Driving under the influence or DUI can be a statutory disqualification event that prevents a registered representative from associating with a broker/dealer, and thereby preventing a registered represent from earning a living in the securities industry. It is not intuitive that a DUI incident is or should have any bearing on an individual’s ability to be an effective securities salesman or have any bearing on that individual’s ability to comply with the dictates of NASD Rule 2110 (requiring that a rep “observe high standards of commercial honor and just and equitable principles of trade”), the reader should appreciate the consequences of a DUI related incident. The National Adjudicatory Council denied a Broker/Dealer’s Membership Continuance Application (or MC-400 Application) filed on behalf of Registered Rep, deciding that this Rep is statutorily disqualified from participating in the securities industry.
The disqualifying event was a 2002 DUI incident to which the Registered Rep pled guilty. He was also charged with related misdemeanor offenses, namely “aggravated, unlicensed operation of a motor vehicle”. What is significant, here, is the fact that that this 2002 DUI was a felony – most DUI incident’s are misdemeanors … up to a point. This is the moral of this NAC decision. It is very important that a registered rep know or learn at what point that DUI misdemeanors become felonies in their home State or in the State where the DUI incident takes place.
Although there were other aggravating factors in this decision (such as customer complaints), the National Adjudicatory Council dwelt on the DUI incident as the fundamental reason for denying the Sponsoring Firm’s MC-400 Application. The NAC, in fact, stated: “We have considered whether the particular felony at issue, examined in the light of the circumstances related to the felony, and other relevant facts and circumstances, creates an unreasonable risk of harm to the market or to investors. What makes this case particularly interesting and compelling is the fact that Registered Rep had completed intensive inpatient and outpatient programs. The NAC actually said that it was “impressed” with testimony given by individuals from the Court Intervention Project about Registered Rep’s “successful rehabilitation and therapy”. And, NAC said it was “impressed” that Registered Rep had been involved with Alcoholics Anonymous. Yet these two important factors failed to carry the day.
NASD Market Regulation recommended that NAC deny the MC-400 Application for two reasons: (1) the DUI at issue was a felony and therefore a serious offense and (2) Registered Rep was a “repeat offender”. NAC agreed with NASD Market Regulation and denied the MC-400 Application, but it is not entirely clear from this decision whether it was the fact that the DUI was a felony or that Registered Rep was a “repeat offender” was the deciding factor. In fact, NAC suggested that Registered Rep simply had not been in rehabilitation long enough to determine whether fundamental change in Registered Rep’s pattern of behavior to warrant to the conclusion that he can and would conduct himself in a responsible and compliant fashion in the securities industry. What is clear is that NAC shared NASD Market Regulation’s concern that Registered Rep’s continued participation in the securities industry would present an unreasonable risk of ham to the market or investors.
There are several lessons to be learned from this case. First, DUI is a serious obstacle to your career in the securities industry. Avoid making the mistake of drinking and driving. However, if you do take the risk and become a DUI offender, make sure that you know whether the DUI for which you are charged is a misdemeanor or felony in the State where the DUI incident occurs. In some States, the fact that your DUI incident is related to an accident could not only prevent the prosecutor from offering you a probationary and rehabilitation program as an alternative to going to trial, but could also trigger transforming a misdemeanor offense into a felony. This usually happens when the DUI related accident involves serious injury to a person. But realize that just injury – as opposed to “serious” bodily injury to a person can trigger a felony charge. Make sure you understand the subtleties of the criminal law in the State where the DUI incident takes place.
A final comment. DUI is becoming an increasingly familiar occurrence in our country; and, because the criminal laws and procedures in many States make it increasingly attractive for first-time DUI offenders to accept probationary and rehabilitation programs as an alternative to going to trial and conviction, most DUI violators readily accept a prosecutors offers without giving any thought to consequences. While a “no-brainer” for most individuals, securities professionals with NASD registrations should require more counsel from their criminal defense counsel than the recommendations usually offered. Press your counsel with questions that are relevant to you – a securities professional – and not simply relevant generally to every DUI defendant. Some States require you to plead guilty of DUI, allowing the court to suspend sentence pending completion of your probation and rehabilitation program, and then never impose sentence, effectively letting the DUI remain in limbo. Other States have a “diversion” program, where there is no entry of any plea of guilty: The DUI offender is automatically placed on probation, with his license suspended for a short period of time; and, if the DUI offender attends rehabilitation classes successfully, there is no judgment of guilt at all on the record. In other words, these options can be particularly attractive in the heat of the moment. But you do need to realize that there is trade-off for a subsequent DUI incident. Usually, a repeat offense results in mandatory prison time. But a repeat offense can make a subsequent DUI incident a felony. This has relevance for you, the securities professional. Make sure that you know or learn at what point a subsequent DUI incident becomes a felony. To assist you, it is recommended that you take a look at the “Subsequent Non-Injury DUI as Felony: State Statute Chart“, put out by the National Traffic Law Center. In any event, the underlying NAC decision is worth reading. It is cited as In the Matter of the Continued Association of X as a General Securities Representative with The Sponsoring Firm, Redacted Decision, SD Decision No. 04005 (NAC, October 12, 2004).
