SECURITIES AND EXCHANGE COMMISSION
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
SECURITIES EXCHANGE ACT OF 1934
Release No. 104352 / December 9, 2025
Admin. Proc. File No. 3-20636
In the Matter of the Application of
WILLIAM JOSEPH KIELCZEWSKI
For Review of Disciplinary Action Taken by
FINRA
OPINION OF THE COMMISSION
REGISTERED SECURITIES ASSOCIATION — REVIEW OF DISCIPLINARY
PROCEEDING
FINRA suspended Applicant and imposed other sanctions after finding that he
participated in private securities transactions, made false statements to his employer firm,
and caused the firm to file a misleading Form U4 and four misleading Form U4
amendments. Held, FINRA’s findings of violations and sanctions are sustained.
APPEARANCES:
Andrew St. Laurent of Harris St. Laurent & Wechsler LLP and Justin L. Chretien and
Natalie A. Napierala of Carlton Fields for William Joseph Kielczewski.
Alan Lawhead, Michael Garawski, Jennifer Brooks, and Michael Smith for FINRA.
Appeal filed: October 28, 2021
Last brief received: November 21, 2023
2
William Joseph Kielczewski, a former registered representative of FINRA member
Huntington Investment Company (“Huntington”), seeks review of FINRA disciplinary action.
FINRA found that Kielczewski, while employed by Huntington, (1) violated National
Association of Securities Dealers (“NASD”) Rule 3040 and FINRA Rules 2010 and 3280 by
engaging in “private securities transactions” (“PSTs”) with Huntington customers on behalf of
Mariemont Capital Partners, LP (the “Fund”); (2) violated FINRA Rule 2010 by making false
statements to Huntington about those PSTs and his management role at the Fund; and (3)
willfully provided misleading information on a Form U4 and four amendments, in violation of
FINRA Rules 1122 and 2010, and Article V, Section 2(c) of FINRA’s By-Laws.
FINRA suspended Kielczewski for 18 months, ordered that he requalify before
reassociating with any member firm, fined him $50,000, and found him subject to a statutory
disqualification. After an independent review of the record, we sustain the findings of violations
and affirm the sanctions imposed.
I.
A.
Background
Kielczewski founded the Fund with Kevin Taylor and moved to Huntington, which
understood him to be a passive investor in the Fund.
In late 2013, Kielczewski and Kevin Taylor, both of whom were then associated with
Fifth Third Bancorp, faced declining revenues in their portfolio of pooled non-agency residential
mortgage-backed securities (“RMBS”) following the 2008 financial crisis. In response,
Kielczewski and Taylor launched the Fund, which they hoped could more readily invest in
RMBS than Fifth Third could.
At approximately the same time, Gregory Chapman, Kielczewski’s former supervisor at
Fifth Third, recruited him to Huntington, with the expectation that Kielczewski would attempt to
transition his Fifth Third clients’ non-RMBS business to Huntington. Chapman believed that
Kielczewski was merely a passive investor in the Fund and Taylor would separately solicit those
clients’ RMBS business for the Fund. Kielczewski left Fifth Third in November 2013 and joined
Huntington in January 2014.
B.
Kielczewski actively managed the Fund and solicited Fund investments from
Huntington clients.
From 2014 to 2016, Kielczewski engaged in various management and operational
activities on the Fund’s behalf. From the Fund’s establishment, Kielczewski was in regular
contact with Taylor about how the Fund would invest its assets; often identified investment
opportunities that he believed the Fund should pursue; and reviewed and edited the Fund’s
quarterly reports, financial statements, and marketing materials. Kielczewski held an initial 10%
ownership interest in the Fund, which grew to 22.25% by 2017 without him making any
additional capital contribution. 1
1
The record is unclear about the basis for the Fund’s determination to increase
Kielczewski’s stake.
3
Kielczewski also solicited five of his former Fifth Third clients to open accounts at
Huntington, as well as invest a total of approximately $10 million in the Fund (the “Fund
Investors”):
C.
•
In January 2014, Kielczewski contacted an insurance agency, HGI, about a “new
potential investment” in the Fund, forwarded Fund marketing materials to HGI, and met
with an HGI executive to describe the offering. In April 2014, Kielczewski again
promoted a potential investment in the Fund to HGI, which subsequently opened a
Huntington brokerage account and made two investments in the Fund.
•
In January 2014, SCCI, a chemical manufacturer, invested in the Fund after meeting with
Kielczewski and Taylor. Kielczewski then successfully encouraged a second SCCI
investment whereby SCCI transferred cash from its Huntington account to the Fund.
Kielczewski facilitated wire transfers of funds for each investment.
•
In January 2014, after Kielczewski’s clients WI and RI, a married couple, agreed to
invest in the Fund, he helped them to determine which securities they should liquidate
from their Huntington account to finance their investment. Kielczewski then executed
the liquidation and arranged the transfer of the proceeds to the Fund.
•
In March 2016, Kielczewski met KK, a principal of construction company K&R, to
discuss moving funds in their Fifth Third brokerage accounts to Huntington and the Fund.
After KK and K&R opened Huntington brokerage accounts, Kielczewski emailed KK
instructions to wire funds from his Huntington account to the Fund and told him to
“hurry” his investment. K&R invested in the fund two days later, and KK invested in the
Fund in June 2016.
Kielczewski disclosed only a minor passive role at the Fund to Huntington.
FINRA Rule 3280 prohibits associated persons, like Kielczewski, from engaging in
PSTs, which it defines as “any securities transaction outside the regular course or scope of an
associated person’s employment with a member,” unless the associated person provides written
notice to their employer before engaging in them. Rule 3280 applies to transactions in which an
associated person “may receive” outside compensation in the form of “rights of participation in
profits.”
Huntington’s written supervisory policies and procedures (“WSPs”) further prohibited
the firm’s associated registered representatives from participating in PSTs, which the WSPs
defined as “outside business activities involving securities transactions . . . engaged in by the
individual outside his or her regular course of activities . . . .” The WSPs in turn defined
“outside business activities” as “any outside activit[ies]” whereby Huntington personnel were
“employed in any way outside of the normal scope of [their] employment with” Huntington,
including “any investment or affiliation with a private business” but excluding “passive
investments and activities . . . from which an individual receives income” but “performs no
service.” The WSPs further required registered representatives to notify Huntington’s
compliance department in writing before participating in PSTs.
4
In December 2013, as part of his initial registration with Huntington, Kielczewski
answered “yes” on a compliance questionnaire asking if he participated in PSTs. Kielczewski
also answered “yes” to the form’s question of whether he had any outside business activities. As
a result, Huntington compliance required Kielczewski to complete a separate “Disclosure of
Outside Business Activity” form, in which he stated that he was a “passive owner/investor” of
the Fund and estimated that he devoted “[a]pprox. 1 hour a month” to it, with annual
compensation of “$50,000.” He also wrote that he had “[n]o business duties” and was merely an
“[i]nvestor and owner in a partnership that invests in non conforming [R]MBS.”
Huntington compliance then asked Kielczewski to clarify his relationship with the Fund,
noting that Huntington “normally [did not] allow these types of transactions.” Kielczewski
responded that he was merely “a passive general partner . . . not a manager” and that his “passive
ownership will not conflict with [Huntington] clients.” Mark Gregory, then Huntington’s chief
compliance officer, asked Kielczewski to clarify that, as a passive investor, he did “not engage in
any private securities transactions.” Kielczewski confirmed that was “correct,” adding that he
“must have misunderstood what the private securities transactions question was.”
Two years later, in December 2015, Kielczewski completed a Huntington questionnaire
about outside business activities, in which he stated that he had not engaged in any private
securities transactions.
In April 2016, in connection with a routine FINRA examination, Kielczewski also
completed a FINRA “Personal Activity Questionnaire,” in which he disclosed that he was
engaged in “outside employment/activities or [PSTs]” through his position as a “[s]ilent minority
partner in” the Fund. He further claimed that this required “0 hours per week” of his time.
In May 2016, as part of that examination, FINRA staff questioned Kielczewski about the
Fund. According to Kielczewski, he acknowledged to FINRA that “there were a lot of
conflict[s] of interest[]” between his job at Huntington and his role at the Fund but that he
believed Huntington had mitigating procedures in place, including what he described as a
commitment between himself, Chapman, and Taylor for “full transparency” in the Fund’s
investments, and the fact that Kielczewski had no access or visibility to an account the Fund had
opened at Huntington, which was instead serviced by an employee unaffiliated with the Fund.
D.
Following FINRA’s examination, Huntington heightened its supervision, and
Kielczewski again represented his Fund role as passive.
In July 2016, in response to Kielczewski’s statements during his interview with FINRA,
Huntington compliance asked Kielczewski to further clarify his relationship to the Fund.
Consistent with his earlier disclosures, Kielczewski responded that he had merely “a passive role
in” and did “not solicit funds for” the Fund. He also completed an updated “Disclosure of
Outside Business Activity” form, in which he again identified the Fund as an outside business
activity, described himself as a “passive minority owner” with “no duties or obligations,” and
represented that he did not solicit Fund investments. He also answered “0” in response to the
question “what percentage of your time is spent on this activity during regular business hours?”
5
In September 2016, Huntington developed a heightened supervision plan to oversee and
monitor Kielczewski’s Fund-related activities, based in part on Huntington’s understanding that
Kielczewski “does not solicit funds for [the Fund], but shares common clients.” As part of this
plan, Huntington conducted a quarterly review of Kielczewski’s emails, cross referenced Fund
trades with Kielczewski’s client accounts, and required Kielczewski to confirm annually that he
did not solicit investments in the Fund, a representation he made to Huntington in both
September and December 2016.
E.
Kielczewski provided misleading disclosures on Form U4 and four amendments.
During his 2013 onboarding, Kielczewski completed a Form U4, which Huntington filed
with FINRA, stating that that he was a “[s]ilent minority partner in [the Fund]” and that “0 hours
per month [were] devoted [by him] to this business.” Between January 2014 and December
2016, he responded to four Huntington compliance questionnaires, repeatedly stating that he had
no updates to his U4. Based on those responses, Huntington filed four amendments to the U4 for
Kielczewski, each of which reaffirmed Kielczewski’s initial statement of no Fund involvement.
F.
Huntington terminated Kielczewski after discovering his role at the Fund.
On April 26, 2017, Huntington terminated the employment of Kielczewski after the
firm’s compliance department found that “actual activity and correspondence” showed his
relationship with the Fund was “beyond passive.” Huntington subsequently filed a Form U5
stating that Kielczewski had “misrepresented activity relating to an [outside business]” and had
“engaged in private securities transactions without firm approval.” In response, FINRA initiated
an investigation of Kielczewski.
II.
A.
Procedural History
FINRA obtained information from Huntington and filed its Complaint against
Kielczewski.
In June 2017, as part of its investigation, FINRA asked Huntington to provide
information about the firm’s decision to terminate Kielczewski, including “[a]ny internal
investigative report created by [Huntington].” On June 23, 2017, Huntington provided what it
represented were “all non-privileged documents, correspondence, emails and memoranda that
[Huntington] was reasonabl[y] able to obtain.” Huntington also stated in its response to FINRA
that the firm did “not waive any applicable privileges, including without limitation, the attorneyclient and work-product privileges.”
On May 21, 2019, FINRA issued a disciplinary complaint against Kielczewski alleging
that he (1) participated in PSTs involving Huntington customers, in violation of NASD Rule
3040 and FINRA Rules 2010 and 3280, (2) falsely represented to Huntington that he was a mere
passive owner of, and did not solicit investments in, the Fund, in violation of FINRA Rule 2010,
and (3) willfully provided misleading information on his Form U4 and four amendments thereto,
which caused Huntington to file a misleading Form U4 and four U4 amendments, in violation of
FINRA Rules 1122 and 2010, and Article V, Section 2 of FINRA’s By-Laws.
6
Shortly after filing the Complaint, on July 19, 2019, FINRA provided Kielczewski all
records associated with its investigation, including Huntington’s response letter to FINRA’s
information request, in which the firm stated that it had provided FINRA “non-privileged
documents” about its investigation.
Two months later, on September 10, 2019, Kielczewski requested that FINRA compel
Huntington to produce (1) internal communications related to the Fund and (2) records about
FINRA’s 2016 exam and Huntington’s subsequent internal investigation of Kielczewski. 2
FINRA submitted Kielczewski’s requests to Huntington, which produced responsive documents
to FINRA on October 7, 2019. In doing so, Huntington again represented that it was providing
“copies of all non-privileged” records and that it did not waive attorney-client or work-product
privileges. On October 11, 2019, FINRA forwarded the documents, including these
representations about privilege, to Kielczewski.
B.
Kielczewski unsuccessfully sought to continue the hearing after learning of
Huntington’s privileged withholdings.
On December 2, 2019, nine days before Kielczewski’s December 11, 2019, hearing,
Huntington moved to permit its counsel to attend that hearing to object to questions that might
elicit privileged communications between Huntington’s employees and its in-house counsel.
Kielczewski’s counsel initially claimed that Huntington’s motion was the first time that he had
learned the firm may have withheld privileged material. Kielczewski’s attorney later claimed
that he did not know about Huntington’s October withholdings because he had “failed to pick up
on” an error by an electronic discovery vendor. While acknowledging that it was neither
Huntington’s nor FINRA’s fault that he did not know about the withheld documents sooner, and
conceding that Huntington’s responses “could support an inference that documents were being
withheld,” Kielczewski’s attorney requested that the Hearing Officer find Huntington had
waived privilege by not explicitly identifying the withheld documents and order that Huntington
provide the documents or, alternatively, a privilege log. Kielczewski’s attorney further requested
the hearing be continued pending resolution of those issues.
The Hearing Officer denied these requests, noting that the hearing was scheduled to begin
in just over a week, and that Kielczewski had not shown good cause for his delay. The Hearing
Officer nevertheless said that he would resolve any privilege issues after the record was
developed at the hearing, during which he would allow the parties to question Huntington
witnesses about documents withheld on privilege grounds.
C.
Witnesses testified about Kielczewski’s involvement with the Fund.
The hearing proceeded over four days, with nine witnesses. Kielczewski testified that he
orally disclosed to Chapman his plan to encourage his former Fifth Third clients to move their
accounts to Huntington by offering them the opportunity to invest in the Fund. Kielczewski,
however, did not identify any specific conversations with Chapman or related written documents
2
See FINRA Rule 9252 (permitting a party to move for FINRA to invoke Rule 8210 to
compel the production of documents from a third party).
7
to that effect, such as a memorializing email. Kielczewski also generally testified that Chapman
informed compliance personnel and others at Huntington about Kielczewski’s plan, who,
according to Kielczewski’s testimony, similarly approved of his efforts to market the Fund to
Huntington clients.
Chapman testified differently. Although he admitted to being “well aware” that
Kielczewski was involved with the Fund and assumed that the opportunity to invest in the Fund
might be an incentive for Kielczewski’s former Fifth Third clients to transfer business to
Huntington, Chapman denied giving Kielczewski permission to solicit Huntington clients to
invest in the Fund. According to Chapman, he and Kielczewski “had the conversation that you
work here, you don’t work at [the Fund]. [Kielczewski] understood that.”
Several other Huntington employees testified similarly to Chapman. Mark Gregory and
Stephen Dahlke (Huntington’s chief compliance officers) and David Fitzsimmons (one of
Kielczewski’s immediate supervisors) all testified that they were unaware that Kielczewski was
engaging in PSTs, were unaware of any arrangement in which Huntington permitted Kielczewski
to actively solicit business for the Fund, and were never approached by Kielczewski or Chapman
about such an arrangement.
Taylor also similarly testified that Chapman understood Taylor would promote the Fund
to potential clients, while Kielczewski would merely encourage them to move their non-Fund
holdings to Huntington. Taylor further acknowledged that Kielczewski directly solicited Fund
investments from his Fifth Third clients and erroneously represented to Huntington that he
devoted “0” hours to the Fund monthly.
After the hearing, Kielczewski again moved to compel Huntington to produce any
withheld documents or to provide a privilege log. The Hearing Officer denied that motion, again
finding that Kielczewski had not shown good cause for his delay in raising the issue.
D.
FINRA found that Kielczewski engaged in the alleged violations and imposed
sanctions.
The Hearing Panel found that Kielczewski engaged in the alleged violations. In doing so,
the Hearing Panel credited the testimony of Chapman, Gregory, Dahlke, and Fitzsimmons,
noting that it was “was consistent, plausible, and cross-corroborated, and it was not undercut on
cross-examination.” In making this credibility determination, the Hearing Panel assessed their
demeanor and noted that “none of these witnesses evidenced bias against Kielczewski.” The
Hearing Panel suspended Kielczewski from associating with any FINRA member in any capacity
for 18 months, fined him $50,000, ordered him to requalify by examination as a registered
representative before reassociating with a member firm in any capacity, and imposed a year of
heightened supervision for any subsequent FINRA member association.
FINRA’s National Adjudicatory Council (“NAC”) affirmed the Hearing Panel’s findings
of violations. The NAC also affirmed the Hearing Panel’s sanctions, except it found
8
Kielczewski subject to a statutory disqualification for willfully providing misleading U4s, and
thus removed the Hearing Panel’s heightened supervision requirement. 3
III.
Analysis
We review FINRA disciplinary actions to determine (1) whether the applicant engaged in
the conduct FINRA found; (2) whether that conduct violated the provisions specified in
FINRA’s determination; and (3) whether those provisions are, and were applied in a manner,
consistent with the purposes of the Exchange Act. 4 We base our findings on an independent
review of the record and apply a preponderance of the evidence standard. 5
A.
Kielczewski engaged in PSTs in violation of NASD Rule 3040 and FINRA Rules
2010 and 3280.
FINRA found, and we agree, that Kielczewksi violated NASD and FINRA rules by
offering and selling Fund securities to the Fund Investors without prior written notice to
Huntington. NASD Rule 3040 and FINRA Rule 3280 both explicitly prohibit associated persons
such as Kielczewski from “participat[ing] in any manner in . . . any securities transaction outside
the regular course or scope” of their employment with a FINRA member, including transactions
for which they “may receive” compensation, absent detailed prior written notice. 6 A violation of
these rules is also a violation of FINRA Rule 2010. 7 Here, the record establishes that
Kielczewski, as part owner of the Fund, actively sold its securities without informing Huntington
in writing, despite being told by Chapman that he could not do so, and after Huntington walled
him off from the firm’s Fund account due to potential conflicts of interest. Indeed, Kielczewski
concedes that he engaged in PSTs without providing Huntington the required written notice.
B.
Kielczewski made false representations in connection with the PSTs and his role at
the Fund, in violation of FINRA Rule 2010.
FINRA found, and we agree, that Kielczewski also violated FINRA Rule 2010 by
making “false and misleading statements to Huntington” with respect to his Fund-related PSTs
and his active role at the Fund. An associated person who provides false or misleading
3
FINRA’s rules and by-laws generally prevent a person who is statutorily disqualified
from associating or continuing to associate with a FINRA member firm unless the firm obtains
FINRA’s approval through the membership continuance process on the person’s behalf. See
FINRA By-Laws, Art. III, §§ 3(b), 3(d), 4; FINRA Rules 9521-27.
4
15 U.S.C. § 78s(e)(1).
5
See Richard G. Cody, Exchange Act Release No. 64565, 2011 WL 2098202, at *9 & n.7
(May 27, 2011), aff’d, 693 F.3d 251 (1st Cir. 2012).
6
FINRA Rule 3280 superseded NASD Rule 3040 without substantive change in
September 2015.
7
See Kenny Akindemowo, Exchange Act Release No. 79007, 2016 WL 5571625, at *8
(Sept. 30, 2016) (finding a violation of FINRA Rule 2010 due to applicant’s violation of NASD
Rule 3040).
9
information in compliance questionnaires and related communications with his firm violates
Rule 2010’s requirement that FINRA members “observe high standards of commercial honor
and just and equitable principles of trade.” 8
Here, from 2013 to 2016, Kielczewski repeatedly claimed to Huntington in various
required written disclosures that he had a passive role at the Fund and did not engage in PSTs.
As he conceded at the hearing, however, Kielczewski actively participated in soliciting
investments and managing the Fund.
Kielczewski nevertheless disputes that he misled Huntington because, he claims, he fully
disclosed his Fund relationship to Huntington orally. But he points to no evidence of this, other
than his own hearing testimony, which was vague regarding the dates, terms, and other details of
his asserted disclosure. And the other evidence undercuts this claim. For example, the other
Huntington personnel who testified at the hearing all contradicted Kielczewski’s claims by
testifying that he had not made any such oral disclosures. The firm also expressly implemented
its 2016 heightened supervisory plan for Kielczewski’s Fund activities on the premise that he had
a passive involvement in the Fund. And Kielczewski did not claim to have made such oral
disclosures before his testimony, such as when Huntington personnel confronted Kielczewski
during the firm’s 2016 investigation or during the subsequent meeting at which he was
terminated.
Kielczewski also claims that he fully disclosed his active role in the Fund to FINRA
personnel during their 2016 examination, but the record shows he told only FINRA of his
passive interest. Nor would any such belated disclosures to FINRA excuse his earlier false and
misleading statements to Huntington.
Moreover, even if Kielczewksi provided accurate oral disclosures to Huntington, he still
provided the firm with written communications that were consistently inaccurate and
affirmatively misrepresented the extent of his involvement with the Fund. And while
Kielczewski claims that he summarized his role at the Fund in documents relating to a line of
credit the Fund obtained from Huntington’s affiliate bank, those documents merely stated that
former Fifth Third clients (and prospective Huntington clients) would be investors in the Fund,
without disclosing Kielczewski’s role in soliciting them.
Kielczewski additionally claims he should not be held liable because Huntington had a
financial incentive to ignore his role at the Fund and claims that he did not lie about his Fund
activities because there was “confusion at every level at Huntington” about what was
permissible—noting that FINRA Rule 3280 prohibited “participat[ing] in any manner” in PSTs,
while Huntington’s internal definitions of PSTs were more permissive of such activity. But
Kielczewski has not established that there was such confusion about Huntington’s requirements
or that he ever raised this alleged confusion with compliance. As an associated person of a
8
FINRA Rule 2010; see also, e.g., Allen Holeman, Exchange Act Release No. 86523,
2019 WL 3530381, at *9 (July 31, 2019) (applicant’s “false response in his firm’s Annual
Compliance Certification was inconsistent with just and equitable principles of trade”), pet.
denied, 833 F. App’x 485 (D.C. Cir. 2021).
10
FINRA member, Kielczewski was also expected to know and comply with FINRA’s rules, as
well as the requirements of his employer. 9 And given that, as he argues, FINRA’s rule was
stricter than Huntington’s requirements, he could have complied with both had he simply obeyed
the FINRA rule.
C.
Kielczewski violated FINRA By-Laws and Rules 1122 and 2010 by providing false
information on his Form U4 and four U4 amendments.
We further agree with FINRA that Kielczewski provided false information on his Form
U4 and subsequent compliance disclosures in violation of FINRA By-Laws and rules, thus
causing Huntington to file a false and misleading Form U4 and four false and misleading Form
U4 amendments with FINRA. FINRA Rule 1122 prohibits members or their associated persons
from filing membership or registration information that is “incomplete or inaccurate so as to be
misleading, or which could in any way tend to mislead,” or from “fail[ing] to correct such filing
after notice thereof.” 10 A violation of Rule 1122 is also a violation of FINRA Rule 2010. 11
Article V, Section 2(c) of the FINRA By-Laws further mandates that registrants keep
information required by Form U4 “current at all times.” 12
It is undisputed that Kielczewski’s statement in his initial U4—that his involvement in
the Fund was “passive”—was untrue, a falsehood that he reaffirmed in four subsequent U4
amendments. By misleading Huntington and FINRA about his significant Fund role in these
multiple filings, Kielczewski violated FINRA Rules 1122 and 2010, as well as Article V, Section
2(c) of the FINRA By-Laws. 13
9
See Joseph R. Butler, Exchange Act Release No. 77984, 2016 WL 3087507, at *6 (Jun. 2,
2016) (finding an experienced registered person “may be charged with understanding the
importance of providing accurate information” to his employer); see also William Scholander,
Exchange Act Release No. 77492, 2016 WL 1255596, at *6 (Mar. 31, 2016) (holding that
“associated persons are responsible for their own compliance and cannot shift that responsibility
to a supervisor . . . .”).
10
FINRA Rule 1122.
11
Michael Earl McCune, Exchange Act Release No. 77375, 2016 WL 1039460, at *4 &
n.14 (Mar. 15, 2016) (“Failing to timely amend a Form U4 when required violates . . . FINRA
Rule 1122 and the high standards of commercial honor and just and equitable principles of trade
to which FINRA holds its members and their associated persons under . . . FINRA Rule 2010.”
(collecting cases)).
12
FINRA By-Laws, Art. V § 2(c); see Bruce Zipper, Exchange Act Release No. 84334,
2018 WL 4727001, at *4 (Oct. 1, 2018) (“Persons seeking registration as a registered
representative must file with FINRA a complete and accurate Form U4 and have a continuing
obligation to timely update information required by Form U4 as changes occur.” (internal
quotations omitted)).
13
See, e.g., David Adam Elgart, Exchange Act Release No. 81779, 2017 WL 4335050, at
*3-4 (Sept. 29, 2017) (finding that failure to disclose five unpaid tax liens on Form U4 violated
11
Kielczewski defends his false U4 disclosures by again claiming that Huntington knew
they were inaccurate. As discussed above, the evidence does not support this claim. Moreover,
the deliberate preparation of misleading compliance documents is a violation of FINRA Rules
1122 and 2010—regardless of knowledge of a supervisor. 14
We also agree with FINRA that Kielczewski’s provision of misleading information on his
Form U4 and amendments was willful, and that he is thus statutorily disqualified. Exchange Act
Section 3(a)(39)(F) and Article III, Section IV of the FINRA By-Laws specify that a person is
subject to a statutory disqualification from associating with FINRA members if that person, like
Kielczewski, has willfully made or caused to be made a misleading statement of material fact in
a FINRA membership application or required report to FINRA. 15 Although courts have
provided varying definitions of what “willfulness” means in the securities law context, 16 acting
with scienter necessarily meets the definition of willfulness. 17
Here, the record amply supports FINRA’s finding that Kielczewski acted with scienter by
knowingly—and thus willfully—misrepresenting his role at the Fund on the U4 and
amendments. 18 Given his long-running and close personal involvement with the Fund, he
Article V, Section 2(c) of the FINRA By-Laws, and FINRA Rules 1122 and 2010), pet. denied,
750 F. App’x 821 (11th Cir. 2018).
14
See, e.g., Joseph S. Amundsen, Exchange Act Release No 69406, 2013 WL 1683914, at
*7-8 (Apr. 18, 2013) (finding Rule 1122 and 2010 violations over applicant’s claim that he
discussed omitted U4 information with his employer, because those discussions “d[id] not affect
[applicant’s] obligation to provide complete and accurate information on each Form U4 he
completed”).
15
15 U.S.C. § 78c(a)(39)(F); FINRA By-Laws, Art. III § 4.
16
See, e.g., Robare Grp., Ltd. v. SEC, 922 F.3d 468, 479 (D.C. Cir. 2019) (holding that
statutory text making it unlawful “willfully to omit any material fact from a Form ADV . . .
signals that the Commission had to find, based on substantial evidence, that at least one of
TRG’s principals subjectively intended to omit material information from TRG’s Form ADV”
(cleaned up)); Mathis v. US SEC, 671 F.3d 210, 218 (2d Cir. 2012) (rejecting petitioner’s
“argument that a finding of ‘willfulness’ under § 3(a)(39)(F) would have required a
determination that [he] was aware that he was violating a particular rule or regulation”);
Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (defining willfulness as “intentionally
committing the act which constitutes the violation” (citation omitted)).
17
See Robare, 922 F.3d at 479-80; Bennett Grp. Fin. Servs., Exchange Act Release No.
80347, 2017 WL 1176053, at *4 n.30 (Mar. 30, 2017) (finding that scienter demonstrates that
violations were willful), abrogated in part on other grounds by Lucia v. SEC, 138 S. Ct. 2044
(2018); cf. Allen Holeman, Exchange Act Release No. 86523, 2019 WL 3530381, at *11–12
(July 31, 2019) (finding that applicant who acted with extreme recklessness had acted willfully).
18
Cf. ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 65 (1st Cir. 2008) (“[T]he fact that
a defendant knowingly made a false statement is ‘classic evidence’ of scienter.” (citation
omitted)).
12
plainly knew that he was not, as he wrote in his Form U4 and amendments, devoting “0” hours
per month to the Fund or a “passive investor.” 19 Kielczewski’s misleading U4 disclosures were
also material, in that there is a substantial likelihood that a reasonable regulator, employer, or
customer would have viewed Kielczewski’s participation in PSTs as significantly altering the
total mix of information made available in Huntington’s regulatory disclosures. 20
D.
FINRA’s rules are, and were applied in a manner, consistent with the Exchange
Act’s purposes.
We have stated repeatedly that the prohibition on engaging in PSTs is fundamental to an
associated person’s duties to his customers and his firm because such transactions “deprive[]
investors of a brokerage firm’s oversight, due diligence, and supervision—protections investors
have a right to expect.” 21 Thus, NASD Rule 3040 and FINRA Rule 3280 are consistent with the
Exchange Act’s purpose of “promot[ing] just and equitable principles of trade.” 22 FINRA Rule
2010 also reflects the Exchange Act’s mandate that FINRA adopt rules to promote just and
equitable principles of trade. 23 FINRA Rule 1122 is similarly consistent with the purposes of the
Exchange Act because “requiring members and associated persons to file accurate and complete
Forms U4” is “critical to the effectiveness of the screening process used to determine who may
enter (and remain in) the industry” by “enabl[ing] regulators and the public to determine and
monitor the fitness of securities professionals,” thus “serv[ing] as a means of protecting the
investing public.” 24
FINRA applied these rules consistently with the Exchange Act’s purposes. Because
Kielczewski did not disclose the PSTs and mischaracterized his role at the Fund, neither
Huntington nor any other broker-dealer oversaw his active solicitation of Fund investments.
Investors and Huntington were thus deprived of the “oversight, due diligence, and supervision”
to which they were entitled. 25
19
See Gopi Krishna Vungarala, Exchange Act Release No. 90476, 2020 WL 6867617, at
*12 (Nov. 20, 2020) (finding that applicant acted willfully for purposes of Exchange Act Section
3(a)(39) because he “acted at least recklessly when he made misrepresentations and omissions”);
Bruce Zipper, Exchange Act Release No. 90737, 2020 WL 7496222, at *14 (Dec. 21, 2020)
(holding that applicants who knowingly maintained inaccurate records acted willfully).
20
McCune, 2016 WL 1039460, at *4-6 (finding applicant statutorily disqualified for failing
to amend Form U4 to disclose bankruptcy and tax liens).
21
2015).
Blair C. Mielke, Exchange Act Release No. 75981, 2015 WL 5608531, at *13 (Sept. 24,
22
15 U.S.C. § 78o-3(b)(6); e.g., Mielke, 2015 WL 5608531, at *13.
23
Fuad Ahmed, Exchange Act Release No. 81759, 2017 WL 4335036, at *17 (Sept. 28,
2017).
24
McCune, 2016 WL 1039460, at *7 (finding FINRA Rule 1122 to be, and applied in a
manner consistent with, the purposes of the Exchange Act) (cleaned up).
25
2011).
Harry Friedman, Exchange Act Release No. 64486, 2011 WL 1825025, at *10 (May 13,
13
We further find that the proceeding against Kielczewski was consistent with the
Exchange Act’s requirement that FINRA provide a fair procedure for disciplining its associated
persons. 26 We review the “overall fairness” of a FINRA disciplinary action based on the
“entirety of the record.” 27 Here, Kielczewski argues that FINRA deprived him of a fair
proceeding by denying his various requests related to Huntington’s withholding certain
documents on privilege grounds. We find no merit to those claims.
1.
FINRA did not err in denying Kielczewski’s motion to compel Huntington to
produce documents or a privilege log.
Kielczewski claims that the FINRA Hearing Officer erred in declining to compel FINRA
to require Huntington to produce withheld documents or a privilege log. We disagree. FINRA
Rule 9252 specifies that parties shall file any requests for FINRA to compel the production of
documents from members “no later than 21 days before the scheduled hearing date.”
Kielczewski’s motion to compel documents or a privilege log was plainly untimely, as he made
it only nine days before the hearing. He also did so despite receiving documents at least four
months earlier stating that Huntington was producing only non-privileged documents—a position
that Huntington reasserted in documents that Kielczewski received approximately two months
before the hearing. Although Kielczewski’s attorney claimed he had not seen Huntington’s
latter privilege claims because of a “vendor” error, he also admitted that a technology error did
not excuse Kielczewski’s untimely motion. Accordingly, we find no error in the Hearing
Officer’s denial of Kielczewski’s request to produce documents or a privilege log as untimely. 28
2.
FINRA did not err in denying Kielczewski’s motion to continue the hearing.
We similarly find no error in the Hearing Officer’s conclusion that Kielczewski failed to
show the necessary good cause to justify a continuance of the hearing pending Huntington’s
production of any withheld documents or a privilege log. FINRA rules require that a party
establish good cause for a postponement, 29 and the Commission has held that hearing officers
26
Exchange Act Section 15A(b)(8), 15 U.S.C. § 78o-3(b)(8).
27
Mark H. Love, Exchange Act Release No. 49248, 2004 WL 283437, at *4 (Feb. 13,
2004).
28
See, e.g., Raghavan Sathianathan, Exchange Act Release No. 54722, 2006 WL 3228694,
at *7 (Nov. 8, 2006) (agreeing with NASD’s denial of applicant’s request to compel production
of documents because it was not timely); cf. John B. Busacca, III, Exchange Act Release No.
63312, 2010 WL 5092726, at *14-15 (Nov. 12, 2010) (finding no error in FINRA’s denial of
applicant’s Rule 9252 request, where applicant delayed notifying the hearing officer of his
inability to independently obtain the requested documents until two weeks before the hearing).
29
FINRA Rule 9222(a); FINRA Rule 9222(b) (providing that, when determining whether
to postpone a hearing, a hearing officer shall consider (1) the length of the proceeding, (2) the
number of prior postponements, (3) the stage of the proceeding at the time of the request, (4)
potential harm to the investing public if a postponement were granted, and (5) “such other
matters as justice may require”).
14
have “broad discretion” to consider such requests. 30 Here, the Hearing Officer denied
Kielczewski’s request for a continuance because Kielczewski did not raise the privilege issue
until “four and a half months after receiving Huntington’s June 23, 2017 response; over a month
and a half after receiving the October 7, 2019 cover letters; and only nine days before the
hearing.” Moreover, the parties had stipulated to most of the relevant facts, the issues to be
resolved at the hearing were straightforward, and Kielczewski was able to question
knowledgeable witnesses about the privilege issue. 31 We thus conclude that the Hearing Officer
acted well within his discretion to deny the continuance request.
3.
FINRA was not required to independently investigate Huntington’s
disclosures on Kielczewski’s behalf.
Kielczewski also claims that because FINRA transmitted Rule 8210 requests to
Huntington and received its responses—both as part of its initial investigation and later at
Kielczewski’s request—FINRA should have sought, pursuant to Rule 9251, more specific
responses to Huntington’s statements that it was producing only non-privileged documents. But
Rule 9251 requires only that FINRA provide applicants with documents obtained as part of an
investigation leading to the institution of proceedings. It does not require FINRA to challenge
privilege claims by third parties. Rather, as we have noted in other contexts, it is an applicant’s
obligation (not FINRA’s) to marshal the evidence in his defense, 32 and “any failure to adduce
available evidence to meet the charges against him and show mitigating factors does not entitle
[applicant] to have the proceedings reopened after the issuance of an adverse decision.” 33
30
Robert J. Prager, Exchange Act Release No. 51974, 2005 WL 1584983, at *13 (Jul. 6,
2005); see also Michael Nicholas Romano, Exchange Act Release No. 76011, 2015 WL
5693099, at *5 & n.14 (Sept. 29, 2015) (stating the Commission will affirm a continuance unless
the hearing officer applied the wrong legal standard or made a “clear error” of judgment, with
the moving party “carry[ing] a heavy burden to succeed” (citations omitted)).
31
See, e.g., Richard Allen Riemer, Exchange Act Release No. 84513, 2018 WL 5668898, at
*6-7 (Oct. 31, 2018) (finding no abuse of discretion in FINRA’s denial of motion to continue,
where most facts were stipulated-to, the issues to be resolved were not complex, applicant did
not move for a continuance until less than a month before the hearing, and the applicant could
not show that the denial prejudiced him).
32
In Re Montelbano, Exchange Act Release No. 47227, 2003 WL 147562, at *13 n.8 (Jan.
22, 2003); cf. also Edward Beyn, Exchange Act Release No. 97325, 2023 WL 3017562, at *20
(Apr. 19, 2023) (rejecting applicant’s argument that FINRA should have obtained documents
relevant to his defense and noting that applicant could have timely made a Rule 9252 request for
those documents).
33
Robert D. Tucker, Exchange Act Release No. 68210, 2012 WL 5462896, at *13 (Nov. 9,
2012) (quotations omitted).
15
4.
Kielczewski has not shown that FINRA’s proceedings were otherwise unfair
or prejudicial.
Kielczewski broadly claims that he was prejudiced and denied a fair proceeding by his
lack of access to the allegedly-exculpatory documents at issue. We disagree. The Hearing
Officer gave Kielczewski wide latitude to question Huntington witnesses during the hearing
about such documents, as well as Huntington personnel’s knowledge of Kielczewski’s Fund
activities—the issues Kielczewski claims the withheld documents might address. 34 Despite such
latitude, Kielczewski elicited no testimony indicating that Huntington knew and approved of his
Fund role, improperly withheld exculpatory, documents or otherwise deprived him of records or
information material to his defense. 35 Although Kielczewski claims that the Hearing Officer
improperly required him, rather than Huntington, to establish the basis for Huntington’s privilege
claims during the hearing, the record shows the opposite: that the Hearing Officer required
Huntington’s counsel to establish the basis for her privilege objections. Similarly, while
Kielczewski claims that the Hearing Officer repeatedly and prematurely sustained Huntington’s
privilege objections, the record shows that Huntington objected on just two occasions, and the
Hearing Officer sustained only when the witnesses plainly stated they could not answer without
referencing privileged communications with counsel.
Moreover, while Kielczewski identifies certain broad categories of withheld documents
that “may” contain further information about Huntington’s alleged understanding of his activities
related to the Fund (such as personal notes taken and retained by testifying Huntington
witnesses; records about Huntington’s 2016 investigation; and certain employment records),
Kielczewski does not dispute or address that the record contained numerous similar documents
of this same type, including compliance department emails, minutes from meetings, and other
employment-related documents—none of which suggested that Huntington knew the extent of
Kielczewski’s Fund activities. And an applicant is not “entitled to conduct a fishing expedition
in an effort to discover something that might assist him in his defense.” 36
Nor do we agree with Kielczewski that Huntington waived its privilege claims by not
specifying the documents that it was withholding (and the basis for withholding them) or,
alternatively, by not identifying such documents in a privilege log. In support of this argument,
34
See Guang Lu, Exchange Act Release No. 51047, 2005 WL 106888, at *8 (Jan. 14, 2005)
(finding no error in denial of motion to compel production of documents from firm supervisor
when applicant was able to cross-examine supervisor at the hearing), aff’d, 179 F. App’x 702
(D.C. Cir. 2006); cf. Sathianathan, 2006 WL 3228694, at *8 (finding no error where FINRA
permitted testimony regarding the contents of an e-mail not in evidence).
35
See Beyn, 2023 WL 3017562, at *21 (finding no error in FINRA denial of Rule 9252
motion where applicant had “not shown that the record contained insufficient information”
concerning the sought-after information); Busacca, 2010 WL 5092726, at *14-15 (finding no
error in FINRA’s denial of Rule 9252 motion where the record contained other “competent
evidence” about the documents at issue, including witness testimony).
36
Scott Epstein, Exchange Act Release No. 59328, 2009 WL 223611, at *17 n.54 (Jan. 30,
2009) (cleaned up), aff’d, 416 F. App’x 142 (3d Cir. 2010).
16
Kielczewski cites precedent under the Federal Rules of Civil Procedure, but those rules do not
apply here. 37 And while FINRA Rule 9251(c) provides that a hearing officer can order FINRA’s
Department of Enforcement to submit a privilege log for materials that Enforcement withheld
based on privilege or other specified reasons, FINRA’s rules do not require third parties to
provide such logs. Kielczewski also had opportunities to pursue these waiver arguments, but
failed to timely do so before the hearing.
Kielczewski further suggests that Huntington also improperly withheld other documents
in response to seven different FINRA document requests that it made from August 15, 2017, to
May 8, 2019. But Kielczewski has made no specific argument on this point, and we find, based
upon our independent review of the record, that the preponderance of the evidence does not
establish that Huntington withheld any documents from FINRA in relation to those requests.
IV.
Constitutional Claims
After the completion of briefing in this proceeding, Kielczewski filed a motion requesting
that the Commission “vacate the FINRA determination against him and dismiss the action” or,
alternatively, postpone this proceeding in light of the D.C. Circuit’s decision in Alpine Securities
Corp. v. FINRA. 38 Kielczewski argues that Congress unconstitutionally delegated executive
authority to FINRA, a private entity. Alternatively, Kielczewski argues that “FINRA takes
governmental action” and as a result: the process used to appoint FINRA hearing officers
violates the Appointments Clause; the process to remove FINRA hearing officers violates the
Constitution’s separation of power guarantees; and the Constitution’s due process and jury trial
rights applied to FINRA’s disciplinary proceeding.
As a threshold matter, Kielczewski forfeited these arguments by failing to raise them
before FINRA. 39 Challenges premised on constitutional claims are not exempt from “ordinary
principles of waiver and forfeiture.” 40 In addition to being forfeited, these arguments also lack
merit.
The non-delegation doctrine, Appointments Clause, and removal claims that Kielczewski
asserts here are substantially similar to challenges that have been raised in federal courts to
37
See, e.g., Beyn, 2023 WL 3017562, at *17 n.86 (holding that the Federal Rules of Civil
Procedure do not apply to a FINRA proceeding).
38
121 F.4th 1314 (D.C. Cir. 2024).
39
See, e.g., Newport Coast Sec., Inc., Exchange Act Release No. 88548, 2020 WL
1659292, at *16 (Apr. 3, 2020) (finding that applicant’s “failure to raise its Appointments Clause
argument before FINRA is reason enough for us to reject it now”).
40
Island Creek Coal Co. v. Wilkerson, 910 F.3d 254, 256 (6th Cir. 2018) (citation omitted);
see, e.g., Newport Coast, 2020 WL 1659292, at *15-17 (finding waiver of constitutional
arguments where they were not first raised before FINRA).
17
FINRA’s structure and operations. 41 As described below, we follow the lead set by the courts on
these constitutional questions to conclude that Kielczewski’s claims do not have merit. Briefs
filed by the Commission and by the Department of Justice in other proceedings have discussed in
detail the type of constitutional claims that Kielczewski raises. 42 We agree with that analysis and
therefore explain only briefly why we conclude that Kielczewski’s claims lack merit.
A.
Kielczewski’s private non-delegation claim fails.
The Supreme Court has recognized that Congress may enlist the aid of a private
organization in administering federal law without running afoul of the non-delegation doctrine as
long as the private actor “function[s] subordinately” to a government agency that exercises
“authority and surveillance” over its activities. 43 Courts have repeatedly recognized that the
relationship between FINRA and the Commission satisfies these private non-delegation
principles. 44
Through the Exchange Act, Congress gave the Commission “pervasive supervisory
authority” over the rulemaking and enforcement activities of FINRA and other self-regulatory
organizations in order to protect “the public interest.” 45 For example, FINRA’s proposed rules
for its members generally only take effect if the Commission approves the rules after public
notice and comment, and the Commission “may abrogate, add to, and delete from” those rules. 46
The Commission also exercises supervisory authority over FINRA’s disciplinary decisions,
41
See, e.g., Alpine Sec. Corp. v. Nat’l. Sec. Clearing Corp., No. 2:23-CV-00782-JNP-JCB,
2024 WL 1011863, at *6 (D. Utah Mar. 8, 2024) (concluding that the applicant “has not
demonstrated a likelihood of success” as to its claim that self-regulatory organizations “are
unconstitutionally structured under the Appointments Clause” or that the authority “delegated to
[them] violates the constitutional nondelegation doctrine”), injunction pending appeal denied,
Order, Case No. 24-4027, ECF No. 11074625 (10th Cir. Mar. 15, 2024).
42
See Br. for Respondent SEC, Black v. SEC, Case No. 23-2297, ECF No. 45 (4th Cir. July
8, 2024); see also Def. SEC’s Combined Br. in Supp. of Cross-Mot. for Summ. J. & Opp. to Pl.’s
Mot. for Summ. J., Black v. FINRA, Case No. 3:23-cv-709-RJC-DCK, ECF No. 51-1 (W.D.N.C.
Apr. 4, 2025); Mem. of Law of Intervenor United States in Defense of the Challenged Provisions
of the Sec. Laws, Alpine Sec. Corp. v. Nat’l Sec. Clearing Corp., Case No. 2:23-cv-00782-JNPJCB, ECF No. 30 (D. Utah Jan. 29, 2024).
43
Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 399 (1940).
44
See, e.g., Sorrell v. SEC, 679 F.2d 1323, 1325-26 (9th Cir. 1982) (upholding arrangement
against a challenge that Congress unconstitutionally delegated power to self-regulatory
organizations to impose disciplinary sanctions); First Jersey Sec., Inc. v. Bergen, 605 F.2d 690,
697 (3d Cir. 1979); R. H. Johnson & Co. v. SEC, 198 F.2d 690, 695 (2d Cir. 1952); cf. Alpine
Sec. Corp. v. FINRA, 121 F.4th 1314 (D.C. Cir. 2024) (discussed below).
45
United States v. NASD, 422 U.S. 694, 732-33 (1975); see also Oklahoma v. United
States, 62 F.4th 221, 229 (6th Cir. 2023) (observing that the Commission “oversees both
[FINRA’s] rulemaking and [its] enforcement”).
46
See 15 U.S.C. § 78s(b)(1), (2)(C), (c).
18
including plenary review over its final disciplinary actions—the very process Kielczewski has
pursued here. 47 The Commission may even suspend or revoke FINRA’s registration if, in the
Commission’s opinion, “such action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance” of the Exchange Act’s purposes. 48
Although the D.C. Circuit recently found that an applicant for a preliminary injunction
had demonstrated a likelihood of success on a nondelegation claim against FINRA, the
circumstances that were crucial to the D.C. Circuit’s decision are not present here. 49
Specifically, the court determined that plenary Commission review of a FINRA expedited
expulsion proceeding was “not available as a practical matter” before the expulsion forced the
business to close—thus leaving a “gap” in Commission oversight of FINRA’s disciplinary
proceedings. 50 Here, by comparison, the same procedural posture and concerns are not present
in our review of FINRA’s final disciplinary decision. 51
B.
Kielczewski’s Article II appointment and removal claims fail.
Kielczewski has also not established that Article II’s appointment and removal
requirements apply to FINRA personnel. By their terms, those structural constitutional
requirements apply only to “Officers of the United States,” 52 and Article II “says nothing” about
the method of hiring or firing “some other type of officer” that is not an officer “of the United
States.” 53 FINRA is not “part of the government” under the Supreme Court’s test in Lebron v.
National Railroad Passenger Corp. because it was not created by the government and its leaders
are not chosen by the government. 54 FINRA is instead a private, non-profit corporation
47
See id. § 78s(e); see also NASD v. SEC, 431 F.3d 803, 806 (D.C. Cir. 2005) (recognizing
that the Exchange Act “provides the Commission with plenary review powers” over selfregulatory organizations’ disciplinary sanctions).
48
15 U.S.C. § 78s(h)(1).
49
See Alpine Sec., 121 F.4th at 1330-31 (finding a likelihood of success on a preliminary
injunction applicant’s nondelegation claim where FINRA expelled the applicant in an expedited
proceeding and the expulsion was allowed to take effect before the completion of Commission
review proceedings).
50
Id. at 1331.
51
See, e.g., id. at 1326-28 (distinguishing between the Commission’s oversight of FINRA
through review of final FINRA decisions or sanctions and the more limited circumstances in
Alpine Securities involving whether to stay the effectiveness of an expedited expulsion order
pending Commission review).
52
U.S. CONST. art. II, § 2, cl. 2.
53
Fin. Oversight & Mgmt. Bd. for P.R. v. Aurelius Inv., LLC, 140 S. Ct. 1649, 1658 (2020).
54
513 U.S. 374, 399 (1995). Kielcewski conflates the Lebron test with the state-action
doctrine, under which a private entity’s specific actions can be attributed to the government. See,
e.g., NB ex rel. Peacock v. District of Columbia, 794 F.3d 31, 43 (D.C. Cir. 2015). Whether a
19
incorporated under Delaware law. 55 As a private entity (acting subject to the supervision and
authority of the Commission pursuant to private non-delegation principles), FINRA’s processes
for selecting or terminating its personnel—including with respect to hearing officers and the
composition of hearing panels—are not subject to the Appointments Clause or constitutional
limitations on removal restrictions.
C.
Kielczewski’s Fifth Amendment due process and Seventh Amendment jury trial
claims fail.
Finally, a threshold requirement for Kielczewski’s Fifth Amendment due process and
Seventh Amendment jury trial claims is “a demonstration that in denying plaintiff’s
constitutional rights, the defendant’s conduct constituted state action.” 56 But courts have held
that the requirements of constitutional due process and jury trial rights do not apply to FINRA
(or its predecessor), because it is not a state actor. 57
V.
Sanctions
Under Exchange Act Section 19(e)(2), we sustain FINRA sanctions unless we find,
having due regard to the public interest and the protection of investors, that the sanctions are
excessive or oppressive or impose an unnecessary or inappropriate burden on competition. 58 We
consider any aggravating or mitigating factors 59 and whether the sanctions imposed are remedial
private entity takes action that may “be deemed that of the state” is a different question from
whether an entity is part of the “Government itself” under Lebron. See Herron v. Fannie Mae,
861 F.3d 160, 167 (D.C. Cir. 2017) (distinguishing between those two questions). The stateaction doctrine does not bear on whether an entity is part of the government subject to the
structural constitutional requirements applicable to the government itself.
55
See, e.g., Jones v. SEC, 115 F.3d 1173, 1183 (4th Cir. 1997) (“While the NASD is a
closely regulated corporation, it is not a governmental agency, but rather a private corporation
organized under the laws of Delaware.”).
56
Desiderio v. NASD, 191 F.3d 198, 206 (2d Cir. 1999). Fifth and Seventh Amendment
claims were not at issue in Alpine. See Alpine Sec., 121 F.4th at 1324 n.2 (noting that Alpine did
not raise Fifth and Seventh Amendment claims on appeal).
57
See, e.g., Santos-Buch v. FINRA, 591 F. App’x 32, 33-34 (2d. Cir. 2015) (concluding that
“FINRA is not a state actor that can be held to constitutional standards,” but is instead “a private
actor whose conduct . . . is not fairly attributable to the government” (quotation omitted)
(collecting cases)); Epstein v. SEC, 416 F. App’x 142, 148 (3d Cir. 2010) (“Epstein cannot bring
a constitutional due process claim against the NASD, because ‘[t]he NASD is a private actor, not
a state actor.’” (alteration in original) (citation omitted)); Desiderio, 191 F.3d at 206 (2d Cir.
1999) (rejecting Seventh Amendment claim because “NASD is a private actor, not a state
actor”).
58
15 U.S.C. § 78s(e)(2). Kielczewski does not allege, nor does the record show, that the
sanctions imposed create an unnecessary or inappropriate burden on competition.
59
See Saad v. SEC, 718 F.3d 904, 906 (D.C. Cir. 2013) (explaining that, in reviewing
FINRA’s imposition of sanctions, “the SEC must carefully consider whether there are any
20
or impermissibly punitive. 60 In imposing sanctions, FINRA relied on its Sanction Guidelines. 61
Although not binding on us, we use the Guidelines as a benchmark for assessing sanctions. 62
For the reasons below, we sustain the sanctions imposed by FINRA.
FINRA’s sanctions—an 18-month suspension (with a requirement that Kielczewski
requalify before reassociating with any member firm) and $50,000 fine—are well within
FINRA’s Guidelines for PSTs; falsification of records; misrepresentations; and false, inaccurate,
or misleading Forms U4. 63 For PSTs like Kielczewski’s, for example, the Guidelines
recommend, as a starting point, a fine between $5,000 and $77,000, a suspension of at least one
year, or a bar.
We find that FINRA’s imposition of sanctions was in the public interest and necessary
for the protection of investors. Kielczewski’s violations were serious. The prohibition on
private securities transactions “is fundamental to an associated person’s duties to his customers
and his firm,” and such misconduct “deprives investors of a brokerage firm’s oversight, due
diligence, and supervision—protections investors have a right to expect.” 64 Similarly, “[a]
representative’s truthfulness in answering the financial disclosure questions on the Form U4 is a
particularly critical measure of fitness for the industry because a commitment to accurate,
complete, and non-misleading financial disclosure is central to any securities professional’s
responsibilities.” 65 Thus, while Kielczewski argues that his misconduct did not cause direct
customer harm, his failure to accurately represent his Fund involvement to Huntington had
aggravating or mitigating factors that are relevant to the agency’s determination of an
appropriate sanction”).
60
PAZ Sec., Inc. v. SEC, 494 F.3d 1059, 1065-66 (D.C. Cir. 2007) (directing the
Commission, when reviewing NASD’s imposition of sanctions, to determine whether “those
sanctions were remedial rather than punitive”).
61
FINRA applied the version of its Guidelines in place at the time of the NAC’s decision.
See https://www.finra.org/sites/default/files/2021-10/Sanctions_Guidelines_2020.pdf.
Kielczewski does not object to FINRA’s use of this version of the Guidelines
62
Cf. Saad, 718 F.3d at 911 (holding that the Commission did not err in sustaining sanction
predicated on FINRA’s sanctions guidelines).
63
See Guidelines at 14 (PSTs), 37 (falsification of records), 89 (misrepresentations), 71
(false, inaccurate, or misleading Forms U4).
64
65
Mielke, 2015 WL 5608531, at *13.
Tucker, 2012 WL 5462896, at *9; see also McCune, 2016 WL 1039460, at *9 (“Selfregulatory organizations, state regulators, and broker-dealers critically rely upon Form U4 to
determine whether an applicant is fit for registration as a securities professional.” (collecting
cases)).
21
significant potential for harm by undermining his firm’s “ability to detect actual or potential
conflicts of interest, or other violative conduct.” 66
Kielczewski’s conduct was, at minimum, reckless, as he plainly knew that his activities
were far more extensive than he disclosed. 67 His misconduct was also repeated—he ultimately
engaged in PSTs totaling approximately $10 million with five Huntington customers over two
years, without disclosing them in writing. 68 In doing so, Kielczewski deceived Huntington in
numerous compliance questionnaires, emails, and Forms U4 by not disclosing his significant role
in soliciting investments for the Fund. 69 These repeated efforts to obscure his misconduct and
mislead the firm raise significant doubts about Kielczewski’s honesty and commitment to
fundamental requirements of the self-regulatory system, which depend on, among other things,
supervisory systems that are fully apprised of relevant circumstances related to the personnel
being supervised. 70
We acknowledge that Kielczewski has expressed remorse and promises to avoid future
violations. 71 We also agree with FINRA that Huntington’s termination of Kielczewski
66
Mielke, 2015 WL 5608531, at *20 (also noting that such violations impede detection of
other potentially violative conduct); see also Guidelines at 7 (Principal Consideration No. 11
(whether misconduct “directly or indirectly” harmed “other parties, “including the investing
public” (emphases added))).
67
See Guidelines at 8 (Principal Consideration No. 13 (“Whether the respondent’s
misconduct was the result of an intentional act, recklessness or negligence.”)); see also supra
notes 19-20 and accompanying text.
68
Like the NAC, we considered when evaluating the appropriate sanctions approximately
$5 million in PSTs that Enforcement did not include in its complaint involving HGI, and WI and
RI. See Howard Braff, Exchange Act Release No. 66467, 2012 WL 601003, at *6 & n.22 (Feb.
24, 2012) (considering uncharged conduct in assessing appropriate sanctions); see also
Guidelines at 7-8 (Principal Consideration Nos. 8, 9, and 17 (whether respondent engaged in a
“pattern of misconduct,” “over an extended period,” and “[t]he number, size and character of the
transactions at issue”)).
69
See Denise M. Olson, Exchange Act Release No. 75838, 2015 WL 5172954, at *3 (Sept.
3, 2015) (considering aggravating applicant’s attempt to conceal her misconduct and deceive her
firm); Guidelines at 7 (Principal Consideration No. 10 (“Whether the respondent attempted to
conceal his or her misconduct or . . . deceive . . . the member firm with which he or she is/was
associated.”)).
70
See, e.g., Saliba, 2024 WL 1603297, at *8 (“[A]ctions that subvert FINRA’s regulatory
processes through the submission of false information . . . mislead [FINRA] and can conceal
wrongdoing.”).
71
See Olson, 2015 WL 5172954, at *5 (the Commission has “consistently” sustained
FINRA’s decision to consider acknowledgement of misconduct and remorse mitigating).
22
materially reduced the likelihood of future misconduct on his part. 72 However, we do not find
that Kielczewski’s claims of a good faith belief that Huntington knew and approved of his Fundrelated activities offset the aggravating factors here. As discussed above, the record refutes his
suggestion that the firm knew or approved of anything beyond a passive investor role at the
Fund. Kielczewski also admitted that he was aware that he could not solicit customers for the
Fund, that Huntington did not permit PSTs, and that he could not make false statements to
Huntington or FINRA. Similarly, while Kielczewski claims that the firm’s guidance on PSTs
was unclear; Kielczewski’s repeated willingness to misrepresent his role at the Fund, even when
explicitly asked for clarification, undercuts any suggestion that his disclosures were inadvertent.
Nor do we agree with Kielczewski that the lack of even more aggravating factors
militates against the sanctions that FINRA imposed. We expect associated persons to comply
with the securities laws and FINRA’s rules. 73 We thus recognize that, as he argues, Kielczewski
has no prior disciplinary history, did not violate other rules, did not recruit other registered
representatives for his PSTs, disclosed his Fund interest to his customers, and ceased his Fund
activity after Huntington directed him to do so. But even taking all this together, the fact that
Kielczewski did not engage in such additional, potentially aggravating conduct does not change
our conclusion that FINRA’s imposition of sanctions was appropriate and well within the
Guidelines’ range. 74 And although he earned no direct commissions or profits from the PSTs,
they created the potential for financial gain with respect to the customers who decided to open
accounts with him at Huntington and the Fund. 75
Taking all these factors together, we find that FINRA’s 18-month suspension,
requalification requirement, and $50,000 fine are consistent with the Guidelines and are neither
excessive nor oppressive.
72
See Guidelines at 5 (Principal Consideration No. 7 (whether “a firm’s termination of the
respondent’s employment has materially reduced the likelihood of misconduct in the future”)).
73
See, e.g., Siegel v. SEC, 592 F.3d 147, 157 (D.C. Cir. 2010) (affirming the Commission’s
view that a securities professional “should not be rewarded” for satisfying his legal obligations);
North Woodward Fin. Corp., Exchange Act Release No. 74913, 2015 WL 2151765, at *8 (May
8, 2015) (“When Applicants registered with FINRA, they agreed to abide by its rules . . . .”).
74
Cf. Blair Alexander West, Exchange Act Release No. 74030, 2015 WL 137266, at *12 &
n.54 (Jan. 9, 2015) (collecting cases declining to find the absence of aggravating factors
mitigating); Guidelines at 7 (“[T]he presence of certain factors [in a case] may be aggravating,
but their absence does not draw an inference of mitigation. The relevancy and characterization
of a factor depends on the facts and circumstances of a case and the type of violation.” (footnote
omitted)).
75
See Guidelines at 8 (Principal Consideration No. 16 (whether the misconduct “resulted in
the potential for the respondent’s monetary or other gain”)); Ahmed Gadelkareem, Exchange Act
Release No. 82879, 2018 WL 1324737, at *8 (Mar. 14, 2018) (finding no mitigation where
applicant did not directly profit from his misconduct but “his actions were taken to obtain
financial gain”).
23
An appropriate order will issue. 76
By the Commission (Chairman ATKINS and Commissioners PEIRCE, CRENSHAW,
and UYEDA).
Vanessa A. Countryman
Secretary
76
Because our decisional process would not be “significantly aided” by it, Kielczewski’s
request for oral argument is denied. Rule of Practice 451(a), 17 C.F.R. § 201.451(a). We have
considered all of the parties’ contentions. We have rejected or sustained them to the extent that
they are inconsistent or in accord with this opinion.
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 104352 / December 9, 2025
Admin. Proc. File No. 3-20636
In the Matter of the Application of
WILLIAM JOSEPH KIELCZEWSKI
For Review of Disciplinary Action Taken by
FINRA
ORDER SUSTAINING DISCIPLINARY ACTION TAKEN BY FINRA
On the basis of the Commission’s opinion issued this day, it is
ORDERED that FINRA’s findings of violations against William Joseph Kielczewski are
sustained; and it is further
ORDERED that the sanctions imposed by FINRA against William Joseph Kielczewski
are sustained.
By the Commission.
Vanessa A. Countryman
Secretary
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