According to FINRA, Seung Hoon Kang of Beverly Hills, California, was assessed a deferred fine of $50,000 and suspended from association with any FINRA member in all capacities for 24 months for his role in permitting a statutorily disqualified individual to direct the operations of HB Securities, LLC. The suspension is in effect from September 3, 2024, through September 2, 2026.

The findings revealed that Kang served as a conduit through which a statutorily disqualified individual exercised substantial control over HB Securities. The disqualified individual, working through Kang, directed the firm's operating budget, approved expenses outside of the budget, controlled the firm's net capital decisions, and determined the timing and amounts of distributions. The individual also directed personnel issues, including the hiring of firm employees and the amount and timing of their compensation, as well as the firm's collection efforts on outstanding accounts.

Additionally, Kang acted in a principal capacity for the firm without registering with FINRA as a General Securities Principal, a violation of FINRA registration rules. Specifically, Kang formed and participated in a management committee that had explicit control over firm management decisions. In practice, Kang exerted authority over the responsibilities assigned to that committee. He exercised control over the firm's finances, actively engaged in personnel decisions, and directed key aspects of the firm's securities business, all without holding the required registration. The firm was aware that Kang was not registered with FINRA in any capacity but nonetheless allowed him to actively engage in the management of the firm's securities business.

This case highlights several important lessons for investors. First, FINRA registration requirements exist to ensure that individuals managing a securities firm have met minimum competency standards and are subject to regulatory oversight. When someone operates without proper registration, investors lose the protections that come with that oversight. Second, statutory disqualifications are imposed because an individual has engaged in conduct that makes them unfit to work in the securities industry. When a disqualified person is allowed to run a firm through a proxy, the very purpose of the disqualification is undermined. Investors can use FINRA BrokerCheck to verify that the individuals handling their investments are properly registered and have clean regulatory records.