Initiated By
FINRA
Allegations
McCloskey was named a respondent in a FINRA complaint alleging that he participated in two undisclosed private securities transactions (PSTs) involving a customer, who was an elderly, retired widow, and then sought to conceal these transactions from his member firms and FINRA. The complaint alleges that McCloskey solicited the customer to purchase $20,000 in shares of stock of a company. McCloskey never disclosed the transaction to his member firm. The customer's investment in the company took place outside the regular course or scope of McCloskey's employment with the firm. The customer's investment in the company eventually surfaced because she sent a written complaint to McCloskey at his firm business address about her investment. The customer's complaint prompted McCloskey to participate in a second PST. To appease the customer and further attempt to conceal his misconduct, McCloskey arranged to have his sister purchase the customer's $20,000 investment in the company's stock. McCloskey never disclosed this PST to his firm. McCloskey also failed to timely disclose the written customer complaint. The complaint also alleges that McCloskey provided false information and false on-the-record testimony to FINRA. In connection with FINRA's investigation that led to a previous AWC, FINRA requested that McCloskey provide a list of all firm customers who invested in the company, whether or not he participated in the purchase. McCloskey provided FINRA with a signed response to the request in which he identified three of his firm customers by name as the only firm clients who made their own direct investments in the company. McCloskey failed to identify the customer described above as one of those customers. During subsequent on-the-record testimony, McCloskey identified the same three customers he had identified in his written response and again omitted the customer described above. The complaint further alleges that McCloskey attempted to obstruct FINRA's investigation. During a phone call, McCloskey urged the customer to create and sign a false written statement indicating that McCloskey did not participate in any manner in the customer's $20,000 investment in the company's stock. In exchange, McCloskey offered to let the customer keep the $20,000 she received from his sister in the PST, and to also keep her shares of stock in the company. The customer refused to agree to McCloskey's proposal. In addition, the complaint alleges that McCloskey used an unapproved email address for securities-related communications with the customer. As a result of McCloskey's failure to disclose or receive approval to use his unapproved email address to communicate with a firm customer, the firm was unable to review and preserve the email communications McCloskey sent to or received from the customer. Moreover, the complaint alleges that McCloskey falsely responded to four questions on a personal activity questionnaire that his firm submitted to FINRA. McCloskey misled FINRA on the questionnaire by falsely attesting that while associated with a member firm he had not received any complaints against him from a customer during the past 12 months, utilized a third-party communication system, such as a third-party email address to communicate with customers, engaged in any PSTs, prepared and distributed personalized account statements, consolidated statements or performance reports separate and apart from the account statements prepared and distributed by his member firm. Furthermore, the complaint alleges that McCloskey falsely stated on his annual compliance questionnaire that that he had not solicited, sold, or participated in any PSTs during the past 12 months.
Resolution
Decision & Order of Offer of Settlement
Bar
Bar (Permanent)
Registration Capacities Affected
All Capacities
Duration
Indefinite
Start Date
4/7/2021
Regulator Statement
Without admitting or denying the allegations, McCloskey consented to the sanction and to the entry of findings that he participated in undisclosed private securities transactions involving a customer, who was an elderly, retired widow, and then sought to conceal these transactions from his member firms and FINRA. The findings stated that McCloskey solicited the customer to purchase $20,000 in shares of stock of a technology company that purportedly developed a wireless network system to control lighting for energy conservation. When McCloskey left his firm and joined a new firm, the customer followed him. The customer's investment in the company eventually surfaced because she sent a written complaint to McCloskey at his new firm business address about her investment. The customer's complaint prompted McCloskey to participate in another private securities transaction. To appease the customer and further attempt to conceal his misconduct, McCloskey arranged to have his sister purchase the customer's investment in the company's stock. McCloskey failed to timely disclose the written customer complaint and as a result, the new firm was unable to timely report the complaint to FINRA. The findings also stated that McCloskey provided false information and false on-the-record testimony to FINRA. In connection with FINRA's investigation, which led to a previous AWC for McCloskey, it requested that he provide a list of all customers of his previous firm who invested in the company, whether or not he participated in the purchase. McCloskey provided FINRA with a signed response to the request in which he identified three of the customers from his previous firm by name as the only firm clients who made their own direct investments in the company. McCloskey failed to identify the elderly customer as one of those customers. During subsequent on-the-record testimony to FINRA, McCloskey identified the same three customers he had identified in his written response and again omitted the elderly customer. The findings also included that McCloskey attempted to obstruct FINRA's investigation. During a phone call with the customer, McCloskey urged her to create and sign a false written statement indicating that he did not participate in any manner in her investment in the company's stock. In exchange, McCloskey offered to let the customer keep the $20,000 she received from his sister in the private securities transaction, and to also keep her shares of stock in the company. The customer refused to agree to McCloskey's proposal. McCloskey hid his participation in the customer's private securities transactions in the company from both of his firms by using an unapproved email account to communicate with the customer about her investment. McCloskey never provided the firms with these emails or preserved them, thereby precluding them from reviewing the communications and from complying with their books and records obligations. McCloskey also concealed his misconduct by providing false information to the previous firm on an annual compliance questionnaire and to FINRA on a personal activity questionnaire.
