2004 as a Financial Adviser Trainee. The initial background search conducted on April 29, 2004 failed to disclose Burton’s criminal history. 
On July 15, 2004, the Firm received the results of a United States Department of Justice, Federal Bureau of Investigation, Criminal Justice Information Services Division fingerprint report (“DOJ report”), which disclosed that Burton had been arrested and charged with two dangerous drug charges and one traffic offense. After receiving the DOJ Report, the Firm ordered the relevant court documents and requested a written statement from Burton, which Burton supplied. The Firm ultimately terminated Burton’s employment on September 8, 2004 for failing to disclose his criminal history. 
On December 2, 2004, Burton entered a plea agreement covering all three counts, whereby guilt was deferred pending the completion by Burton of probation and ninety days of incarceration. 
Sections 3(a)(39) and 15(b)(4)(B) of the Securities Exchange Act of 1934 provide that an individual is subject to a statutory disqualification for a period of ten years if convicted of any felony and certain specified misdemeanors. Burton became statutorily disqualified upon entering his deferred guilty plea, but the statutory disqualification did not go into effect until after Burton had already been terminated from the Firm. Burton will remain subject to a statutory disqualification until the successful completion of his probationary period. 
The NYSE found that Burton
I. Violated Exchange Rule 476(a)(6) by engaging in conduct inconsistent with just and equitable principles of trade in that he failed to disclose his criminal history on an employment application he submitted to his member firm employer;
II. Violated Exchange Rule 476(a)(10) by making one or more misstatements and/or omissions of fact on his application for registration filed with the Exchange; and
III. Caused a violation of Exchange Rule 345.12 by submitting a Form U-4 containing false information. 
The NYSE considered the following in determining penalties:

  • In re Andrew Davis Mills, Decision 05-88 (Aug. 5, 2005)  http://www.nyse.com/pdfs/05-088.pdf (respondent failed to disclose a prior misdemeanor conviction; censure and one year bar) (Note: “failure to disclose a conviction is more serious than failure to disclose a criminal charge"); 
  • In re Catherine McLelland, Decision 04-81 (May 19, 2004) http://www.nyse.com/pdfs/04-081.pdf (misstatement regarding the reason for termination from prior employment; censure and three month bar); 
  • In re Broderick N. Chapman, Decision 03-149 (July 29, 2003) http://www.nyse.com/pdfs/03-149.pdf  (failure to disclose a prior conviction which subjected the respondent to a statutory disqualification; censure and two year bar). 

In an interesting and commendable analysis, the Hearing Panel noted that Burton failed to disclose his arrest/charges for a felony and misdemeanors --- however, he did NOT fail to disclose any conviction (because his plea was entered AFTER he interviewed and was hired by the Firm).  Notwithstanding that he failed to disclosed the arrest/charge, Burton's subsequent conviction per guilty plea does not render him guilty of the potentially more serious charge of failing to disclose a conviction.  That he was subsequently convicted of those crimes through a guilty plea does not raise the initial misstatement to the level of a failure to disclose an actual conviction. 
Censure; 12 month Bar in all capacities beyond the period of statutory disqualification

Bill Singer's Comment: Kudos to this NYSE Hearing Panel.  A beautifully reasoned decision that avoided a number of pitfalls.  This Panel did not go for the cheap shot and made a point of noting that there is a difference (if only in degree) between failing to disclose an arrest/charge and failing to disclose a conviction. 

Anonymous's picture

Also, see this nolo contendere plea case:
Arlen Jolfaie SookiasSFC/NYSE Hearing Panel Decision 05-30/March 14, 2005 
On May 31, 1995, before the Municipal Court of the Pasadena Judicial District, in Los Angeles County, California, Sookias was charged with three felony offenses: “Injure/Destroy Insured Property” in violation of Section 548 of the California Penal Code (“Cal. P.C.”), “Present False/Fraud Claim Payment” in violation of Section 550(a)(1) of the Cal. P.C., and “Insurance-Written False Claim” in violation of Section 550(a)(5) of the Cal. P.C., in connection with his filing of a false insurance claim and improperly receiving payment of approximately $52,000. On April 15, 1996, Sookias pled nolo contendere and was convicted of the misdemeanor offense of “Injure/Destroy Insured Property.” The court suspended the imposition of the sentence and placed Sookias on summary probation for three years and required him to perform 200 hours of community service, pay restitution in the amount of $52,000, and obey all laws and orders of the court. On April 18, 1997, the court granted Sookias’ motion under Section 1203.4 of the Cal. P.C. and ordered that the plea, verdict, or finding of guilt be set aside and vacated, that a plea of not guilty be entered, and that the complaint be dismissed. 
On May 25, 1999, before the Superior Court of the Northeast Judicial District, in Los Angeles County, California, Sookias was charged with seven felony offenses: two counts of “Grand Theft of Credit Card” in violation of Section 484e(e) of the Cal. P.C., two counts of “Burglary” in violation of Section 459 of the Cal. P.C., one count of “Forged Name on Credit Card” in violation of Section 484f(b) of the Cal. P.C., one count of “Acqustn of Access Card-Defraud,” in violation of Section 484e(d) of the Cal. P.C., and one count of “Malicious Computer Credit System” in violation of Section 502(c) of the Cal. P.C., in connection with his falsely disputing a charge on his credit card and receiving funds credited to his account. On August 9, 1999, Sookias pled nolo contendere and was convicted of the misdemeanor of “Grand Theft of Credit Card.” On August 11, 2000, the court suspended the imposition of sentence, placed Sookias on summary probation for two years, required him to perform 150 hours of community service and pay restitution in the amount of $2,781.34, and prohibited him from possessing any credit cards not in his name. On September 13, 2002, the court granted Sookias’ motion under Section 1203.4 and ordered that the plea, verdict, or finding of guilt be set aside and vacated, that a plea of not guilty be entered, and that the complaint be dismissed.
On or about October 9, 1998, Sookias completed and signed an application for employment with Morgan Stanley DW (the "Firm"). Question 1, in the “Miscellaneous Data” section of the application, stated: “Have you ever been: convicted, or pleaded no contest to a felony of any kind, or of a misdemeanor involving embezzlement, theft, counterfeiting, forgery, fraud, false statements, misappropriation of funds, abuse or misuse of a fiduciary relationship, or a purchase or sale of any security arising out of the conduct of a broker dealer?” Sookias responded “No” to this question. Because on April 15, 1996, Sookias was convicted of a misdemeanor offense involving his filing of a false insurance claim and improperly receiving funds, this question required a “Yes” answer. 
Question 1, in the “Supplemental Information” section of the employment application stated: “Have you…ever been charged with any felony or charged with a misdemeanor specified in Miscellaneous Data, question 3?” Sookias responded “No” to this question. Because Sookias was charged with three felony offenses on May 31, 1995, this question required a “Yes” answer. 
Sookias was subject to a statutory disqualification for his April 15, 1996 and August 9, 1999 misdemeanor convictions, which involved the filing of a false report, theft, and/or the fraudulent conversion of funds. Sookias was subject to a statutory disqualification under the Exchange Act even though these convictions were subsequently set aside and vacated under California law.  Sections 3(a)(39) and 15(b)(4)(B) of the Securities Exchange Act of 1934 (“Exchange Act”) provide that an individual is subject to a statutory disqualification if he or she is “convicted” within the past ten years of any felony and certain specified misdemeanors, including misdemeanors “involving…the making of a false report…larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or misappropriation of funds, or securities, or substantially equivalent activity.”  Exchange Rule 351(a) requires member organizations to promptly report to the Exchange if an employee “is arrested, arraigned, indicted or convicted of, or pleads guilty to, pleads no contest to, any felony” or any misdemeanor specified in Section 15(b)(4)(B) of the Exchange Act or if an employee is subject to a statutory disqualification. Exchange Rule 351(b) requires an employee to promptly report the occurrence of those events to his or her member organization employer. Exchange Rule 346(f) prohibits member organizations from employing individuals who are known, or in the exercise of reasonable care should be known, to be subject to a statutory disqualification, unless approval is received from the Exchange. fter Sookias was employed at the Firm, he violated Exchange Rule 351(b) and caused a violation of Exchange Rules 351(a) and 346(f) by failing to report facts relating to his April 15, 1996 conviction to the Firm. 
The NYSE found that Sookias:
I. Engaged in conduct inconsistent with just and equitable principles of trade in violation of Exchange Rule 476(a)(6) by failing to disclose his criminal history, including a conviction that subjected him to a statutory disqualification, on an employment application submitted to his member organization employer. 
II. Violated Exchange Rule 351(b) by failing to promptly report his criminal history, including a conviction that subjected him to a statutory disqualification, to his member organization employer. 
III. Caused a violation of Exchange Rule 351(a) by failing to promptly report his criminal history, including a conviction that subjected him to a statutory disqualification, to his member organization employer. 
IV. Caused a violation of Exchange Rule 346(f) by failing to disclose his criminal history, including a conviction that subjected him to a statutory disqualification, to his member organization employer.
Censure and Barred for 8 years in all capacities

semantik's picture
Joined: 2006-01-10

Ive actually read the first reply, the second reply is new and pertains more to me...
Even though her crimes were "expunged" under 1203.4, i guess the NYSE and NASD still require that it be answered YES.
But if the statutory 10 year wait after any felony would apply to my case, where the felony has been expunged and has nothing to do with any ficuiciary responsibility or anything related to securities/money.
I'm calling the CRD tomorrow to get a more upfront answer.

semantik's picture
Joined: 2006-01-10

In the Act of 1934:
The Commission, by order, shall censure, place limitations on the activities, functions, or operations of, suspend for a period not exceeding twelve months, or revoke the registration of any broker or dealer if it finds, on the record after notice and opportunity for hearing, that such censure, placing of limitations, suspension, or revocation is in the public interest and that such broker or dealer, whether prior or subsequent to becoming such, or any person associated with such broker or dealer, whether prior or subsequent to becoming so associated--(My paraphrase- if they feel that it is in the publics best interest, they can place limitations, censure, suspend, or revoke a brokers licence)
A. has willfully made or caused to be made in any application for registration or report required to be filed with the Commission or with any other appropriate regulatory agency under this title, or in any proceeding before the Commission with respect to registration, any statement which was at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact, or has omitted to state in any such application or report any material fact which is required to be stated therein.(My Paraphrase: if I willfully mark NO, when i had indeed been charged/convicted with a felony, then i have done something misleading)
B. has been convicted within ten years preceding the filing of any application for registration or at any time thereafter of any felony or misdemeanor or of a substantially equivalent crime by a foreign court of competent jurisdiction which the Commission finds--(My Paraphrase: if i have been convicted of a felony within 10 years, i can be censured/barred/ or limitations placed)
So I guess as long as I disclose the info... its up to them, I'll have to let you know, once i make some calls tomorrow

semantik's picture
Joined: 2006-01-10

http://www.nasd.com/web/idcplg?IdcService=SS_GET_PAGE&no deId=1110
I know i havent called yet, but it looks like the firm would have to file a special form because I would be disqualified:

Anonymous's picture

I'm not sure I can provide you with any meaningful answer based upon the sparse fact pattern you've provided, the fact that you are giving a layperson's understanding of the facts and procedural developments, and that I haven't independently investigated the issues.  However, as best I understand your situation, I would suggest that an individual is NOT statutorily disqualified for merely being charged with any felony, but is SD'd upon conviction (by plea or decision).  As such, if you were convicted of any felony, you were SD'd for ten years from that date.  HOWEVER, if your felony conviction was subsequently reduced to a misdemeanor --- the SD would depend upon whether the midsdemeanor is one that is specifically covered under the definition of SD (if it isn't, then you would no longer be deemed an SD).  Finally, if the conviction against you was subsequently dismissed and your file expunged, then you likely would cease being SD'd as of that date, but you should have that confirmed by a lawyer or in discussions with the pertinent regulator.  Frankly, I think it is ill-advised for you to directly communicate with a regulator given the attendant circumstances, and would urge you to retain a lawyer for that purpose (and the added protection you might derive).

Anonymous's picture

Finally, may I please urge you to read this case for a better explanation of how complicated these matters actually become.  This case involves a felony conviction and a nolo plea.

semantik's picture
Joined: 2006-01-10

1/31/06 - update, Ive been speaking with someone at the NASD and they say they cant really tell me untill I actually apply and they see everything.  I even sent them the specific wording of my  expungement and felony... so once I apply I'll have to let youknow!

ju6034's picture
Joined: 2006-06-05

I was employed by a large top tier I-Bank and didn’t disclose my prior felony since it was dismissed. A month later, my arrest record came back because of the DOJ fingerprint cards and they asked why I lied in which I told them that it was dismissed. Since I was in a sensitive environment, I had to leave the premises until they finished their investigation.  Two weeks later, the firm said they weren’t willing to bond me regardless if my conviction was dismissed. Basically, they didn’t think I was worth it or they didn’t want someone with my past around there.
<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /> 
Another example is that I applied to a very large Global Investment Firm through an agency after the first incident above. My interview went well and they were in the process of drafting the offer. I informed my recruiter about my prior conviction and the HR dept of the firm informed them that they weren't able to hire me. All they said is that it is best to apply later on and the conviction was only a few years ago.
Even though my conviction occurred when I was young, the circumstances involved, never did time in jail, conviction was dismissed after a year from the sentence date, great work experience in tech companies and after finishing college I was able to work for a large investment bank for several months in a visible role in which didn’t help my case in either circumstances above.
After doing research and speaking to top SEC attorneys it is still unclear if I can work in the securities industry since this issue is very complex. At this point and from personal experience is that it really depends on the firm if they are willing to go the extra mile to hire and fill out the additional paperwork to hire someone with a prior conviction. Additionally there’s the whole issue with the type of conviction and the statuary wait.
After 7 - 10 years (depending on how far the firm will go back) the arrest records won’t show up and by the time with good conduct and excellent employment experience it would be fine to apply again in the industry. I honestly decided to head in a different industry and put the financial services industry on hold until I decide its time to try again. My opinion now is too be honest and always disclose everything at this point since things will always appear.

jhancock411's picture
Joined: 2011-01-03

Hi! Few years ago I had a similar problem and I used one of the online websites that specializes in record clearing(Conveniently they are named http://www.recordgone.com) and I can tell you they were really helpful. I had my criminal record cleared in less than a year. They were really cheap too( I not sure how much they are charging now). I also remember that they gave me a tons of tips for free before I even signed up with them. Give them a call and see what do they have to offer. Good luck!

Sportsfreakbob's picture
Joined: 2008-08-24


BigFirepower's picture
Joined: 2010-07-09

Bob, that troll was actually pretty clever and good, and unfortunately, mentioned a product many visitors to this site might want to check out....He must have used some search words to find this site, and the posts. Then he signs up using a financial name. Then, he uses proper english and highlights features and benefits while he's at it. Someone might want to recruit that fellow.

stockattorney's picture
Joined: 2010-09-09

Regardless if a felony case was expunged or sealed or downgraded, if you were ever charged with a felony, chances are that felony charge will show up on an FBI fingerprint search.  That could be the cause for a firm to term or deny employment because you would have answered NO on the Form U4 and that answer would have contradicted the FBI results.  It's a rather simple way of terming or denying a rep because the cause would be misrepresenting disclosure questions on the Form U4 without having to get into the nature of the case and the felony.   

Ryan L's picture
Joined: 2011-02-16

First off...I want to thank everyone for the information above. All fo the posters seem extremely knowledgeable. This looks like the perfect forum for my situation. Back in 2000 I was convicted for Grand Theft in the amount of $2000. I was 19 years old. I worked at a bank and, along with other tellers, was reversing my service charges. Our local bank was acquired by Washington Mutual. Internal Affairs fired me and I was charged for theft. At court, the public defender had my case reduced to a misdemeanor (since I had no priors), and I was convicted. I spent 5 days in jail and then was released on an ankle monitoring program. I successfully completed the program on August 13, 2000 and made it through my probationary period. On September 29, 2009 I had the case expunged persuant to CA PC 1203.4. My record is completely clean other than this misdemeanor. Should I look into obtaining a Certificate of Rehabilitation or a Governors Pardon?Now: I'm working on getting into the securities industry. In July, I was sponsored by a BD. FINRA ran the FBI print report and my arrests did come up. I obtained documents relating the arrests to the expunged case andsubmitted them to my BD. They sent me an email stating that ... "the 3 Disclosure Letter Inquiries from FINRA regarding CRD #
4950854, Ryan Logan, have been resolved. 
No further action will be required." I don't know if this means that everything was resolved internally with the BD, or if FINRA actually approved me moving forward. I couldn't move forward with the firm because I am facing problems abtaining my insurance license. I am currently attempting to contract with LPL. I"m in the middle of filling out my U4 application through CRD. A Senior Registration Specialist at LPL has advised me that under 1203.4 I must disclose the misdemeanor. After reading the above, it sounds like I should always disclose the incident to all BD's that interview with as well as licensing agencies. Is this correct?Would you advise that I seek legal counsel to help me with the disclosure forms that I will have to fill out on CRD? Can you recommend an attorney in the Los Angeles area that has experience in this area. I do have limited funds. I am new to all of this. I actually clicked on the recordgone.com link. Thanks for pointing out that it's not a legitimate avenue. Thank you all for your posts!Ryan L 

gonne indy's picture
Joined: 2011-03-19

pardons dont change the fact that you were arrested 

Anonymous's picture
rrbdlawyer (not verified)

You certainly should contact a local lawyer familiar with both criminal matters and securities-industry regulatory cases.  For starters, there is really no issue -- and never was -- as to any "arrest," notwithstanding what you may believe and what other posters may have suggested. Frankly, "arrests" are not reportable matters on the U4. Note, carefully, that the U4 asks about charges (which are not mere arrests and, in fact, the definitions for the U4 make that distinction quite clear) and about convictions/pleas.  Nonetheless, that distinction is not of great consequence in your situation as you were found guilty. A misdemeanor conviction for theft may well still constitute a statutory disqualification  but you are using the term "expunged" as a layperson and what your lawyer may have obtained could well alter that conclusion.  My advice: Hire local counsel.  If you do not know of any competent attorneys, you might start with a Google search or telephone your local Bar Association and inquire about their referral service (usually a free or fee-cap initial consultation with up to three qualified lawyers).Best of luck! Bill Singer

Please or Register to post comments.

Industry Newsletters
Investment Category Sponsor Links


Sponsored Introduction Continue on to (or wait seconds) ×