FINRA

Rubin was named a respondent in a FINRA complaint alleging that he engaged in a pattern of deceit by initiating Automated Clearinghouse (ACH) requests for electronic funds transfers from his personal banking account to his member firm brokerage account, totaling approximately $17.895 million, even though he knew or reasonably should have known that he had insufficient funds to cover those requests. The complaint alleges that through the use of these unfunded requests for electronic funds transfers, Rubin also improperly appeared to meet margin calls totaling at least $3.8 million and also the costs of his securities transactions. Rubin's unfunded requests artificially inflated values in his brokerage account contributing to his ability to effect securities transactions with a total principal value of nearly $88 million and to realize approximately $33,000 in trading gains. Through these unfunded ACH requests, Rubin therefore willfully caused the firm to extend credit to him in contravention of Regulation T of the Board of Governors of the Federal Reserve System. Because Rubin had insufficient funds to cover those requests for electronic funds transfer, he made a practice of meeting margin calls resulting from his securities transactions by liquidating the same securities or other commitments in his brokerage account. The failure of those funding requests also caused Rubin to engage in "free-riding," as he made a practice of effecting transactions where the cost of securities purchased was met by the sale of the same securities. By failing to meet margin calls and "free-riding," Rubin willfully violated Section 7(f) of the Securities Exchange Act of 1934 and Regulation X promulgated by the Board of Governors of the Federal Reserve System pursuant to Section 7 of Securities Exchange Act of 1934.

Decision

Bar (Permanent)

All capacities

Indefinite

10/3/2018

Monetary Penalty other than Fines

$5,724.02

$1,713.87

Extended Hearing Panel decision rendered December 14, 2016 wherein Rubin was barred from association with any FINRA member in any capacity and was ordered to pay costs in the amount of $5,724.02. The sanctions were based on findings that Rubin initiated unfunded Automated Clearinghouse (ACH) requests for electronic fund transfers from his personal bank account to his brokerage account with his member firm, totaling approximately $18 million, to create the false impression that his brokerage account and his securities trading activities were funded by significantly greater amounts. The findings stated that Rubin was able to use the ACH requests to make it appear as if he had deposited cash into his brokerage account at his firm because he learned that the firm credited the amounts of the requests to his brokerage account for periods-often more than a week-before his lack of funds ultimately caused the transfers to fail. These extensions of credit artificially inflated the value of Rubin's brokerage account, enabling him to meet margin calls, avoid the issuance of margin calls, and satisfy his obligations to fund his securities transactions. Rubin mismarked certain short sales in his brokerage account as "sales not long," which indicated to the firm that he held those securities outside of his firm's brokerage account and would deliver the securities to cover the sales. Because Rubin mismarked the sales as "sales not long," the firm's systems did not include those transactions when calculating his margin limits, which would have occurred if he had correctly entered the transactions as short sales. Rubin's misconduct went undetected because he misled and lied to his supervisors and other staff at his firm. Rubin voluntarily resigned from the firm shortly after it began a formal investigation into his trading activity. The findings also stated that Rubin used the unfunded ACH requests to artificially enhance his buying power, in the form of his margin equity, which enabled him to effect securities transactions without triggering margin calls and thereby he willfully violated Section 7(f) of the Exchange Act of 1934 and Regulation X promulgated thereunder, and violated FINRA Rules 4210(f)(7) and 2010, by failing to meet margin calls in his brokerage account. On January 9, 2017 this decision was appealed to the NAC and the sanctions are not in effect pending review. NAC Decision rendered October 3, 2018, wherein NAC affirmed the findings and sanctions imposed by OHO. The decision became final on November 5, 2018.