FINRA fines unregistered dealer $20,000

David Elgart, former president and chief compliance officer of the now defunct Roswell, Georgia-based Sequoia Investments has agreed to settle charges with the Financial Industry Regulatory Authority for his role in acting as an unregistered dealer between May 2020 and May 2021, accepting a suspended fine.

Without admitting or denying the findings, Elgart consented to a $20,000 fine and an 18-month suspension from associating with any FINRA member firm in any capacity. He is responsible for violating Article III, Section 3 of FINRA’s by-laws, FINRA Rules 1210 and 2010 and MSRB Rules G-2 on standards of professional qualification and G-4 on statutory disqualifications.

The fine only applies if Elgart, who is now retired, attempts to join the industry again. 

“The $20,000 is if I lose my mind and want to get back into the business,” Elgart said. “Why in the world would anyone want to get back into this business?”

Elgart, 75, also said that he was incapacitated with emergency open heart surgery when FINRA came knocking, and his chief operating officer didn’t know how to handle it without Elgart, and therefore didn’t respond to any of FINRA’s requests for two years. Sequoia Investments is now closed.

The issue in question is from FINRA’s 2021 cycle exam of Sequoia Investments, but Elgart was also dinged by FINRA just a few years before. In June 2016, FINRA issued a decision finding that Elgart willfully failed to update his Form U4 to disclose five tax liens worth over $400,000.

According to FINRA, Elgart engaged in “a pattern of misconduct over ten years that reflected ongoing concealment of his liens.”

In November 2018, Sequoia Investments filed a Form U5 with FINRA terminating Elgart’s registration but in 2019, the firm filed a Membership Continuance Application, or MC-400, seeking to permit Elgart’s reassociation with the firm.

“Elgart knew that he was not permitted to associate with the firm or effect any transaction in–or induce or attempt to induce the purchase or sale of–any municipal security while the MC-400 Application was pending,” FINRA said.

But when the application was still pending during the May 2020 through May 2021 period in question, Elgart used the login credentials and email addresses of other registered representatives to conduct municipal securities business.

“Elgart’s activities included discussing and recommending transactions to customers, communicating with firm vendors about trade corrections and logging on to the firm’s systems to effect trades on behalf of customers,” FINRA said. On June 2, 2021, FINRA approved the MC-400 application.