NEW YORK STATE DEPARTMENT OF FINANCIAL SERVICES

The registered representative provided materially incomplete information when he failed to disclose that he was named in a FINRA arbitration proceeding as part of his initial application and three subsequent renewal applications.

Stipulation and Consent

Monetary Penalty other than Fines

$2,250.00

Prior to Staten's initial application for licensure as a non-resident life agent in New York, an Edward Jones financial advisory customer of his initiated a customer complaint against Edward Jones and Staten related to a sale to the customer of certain Lehman Brothers Holdings notes prior to the financial crisis of 2008. During the crisis, culminating with Lehman Brothers' bankruptcy, the notes, which were part of the customer's fixed income investment portfolio, declined significantly in value, though the portfolio overall showed gains during this time of financial uncertainty. The customer claimed that Edward Jones and Staten failed to apprise her of risks associated with investment in Lehman Brothers notes, which were both highly rated and widely held by investors similar to this customer. On June 13, 2011, Edward Jones decided to settle this customer's complaint, paying the customer $20,500 in consideration of a full release of claims against Edward Jones and Mr. Staten. Neither Edward Jones nor Staten admitted to any wrongdoing or failure to adequately disclose known risks of investing in such corporate notes. At the time of his initial application for licensure as a life agent in New York, Staten interpreted the relevant producer licensure application questions, definitions and instructions as requiring disclosure of any proceedings initiated by or before FINRA that directly pertained to Staten's status as a FINRA licensee and registered securities representative. Thus, at the time of his initial application and subsequent renewals, Staten understood that a customer complaint resolved by Edward Jones without any concession of wrongdoing, was not by definition "an action or arbitration against my FINRA license(s)", and as such was not required to be disclosed. In subsequent insurance license renewal application in New York state and elsewhere, Staten, based upon updated advice from Edward Jones's compliance department, determined that this prior customer complaint related to a customer investment in Lehman Brothers notes should be disclosed. Upon such disclosure, NY DFS initiated an investigation as to discrepancies in Mr. Staten's applications. Ultimately Staten and NY DFS entered into a Stipulation wherein Staten admitted that he provided incomplete information within the meaning of Section 2110(a)(2) of the Insurance laws in an application for an agent's license pursuant to Section 2103(a) of the Insurance Laws on October 5, 2012, and in three renewal applications for an agent's license pursuant to Section 2103(a) of the Insurance Law, submitted to the Department on May 8 2013, May 7 2015, and June 14, 2017, in that Staten failed to disclose that he was named as a party in a Financial Industry Regulatory Authority arbitration proceeding under Case Number 11-02193.

CLAIMANT CLIENT ALLEGES THAT EDWARD JONES AND FA FAILED TO PROPERLY INFORM HER OF RISKS ASSOCIATED WITH LEHMAN NOTES. CLAIMANT FURTHER ALLEGES THAT FA AND EDWARD JONES FAILED TO MONITOR HER INVESTMENT WHICH DECLINED IN VALUE. (DAMAGES SOUGHT: $32,000 FOR RESCISSION OF INVESTMENT, PLUS STATUTORY DAMAGES, INTEREST, AND ATTORNEYS FEES.)

$32,000.00

$20,500.00

SETTLED FOR $20,500.