FINRA suspends Aegis Capital representative over WhatsApp use for business communication
Between November 9, 2017 and June 25, 2019, Paul Falcon used WhatsApp Messenger to conduct securities related business.
Paul A. Falcon, a General Securities Representative, Investment Company and Variable Contracts Products Representative and General Securities Sales Supervisor at Aegis Capital Corp, has entered into a settlement with the Financial Industry Regulatory Authority (FINRA).
Between November 9, 2017 and June 25, 2019 (the “Relevant Period”), Falcon used an unapproved third-party communication application, WhatsApp Messenger, to conduct securities related business with three customers of Aegis. Aegis was not able to capture the communications Falcon sent and received through WhatsApp Messenger. By virtue of the foregoing, Falcon violated FINRA Rules 4511 and 2010.
Aegis’s written supervisory procedures (“WSPs”) provide that electronic business communications can only be accessed and transmitted through Aegis sponsored systems so that Aegis can review, monitor and audit the communications. Aegis’s WSPs further provide that employees can only use mobile devices Aegis has issued and authorized.
On November 6, 2017, Falcon completed Aegis’s annual personal activity questionnaire in which he disclosed using a third-party application and communication system for business purposes. Specifically, Falcon stated that he used WhatsApp Messenger to communicate with overseas customers several times a month on his personal cell phone. Aegis had not approved this messaging application and it did not capture messages sent or received through this application.
On the same day, Falcon signed an Aegis Telecommunication Policy Acknowledgement confirming that he would use only communication devices Aegis issued and approved and that Aegis prohibited the use of text messaging to conduct business.
During the Relevant Period, Falcon continued to use WhatsApp Messenger for business-related communications with several overseas customers. In particular:
- Between November 9,2017 and June 25, 2019, Falcon exchanged 348 WhatsApp communications with one customer, with many of the communications concerning securities-related business.
- Between November 10, 2017 and March 20, 2019, Falcon exchanged 316 WhatsApp communications with another customer and many of these communications concerned securities-related business.
- Between November 10, 2017 and June 8, 2018, Falcon exchanged 230 WhatsApp communications with another customer and many of these communications concerned securities-related business.
Falcon primarily used his personal cellular telephone to communicate via WhatsApp Messenger, but occasionally used his desktop computer at Aegis as well. Aegis did not approve Falcon’s use of WhatsApp Messenger, nor did the firm capture the communications sent and received through WhatsApp Messenger so that it could maintain and preserve them.
Falcon violated FINRA Rules 4511 and 2010. As a part of the settlement with FINRA, he consented to a 30-calendar-day suspension from associating in any and all capacities with any FINRA member firm, and a fine of $5,000.
