Ensure That Your Settlement With A State Regulator Does Not Result In Inadvertent Statutory Disqualification

By Alan Wolper

My son, like most teenage boys, spends his fair share of time (tread that “every waking minute”) devoting himself to achieving higher and higher skill levels in the video games he received for Christmas that make Pac-Man and Asteroids – the games into which I poured my share of quarters way back when – seem as quaint and unsophisticated as an 8-track tape player. For reasons that are unclear to me, perhaps, at their own amusement, the people who program modern games often hide within millions of lines of code “easter eggs”, clever little surprises, such as a new and better weapon, that are revealed, typically, by pressing some complex sequence or combination of buttons. Based on my limited research, it seems that the discovery of such easter eggs is a happy event; indeed, entire websites are devoted to sharing the well hidden locations of easter eggs.

FINRA, unfortunately has a different view of easter eggs. Sadly, buried among the dozens and dozens of pages of the July 2007 amendments to NASD’s By-Laws that were necessitated by NASD’s consolidation with NYSE Regulation, is one easter egg that, when accidentally discovered, will not bring a smile to anyone’s face. The amendment in question served to change the definition of ‘Statutory Disqualification.’ As a result of this seemingly modest amendment, which, interestingly, had nothing whatsoever to do with the consolidation, it has become much more difficult for individuals and firms who have been charged with violations of state securities laws to resolve those charges without the need for an evidentiary hearing.

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