Mohlman v. Financial Industry Regulatory Authority, No. 20-3257 (6th Cir. 2020)
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Mohlman became a licensed securities professional in 2001. The Financial Industry Regulatory Authority, a not-for-profit member organization, regulates practice in the securities industry and enforces disciplinary actions against its members. In 2012, Mohlman had conversations with several individuals concerning WMA. Mohlman did not attempt to sell WMA investments and did not receive compensation from WMA. Mohlman learned in 2014 that WMA was a Ponzi scheme and immediately informed all persons who had invested in WMA. Mohlman appeared for testimony as part of FINRA’s investigation. Another day of testimony was scheduled but instead of appearing, Mohlman and his counsel signed a Letter of Acceptance, Waiver, and Consent, agreeing to a permanent ban from the securities industry. FINRA agreed to refrain from filing a formal complaint against him. Mohlman waived his procedural rights under FINRA’s Code of Procedure and the Securities Exchange Act, 15 U.S.C. 78a and agreed to “not take any position in any proceeding brought by or on behalf of FINRA, or to which FINRA is a party, that is inconsistent with any part of [the Letter].” FINRA accepted the Letter in 2015.
In 2019, Mohlman filed suit, alleging that FINRA fraudulently avoided considering mitigating factors in administering the sanction. The Sixth Circuit affirmed the dismissal of the suit without addressing the merits. Mohlman failed to exhaust administrative remedies under the Exchange Act by appealing to the National Adjudicatory Council and petitioning the SEC for review.
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