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An irreverent Wall Street Blog
by Bill Singer Subscribe to RSS Feed: Blog Home | Past Entries FINRA and Lt. Col. Elton Johnson Written: May 10, 2008

To know me is to know someone who tends to get worked up over a lot of things.  You likely know a number of folks like me.  That one guy who actually writes a letter to his Congressman or stands up and speaks his mind at a Town Hall Meeting—that idiot who goes into Hell for a heavenly cause and doesn’t care if he’s an army of one.  Sure, I’ve heard the jokes.  Some say I like the limelight.  Some call it grandstanding.  Think what you will.  Say what you like.  But at the end of the day, remember George Bernard Shaw’s wonderful quote:<?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />

The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.

So, let us at least agree that I am an unreasonable man, and, now, for my current crusade.

Mr. Johnson’s 18 Month Suspension for Failing to Supervise

Consider the December 2006 NASD regulatory case against one, Elton Johnson, Jr.  I submit it for your consideration in verbatim fashion from the very annals of the NASD’s monthly disciplinary reports:

Elton Johnson, Jr. (CRD #844428, Registered Principal, Moreno Valley, California) submitted an Offer of Settlement in which he was suspended from association with any NASD member in any supervisory capacity and in a financial and operations principal (FINOP) capacity for 18 months, and must requalify by exam as a general securities principal and FINOP prior to reassociation with any NASD member following the suspension. Johnson is also required to ensure that his member firm employs a second general securities principal and a FINOP until his suspensions have concluded and he has requalified as a principal and FINOP. Without admitting or denying the allegations, Johnson consented to the described sanctions and to the entry of findings that he failed to supervise a registered representative’s private securities transactions activities in the manner NASD Rule 3040 requires. The suspensions in any supervisory and FINOP capacities are effective from December 4, 2006, through June 3, 2008. (NASD Case #C3A20030008)

 

So, indulge me for a moment.  Form your opinion about Mr. Johnson.  Base it solely upon that NASD’s paragraph. Keep in mind that what you now believe is basically what the public also inferred about Johnson based upon the monthly disciplinary report. 

Okay, now, put all your inferences aside and consider this.

Not Exactly the Hero Treatment

Read this September 2005 article about Johnson in Registered Rep. Magazine http://registeredrep.com/mag/finance_battle_home/index.html  What you might glean from that article is this nugget:

Johnson, owner and operator of Amerivet Securities, a small broker/dealer in Inglewood, Calif., is a major in the U.S. Army Reserve who has been on active duty since Dec. 2001. He served in Iraq virtually all of 2004, and he is headed back for a second tour in Sept. Prior to being activated, Johnson ran a business with $750,000 in revenue; that number has dwindled to $50,000 (which comes from a pair of California pension clients that are required to give him business because of his b/d's status as a Disabled Veteran's Business Enterprise.)

 

“I couldn't take care of my retail business,” says Johnson, “so I lost it all.”

 

Hmmm…gee…my…that’s interesting Bill.  Maybe I reached some hasty conclusions about the guy.  But, okay, Bill, why are you so worked up about Johnson?  That NASD regulatory case was two years ago and his suspension is up in a few weeks.  It’s not like he’s still in Iraq, right?  I mean he didn’t ask for another tour after 2005, right?  So what’s the big deal?  He agreed to a 18 month suspension and that’s up in a few weeks and he’s back home and all.

Well, read this email I sent on Friday May 9, 2008 to Mary Schapiro, Chief Executive Officer of the Financial Industry Regulatory Authority (FINRA) with copies to the Financial Industry Association (FIA) and the Securities Industry Professionals Association (SIPA):

Sent: Fri, 9 May 2008 3:09 pm
S<?: prefix = v ns = "urn:schemas-microsoft-com:vml" /><?: prefix = w ns = "urn:schemas-microsoft-com:office:word" />ubject: From Bill Singer: Friday May 9, 2008. For PUBLIC DISSEMINATION

Dear Ms. Schapiro:

Some time ago I brought to your personal attention the plight of Lt. Col. Elton Johnson, a true American hero and Bronze Star recipient, who voluntarily returned to the Iraq war zone in January 2008 and will soon be departing for the southern city of Basra. 

As you may recall, last year I served in a pro bono capacity on behalf of Lt. Col. Johnson during his dispute with NASD/FINRA.  I attempted to amicably resolve certain issues prior to his departure for military service.  Because I personally promised to maintain the confidentiality of my communications with NASD/FINRA in an effort to promote a resolution of the matter, I will not reiterate that situation here.

However, I now approach you with yet another troubling incident involving my former client and your organization, and note that I am once again prepared to serve in a pro bono capacity to help him.  As a result of a just-completed email exchange with Lt. Col. Johnson, I am hereby authorized to contact you on his behalf.  I have openly copied him on this communication and, at his request, the Financial Industry Association and the Securities Industry Professionals Association.

Lt. Col Johnson has been participating in the support of combat operations by the Iraqi Army in a combat zone and because of that, it was extremely difficult for him to file a recently-due FOCUS report for Amerivet Securities (his FINRA member firm). Believing that his presence in a war zone was a legitimate reason for an extension, in March 2008, he emailed FINRA examiner, Ms. Peggy O'Reilly, and requested a 45 day calendar extension in regards to the filing of Amerivet Secuirities 1st Quarter FOCUS report. I am advised Johnson did not receive any response from examiner O'Reilly.  Clearly, there are a number of possible explanations to that scenario.  One, none of Johnson's emails were transmitted from the war zone and did not arrive at FINRA; or, two, none of examiner O'Reilly's responses were able to reach Johnson.

My client is shocked and distressed to have just received notice that despite his combat role and his prior efforts to obtain an extension to file, FINRA has shut down his member firm.  Moreover, your organization has apparently decided to fine him for the late filing. 

While I could detail Lt. Col. Johnson's extraordinary life story, I have previously done so in correspondence to NASD/FINRA and will assume that you and your colleagues retain familiarity with his story.  I would also refer you to a 2005 article about him at this link: http://registeredrep.com/mag/finance_battle_home/index.html.  Similarly, I would remind you of my seminal role in 2005 of raising various veterans' and active-duty issues with NASD/FINRA, as documented at http://www.rrbdlaw.com/brokeandbroker/index.php?a=blog&id=6 

At your earliest convenience, would you kindly review the current matter and undertake any action that you deem appropriate to resolve this problem.  Whatever the regulatory concern, this all could have been handled with far more sensitivity, if not compassion.  Your subordinates were on notice as a result of their recent dealings with Lt. Col. Johnson that he had returned to the war zone in Iraq.  There can be no question as to that point.  I know of that fact from personal dealings with the pertinent District Office.  Johnson's return to the war zone was a major factor in his decision to settle your prior case and was also the key issue that motivated me to assist him without compensation.  Given my admitted unfamiliarity with the present matter, I cannot necessarily dispute any alleged concern by FINRA; however, nothing that could possibly have recently occurred at Amerivet seems likely to pose any imminent threat to the public as to require FINRA to close down the member firm AND to impose a fine--or at least not until such time as FINRA was informed that Johnson had been contacted about the issue and had received a reply from him.

Regardless of any perceived regulatory necessity to take the actions now questioned, did anyone at FINRA even stop to consider whether its conduct would serve as a dangerous distraction to a soldier on active duty and unnecessarily imperil those whose lives he may be responsible for?  I urge you to ask the tough questions and to promulgate policies that will prevent a recurrence of this unfortunate event.

Sincerely,

Bill Singer,
acting pro bono publico for Elton Johnson.

 

To say that I am disgusted with FINRA’s apparent callousness would be an understatement. FINRA District Staff knows Lt. Col. Johnson and his member firm Amerivet.  They pointedly know that he is in Iraq in the service of his country.  Yes, that’s correct (in case you missed it!)—he is back in Iraq again, right now, this very moment. 

 

How do I know that FINRA knows that Johnson is in Iraq?  For starters, I made quite a pain of myself defending Lt. Col. Johnson in 2006, and, trust me, to tangle with me is to remember me and my clients.  Elton’s desire to expedite his return to Iraq caused me immeasurable difficulty because I had to make concessions to FINRA that I counseled him against because he thought it more important to get back in the field. Can you imagine that?  His priority was to return to a war zone rather than waste time fine-tuning his FINRA settlement.  Rarely have I seen a more patriotic individual willing to sacrifice so much for his country.

 

But let me be equally clear,  I also heard the snickers and the ever-so politely phrased questions.  Seems that we don’t like our heroes these days.  No, it’s virtually a sport to chew and gnaw at anyone who tries to do the right thing.  For those in the regulatory community who still question Elton’s sincerity or whether he really was in Iraq or is now there, please visit his blog at http://eltonjohnson.blogspot.com/ And while you’re trying to still pull him apart or down, note that the entries go back to 2005 – you know, when you folks were sitting in your offices in the comfort that soldiers such as Lt. Col. Johnson bought for you daily with their blood. 

 

Oh, and while you’re wondering if he is a “real” soldier or not, take a look at this Blog entry and, well, you tell me what you think about whether he’s playing soldier or not.

 

Tuesday, February 15, 2005 A US Warrior's Diary of Iraq ( Page 2 of my blog )

A US Warrior's Diary of Iraq 

Taken at the Riverside Estates II, Presidential Palace, Green Zone, Baghdad, Iraq. I am armed with a 9mm Baretta pistol and an MP5 submarine gun. In Iraq, I quickly found out that the M-16 rifle is totally unsuitable for fighting from a moving vehicle. Shorter weapons are ideal for this purpose which is why folding stock AK-47's, M-4 carbines and MP5's are so popular in Iraq.Why was my weapon of choice the MP5? Simple: The Heckler & Koch MP5 is the favored submachine gun for police SWAT and military counter-terrorist teams throughout the Western World. It supercedes all other pistol caliber designs and lastly, it's German made (and you know how the Germans are sticklers for efficiency). FYI, the MP5s were the official property of the Iraqi Army. My men and I were allowed to carry them because we handled Iraqi Army payroll funds.

 

My Parting Shot

So, here’s my question for all you hard-working registered representatives and executives of FINRA member firms.  Are you proud of FINRA’s dealing with Lt. Col. Johnson?  Are you and your family safe and sound, while he and his comrades risk life and limb? Won’t you raise a lousy finger to urge FINRA to do the right thing—hell, let me phrase it the way I think is best:  Can’t you make one damn phone call to FINRA or write one damn email and get them off his back while he’s serving our country in Iraq?

Please monitor this Blog for updates.  I welcome all emails to [email protected] and phone calls to 917-520-2836.  Also, please contact the two trade groups willing to work with me on the Johnson matter: http://financialindustryassociation.org/ and http://thesipa.com for additional guidance.