According to FINRA, Hayk Papoyan was barred from association with any FINRA member in all capacities for failing to timely disclose an outside brokerage account to his member firm and for providing false testimony to FINRA.
Papoyan was found in violation of rules requiring disclosure of outside brokerage accounts and prohibiting false statements to regulators. First, Papoyan opened and funded a brokerage account in his name at another firm but did not disclose the account to his employer firm. Additionally, when opening the account, he failed to disclose his association with his FINRA member firm in his account application. FINRA rules require registered representatives to notify their employing firm of any brokerage accounts they maintain at other firms and to notify the other firm of their securities industry employment. These requirements enable firms to monitor for conflicts of interest, unauthorized trading, and other potential violations.
Second, and more seriously, Papoyan eventually disclosed the account to his firm only after FINRA initiated an investigation. During on-the-record testimony with FINRA, Papoyan falsely claimed he did not know about or control the subject brokerage account. This false testimony represented an attempt to mislead FINRA investigators about his undisclosed outside account. However, during subsequent testimony, Papoyan admitted that his earlier claims were false.
Outside brokerage accounts can be used for various types of misconduct, including unauthorized personal trading, front-running customer orders, insider trading, or parking securities to hide beneficial ownership. The disclosure requirement allows firms to obtain duplicate account statements and monitor for such misconduct. When registered representatives fail to disclose outside accounts, they deprive their firms of the ability to supervise their activities and detect potential violations.
Providing false testimony to FINRA during an investigation is a serious aggravating factor that demonstrates a willingness to lie to regulators to avoid accountability. While Papoyan eventually admitted the truth, his initial false testimony constituted obstruction of the investigation. The combination of failing to disclose an outside account and providing false testimony warranted a bar from the industry. Investors should understand that financial professionals who hide their activities and lie to regulators pose significant risks and do not belong in a position of trust over customer assets.
