Legal consequences of undisclosed broker account
If I forgot to disclose a brokerage account to HR during compliance training, what should I do several months into the job? Worst case scenarios is I get fired, right? I did not make any trades or anything, the account just kind of existed, but is this non-disclosure violating some regulation or anything that would result in FINRA license revoked or worse?
Hey Analyst 1 in IB - Cov, I'm here to break the silence...any of these links help you?:
More suggestions...
I hope those threads give you a bit more insight.
Just liquidated the account bro
Hey,
Am in a similar situation - did you liquidate it or seek compliance advise?
Not OP but was in a similar spot a month ago. I just closed it. This is NOT legal advice though and I'm not suggesting you do what I did.
Hi, thanks for your reply - may I ask if you liquidated any positions before closing it?
Don’t trade it. (If not obv)
Close account.
Move on with life.
Thanks a lot for your reply - would need to liquidate what's already on the account before closing it - would this change your view?
Why not just disclose it? Just say it was an oversight.
Am aware of similar cases where this has lead to termination of employment although the oversight was a mistake and made in good faith
I know of a couple of people that had the same issue. Just talk to your manager and seek their advice. Most likely they’ll just ask you to disclose it to remedy the compliance breach, and maybe on the background compliance will review any suspicious trade (which you shouldn’t worry about) and that’s it.
Don’t trade, don’t close the account, don’t do anything without asking advice from your line manager / compliance. That will just make things worse.
.
This is good advice
If you didn't trade at all I would disclose it to compliance and expect a slap on the wrist. It's even less of a concern if the investments in the account are just mutual funds / ETFs. I wouldn't sell out of any positions or engage in any activity on the account because trading on the account, including sells, would be a much more serious offense. Others suggested just selling everything and closing the account but I wouldn't want it hanging over my head for my entire duration of employment that they could find out about the account at any time.
What are the positions you're holding? Are any of them on your firm's restricted list?
Thanks all for your replies, very helpful. Unfortunately the account (worth around 3k usd) contains one single stock purchased years ago. Reason I discovered the account is because the bank contacted me about closing down the account as its far below their minimum deposit/value
What stock and is it on the restricted list?
You can either do nothing, sell the position and close down the account, or disclose to compliance. Here are your strategic alternatives:
Doing nothing: You aren't trading in the account which would be a more serious offense but given the account remains active there's a higher likelihood of the account being reported to compliance which would be a more serious offense vs. self disclosing. However you will still be gaining from the economic benefits of a restricted stock for which your company has access to MNPI.
Sell the position and close the account: You are actively committing a violation of the bank's compliance policies by trading in a restricted stock, which is a much, much more serious offense than merely holding a brokerage account. And that is on top of the offense of having the undisclosed brokerage account. Additionally, it will be clear if compliance finds out that you intentionally attempted to conceal this account from them.
Self disclose to compliance: You will face the consequences of having an undisclosed account. You will get credit for self disclosing. You will not have traded in the account so no offense there. You will be mitigating the offense of having the account by resolving the issue before accruing additional economic benefit on a restricted stock for which your company has access to MNPI.
So really your two realistic options are self disclosing or leaving the account just sitting there doing nothing. That's a decision I suppose you have to make. But you would also have to consider how complex this would get if you get put on a deal where you have direct access to MNPI of the company - either the company itself, a competitor, a vendor, a customer. Then you're in much deeper.
My vote is self disclose and deal with the consequences. You may be fired or you may just get a sternly worded email saying not to do it again and that's it. But your other options are guaranteed terminations if you try to hide it or close the account and get caught.
Thank you very very much for your reply
To give a bit of background: I was an intern and still am - I am about 6 months into the job and in IBD
Other than the above, I have the option of transferring the shares to a relative
I do not work in/ cover the same sector as the stock
A six month internship in the winter?
Just one further question - how are accounts that are not disclosed usually found by the employer? Am very surprised that my employer has not yet found this account in some system/database yet
Also interested
.
Disclose immediately. It's fine if you disclose and say you forgot with no trading activity on the account rather than the firm finding out independently. If you disclose yourself, there will likely be minimal repercussions but if they find out, even if you havent traded on it recently, you could be let go or slapped with a harsh punishment
.
People are really stupid telling you to sell out and close it. Do absolutely nothing and inform compliance, you don’t want to make any trades at all without clearance. Truth will set you free
Start networking and lateral to another firm
Slightly different situation for myself: will be joining full time this summer after completing internship last summer. I held 1 position in my account months before starting my internship and haven't touched the account since. I don't remember any specific emails asking us to disclose with instructions prior to or during the internship (might have missed it because we were bombarded with so many emails).
Do you think if I disclose during my FT onboarding there may be problems (i.e. they notice I didn't disclose it for last summer)? Also, any other summer interns who didn't get any instructions asking to disclose?
I was in the same position and when I told my compliance team they really didn't care. Granted I caught my mistake 2-4 weeks later versus a few months in.
If you're that worried I would just willfully forget the account exists. Don't check it, don't trade in it, don't do anything with it. If it comes up down the line act oblivious to its existence and then suddenly remember with a dramatic "SHIT! I swear I haven't even looked at that account in __ years"
Without self disclosure, is it possible for them to find out your accounts?
Yes, especially if you are effecting trades.
Non velit voluptatem labore cumque accusantium eius ut. Et in reiciendis voluptatibus ullam voluptates in. Similique enim non repudiandae beatae atque quo omnis.
Minima nesciunt rerum vel autem perspiciatis velit velit. Eligendi quis labore culpa possimus minima. Est et ipsa repellat assumenda maxime neque. Esse quae molestiae expedita in et qui.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Dolor possimus sint quod est eius. Aspernatur qui voluptates voluptas hic voluptates ipsam distinctio.
Qui sint enim corrupti officia ut officia ipsum. Perferendis blanditiis officia magnam perspiciatis sequi est doloremque. Animi ut dicta eaque aliquid qui quos autem.
Pariatur accusamus enim optio fuga pariatur consequatur. Impedit placeat voluptatum libero cumque recusandae aspernatur nobis. Quas fuga illum quia vitae consequuntur. Eius dolor qui at fugit recusandae atque voluptates.