By Michael Musto
By Capt. James Van Thach told to Jonathan Wei
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Thompson's apparent test aversion continued even after he passed the licensing exam. He has twice failed to meet a minimal continuing education requirementwhich involves a three-hour testresulting in the temporary suspension of his ability to engage in any securities business. His license was listed as "deficient" and "inactive" by the NASD on September 28, 1996, and was only restored on August 7, 1998, when he finally met the initial continuing education requirement, almost two years late. He was "deficient" again on September 28, 1999, when he failed to meet a second continuing education requirement, raising the number of tests he's missed to seven.
Unless Thompson completes his outstanding continuing ed exam by September 28roughly two weeks after the primaryhis license will finally be terminated. He is "prohibited" now under NASD regulations "from performing any duties and functioning in any capacity requiring registration." However, both times that the politically-wired Thompson was barred from doing business because of a deficient license, he was still able to get a jobin 1998 with Berean Capital, a Chicago-based firm, and this year, with Liati, a new Wall Street firm not involved in municipal bonds.
Calling the continuing ed test "a walk in the park," Thompson dismissed his inattentiveness to the requirement imposed by a half a dozen regulators, including the NASD, the New York Stock Exchange, and the Municipal Securities Rulemaking Board. "I didn't think I needed my license," Thompson added, though he appears to have illegally "parked" it at Berean in order to avoid losing it.
Thompson admits that he did no deals for Berean during the three years he was registered there, nor was he compensated. By his own account, he did not even travel to their Chicago office once, only meeting with Dudley "Betsy" Brown, the head of the firm, in New York. Yet he was listed as a general securities rep with Berean from April 20, 1998, until May 21, 2001.
Thompson was hired by Berean a few days before his license would have lapsedon April 30,1998if he did not find a NASD employer. A license is automatically canceled if it is not used for two years and Thompson had not been registered with a firm since he left Baum on that date in 1996. If canceled, the only way Thompson could have returned to the field would be to pass the original Series 7 test all over again.
Berean's Brown was evasive about Thompson in a Voicephone interview, saying he was "hired on a commission basis" and that "he'd find a deal for us and bring it to us." When told that Thompson did not report any earnings from Berean on the disclosure form he filed with the Board of Ed, Brown shifted and declared, "I didn't say he got any deals for us. I just said I couldn't remember." After saying he also couldn't recall why Thompson left just a couple of weeks ago, Brown ended the conversation and didn't respond to further Voicemessages.
For his part, Thompson adamantly denied he parked his license at Berean, contending that the company hired him "because Brown was thinking of coming to New York and I was going to run his office there." Not only did the company never do business here, but Thompson's license was suspended at the time Berean hired him and suspended a second time while he was employed by them. In fact, Berean's own license in California was revoked during this period and the NASD fined the firm $5000 for a continuing failure to maintain "the minimum required net capital" to do business anywhere. These are hardly signs of a business looking to expand into the nation's biggest and most competitive public finance market.
NASD regulations forbid companies from registering a person "where there is no intent to employ such person in the member's securities business," and bar the retention of anyone "no longer functioning as a representative." Thompson is deliberately vague about how he got the jobsaying only that he "was introduced to Brown by mutual friends." That's also all he'll say about how he got his first job in finance with Baum when he had no background in the field.
Thompson's final end run around securities rules was his 1999 assumption of a position on the board of Liati, a firm that soon after sought NASD registration to do limited partnership financing deals. He became a director of the Liati board long before his recent hiring by them as an employee. According to Thompson's tax returns, he earned $84,100 from Liati in 1999 and 2000.
The problem is that Thompson was registered as a Berean representative for the same two years. NASD regulations require the disclosure on Berean filings of any other business relationship of their employees, but Thompson's Liati role was never listed. It is illegal to maintain an undisclosed business relationship with two securities firms at the same time.
In addition, when Thompson moved his GS registration to Liati this year, it appeared to be his second attempt to park it. Thompson says he gets "the same compensation" now at Liati as he did when he was only a director and that he does "irregular" work there. He has no license to do the limited partnership deals Liati specializes in, and Liati has no license to do the bond deals that he once did.
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