FINRA fines and suspends ex-Merrill general securities representative over cryptocurrency mining

Maria Nikolova

Kyung Soo Kim formed an outside business activity to engage in cryptocurrency mining activities, without providing prior written notice to his member firm.

The United States Financial Industry Regulatory Authority (FINRA) has fined and suspended for a month a former employee of Merrill Lynch, Pierce, Fenner & Smith Incorporated over his cryptocurrency mining activities.

Earlier this week, the respondent – Kyung Soo Kim, submitted Letter of Acceptance, Waiver and Consent (AWC) for the purpose of proposing a settlement of the alleged rule violations.

From March 20, 2014 through April 10, 2018, Kim was registered as a GSR (General Securities Representative) and IR (Investment Company and Variable Contracts Products Representative) through an association with member firm Merrill Lynch, Pierce, Fenner & Smith Incorporated. On the Uniform Termination Notice for Securities Industry Registration filed by Merrill with respect to Kim, Merrill stated that the Firm discharged Kim on March 14, 2018 for, in part, “…fail[ing] to disclose an outside business activity.”

In December 2017, Kim engaged in an outside business activity without providing prior written notice to his Firm. As a result, Kim violated FINRA Rules 3270 and 2010.

FINRA Rule 3270 states, in relevant part, that “no registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member, in such form as specified by the member.”

FINRA Rule 2010 requires associated persons to observe high standards of commercial honor and just and equitable principles of trade.

In December 2017, Kim formed and incorporated an entity (“S Corporation”), for which he was the sole shareholder and director, to engage in cryptocurrency mining activities. Kim: (i) opened and funded a bank account for S Corporation; (ii) entered into a contract on behalf of S Corporation with another entity that was to build and operate computer hardware and software for S Corporation’s cryptocurrency activities; and (iii) transferred funds from S Corporation to that entity pursuant to the contract.

Kim failed to provide written notice to Merrill of the above-described activity. By reason of the foregoing, Kim violated FINRA Rules 3270 and 2010.

As a result, Kim consents to the imposition of the following sanctions:

  • a one-month suspension from association with any FINRA member firm in any capacity;
  • a $5,000 fine.

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