According to FINRA, Richard Celis Davalos (CRD #7194114), a former registered representative based in Kyle, Texas, was barred from association with any FINRA member firm in all capacities. The bar was issued on August 28, 2024, through an Acceptance, Waiver, and Consent (AWC) agreement under FINRA Case #2023078946501.
Davalos was found in violation of FINRA rules after he refused to appear for on-the-record testimony requested by FINRA during its review of an amended Form U5 filed by his previous member firm. The Form U5, formally known as the Uniform Termination Notice for Securities Industry Registration, is a regulatory filing that firms submit when a registered representative leaves. When a firm later discovers additional information relevant to the reason for departure, it may file an amended Form U5 to update the record. The fact that Davalos's former firm filed an amended Form U5 indicates that new or additional information came to light after his initial departure.
The amended Form U5 stated that the firm had initiated an internal investigation of Davalos related to two separate issues: his personal automobile loan application and outside business activity (OBA). Both of these matters raise important regulatory concerns.
Regarding the automobile loan application, while the specific details were not fully disclosed, issues involving personal loan applications by registered representatives can involve misrepresentations of income, employment status, or other material information. Such conduct can reflect on the individual's honesty and integrity, which are fundamental requirements for anyone working in the securities industry.
Outside business activity is governed by FINRA Rule 3270, which requires registered representatives to provide prior written notice to their employing firm of any business activity outside the scope of their relationship with the firm. This rule exists to ensure that firms can evaluate whether the outside activity creates conflicts of interest, could interfere with the representative's responsibilities to customers, or could give customers the false impression that the activity is endorsed or supervised by the firm. Failure to disclose outside business activities prevents proper supervisory oversight and can expose investors to unregulated risks.
When FINRA requested that Davalos appear for on-the-record testimony to investigate these matters, he refused. Under FINRA Rule 8210, all associated persons must cooperate with FINRA's investigative requests, including appearing for testimony. Refusal to comply is a serious standalone violation that typically results in a permanent bar from the industry.
Without admitting or denying the findings, Davalos consented to the sanction and the entry of findings against him. He is now permanently barred from working with any FINRA-registered broker-dealer.
Investors should be aware that their brokers are required to disclose outside business activities. If your broker is involved in business ventures outside of their brokerage firm, you should verify whether those activities have been properly disclosed and approved. FINRA's BrokerCheck tool provides information about a broker's outside business activities and disciplinary history, making it a valuable resource for due diligence.
