will you do seem to be losing your audience they probably just one lunch argument on this is an important issue for mr harris he's been permanently barred by the securities industry and found liable for securities fraud he was a registered representative finra which is the governing agency for  brokerage industry here in the united states of america has three thousand seven hundred firms within it that are registered with finra they also have six hundred thirty one thousand brokers excuse me that are registered with  i c c decision would establish if left intact establishes a dangerous precedent that would require every one of them brokers who does not have a fight to sherry obligation to make disclosure of non transaction  based compensation when they're making a recommendation to buy or sells curity so in the ordinary course of business these registered representatives have numerous interactions with various issuers particularly with public companies they may violation of ten b five so if there's a ten b five securities fraud basically says have you made a misrepresentation have you made a false statement in connection with the purchase or sale of a security or an omission right that's one side and be there's no liability for failure speak unless you have a duty to disclose and that's why we come back to the fight to sherry duty mr harris was not a registered investment advisor which would have had if i do sherry said was that it was a quote single substantial not transaction based payment for consulting services and then these two partners use that to open a brokerage firm but that's critical in this case that it was not transaction based payment so at no point was there finding a fact that this was an excess of commission all of the cases that the f c c has referred to all have some transaction based component to it when there is a finding of liability in an omission case for ten p five violation those transaction based items are excessive commissions they could be the fact that the firm is selling out of its own inventory that otherwise it's a market maker but every single one of those cases involve that kind of scenario because we have a specific finding here that the i think the us the scale the with which i'm very familiar included within it as  as a theory the possibility that some excessive self interest in the security issues in the transaction is enough to trigger a duty to disclose based in that particular transaction unlike this particular case where the monies that were paid were not paid for mr harris and his partner to sell the or securities that the brokerage firm that they open sell in connection with pump and dump scheme all of these securities at a particular price but it's not particular transactions i'm just going to give you five million dollars to sell off these securities and the broker dealer through its group was phil's to disclose that to its clients in selling those securities is the violation of the duty i would say your honor that that is a violation because you have that connection they are between the the pavement and the explicit and so finland to determine that this consulting fee this three hundred fifty thousand dollars payment was effectively the same thing as a insider of the example that is a specific payment in order to sell specific security so there is a connection there that does not exist here you know there's a lot of debate now with the department of labor for i do sherry rule that has been proposed and put on hold as to whether or not registered representatives should have this by do sherry duty that would make it a more expansive relationship but the fact of the matter is at the time that this happened that that type of relationship did not exist absent that duty absent if i do share a relationship and a duty to speak mr mr harris had no such duty i would also point out that yes there was a sin significant payment but this leads to a very broad spectrum of if you're going to impose an obligation on registered reps that have no other fight do cherie duty to start disclosing all of their touches with various  companies it's quite slippery slope and there's a very broad one of the three hundred fifty thousand dollars payment for for purposes of this appeal we have not challenge the finding that it was for consulting services it was for consulting services because they went to china to spend two hours mr harris did not go to china and somebody partner and the office manager that was the consulting and there were other touches with this who hours of looking at household it well i would querrey whether or not say for example you undertake some other consulting work for a public company and you why isn't there an available inference that the that the consulting fee was so large and was used to acquire the the the broker dealer agency that that there was an obligation to disclose this extraordinary relationship then you're pushing the stock of the the people who mention the money to buy the agents not take that there's not any such remedy there is and in fact the case that the f c c what remedy is there there would be i would say that there would be a violation of a fin rule finish and agreed not to violate the rules and then and the fact that those rules are not violated and are observed and respected by the people who are members of that organization if on top of that they conclude as they found that your client lied in testimony isn't that a pretty good reason for finra deciding that we don't want this person a person of this character in our industry i think that you need to you need to slice this nothing personal i mean it just i just don't understand that and as if the clones case which did not involve ten b five so the the the  continued referral to that case you know here's somebody who was paid to open up a brokerage firm that was a violation of finra rule he was required he had a three month suspension it was not he was not found guilty of fraud and that it was a violation of the federal rule for just an equitable principles of trade he was going to suspension it was required to requalify the your view is that the violation tenby five ultimately led to this permanent bar i would say that if you if you overturn should view a ten b five violation in this context as requiring a transaction based on the slopes commission so a commission for a a particular client or act and the and we've never said anything one way or the other about that that's correct and yes he sees a response to that as well maybe there is not a fiduciary duty here but the rep was making recommendations that we had to disclose this conflict of interest if we go to that wholesale definition then every registered rock will by virtue of that definition be if i do sheri and that's just not the obligations of a rep they  from the company in china that would be one thing but this is a different thing altogether but the but the key fact here is the finding the very specific finding that it was not transaction based and in the absence of that connection we can't conclude that it was a commission nobody concluded that this was an excessive commission or we would be having to do a different debate thank you reserve minutes rebuttal so we may please the court benjamin better for the securities exchange commission i think it's important to remember that the essential facts of this case are not in dispute in december two thousand and nine harrison his business partner took two hundred or three hundred fifty thousand dollars from dear chinese issuer purportedly for these consulting services over the next two months they use that money to pay the expenses connected to opening up their new brokerage then once they opened their new brokerage they started recommending dear securities to their customers without disclosing that just weeks ago they'd gotten three hundred fifty thousand dollars from dear now since the one nine hundred seventy at least when this court decided the chasses case it's been very clear th brokers who choose to make recommendations to their clients must disclose information material to those recommendations mr harris is not challenging the commission's materiality finding here she doesn't contest that this three hundred  fifty thousand dollars payment was immaterial to think argument that she's making it is not transaction based well she's correct the commission concluded that this wasn't a transaction based compensation in the way one normally thinks about transaction based compensation or the wake the commission talks about it wasn't a percentage of money paid on a particular securities transaction it was instead three hundred fifty thousand dollars from an issue or to the brokers that were making the recommendations now the fact that it wasn't tied or wasn't payable untel recommendation was made we don't think affects its materiality and nothing in the case law says that only transaction based compensation is s leveraging is the nothing in the case losses anything to the contrary either well that's right that's up i guess or i can't think of any cases off the top of my head and in my research i didn't come across any where you know a payment up front before anything was done was that issue it but i just i struggle with the idea that simply because an issue were decided to pay the money upfront and trust that the recommendations that were anticipated would be made would in fact be made would somehow shield the broker from the responsibility of disclosing this piece of material information and many of these pump and dump schemes there was an upfront payment of one type or the other it's not uncommon i think another thing to remember in this case your honor is this really isn't what we would think of as a commission in these cases where they talk about excessive commission is nearly always what you're talking about is a sum of money that's being paid by the broker dealer to its sales agents internally so this scully makes this point actually what would judge rake off is pointing out and scale the is that in the normal course of business a customer expects that his broker is going to get some compensation for the transaction so you don't really have to disclose specially the normally expected compensation however if it's excessive if it's unusual if it's very large then a broker would have some obligation to disclose it to their customer when they're making recommendations this however is something different this is money received from the issuer not money paid by the broker dealer employer to its sales agents so i think that slightly makes this case somewhat different we do think the issue of compensation is not usually it's a form of a  bribe it could certainly be viewed that way now the commission noted in its order that given the undisputed facts here that there were approximately two hours of consulting services and that was it in there was three hundred fifty thousand dollars it had the appearance of a quid pro quo we think that's absolutely correct we think that's the most rational inference from the undisputed facts that this was in fact a form of a quid pro quo now you don't have to actually i mean the quid pro quo don't have to match up you don't have to wait for the qui before you get the pro i mean it just doesn't it doesn't work that way necessarily yes or no and on the point of the bars i know that mr harris is not happy with barr and that's not surprising but it also needs to be remembered that again he's not contesting the factual findings he's not contesting that finra correctly concluded that he misled finra this is a very serious issue finra is a self regulatory organization is entire regulatory structure is premised on the voluntary and truthful cooperation of its members and he doesn't dispute that in several instances he did mislead them he misled them with respect to the three hundred fifty thousand dollars he attempted support mr shoulder under his business partner story that this wasn't really their money this was the office managers money finra found that to be completely lacking credibility and falls he doesn't dispute fenriz conclusion that his representation that he was a m employee of the brokerage and not a part owner was just flatly falls these are important facts that he attempted to mislead finra about and under finra own guidelines when it comes to sanctions whether you've cooperated or misled finra is a very just very briefly in rebuttal there been a lot of aspersions cast about and suggestions of bribery pump and dump and items like that i'd like to point out that the f c c went outside the record and in footnote four of their decision made reference to the fact that you know they had fought a separate action against the chinese promoter of the of the companies that they and that the u s attorney for the southern district of new york had bright criminal charges as well i think they were entitled to do that because it was a matter of public record but i think it's all part of the the aspersion that somehow there was bribery and a pump and dump scheme here i'd like to know for the court that both those s t c charges against the chinese promoter and the  criminal charges have all been dismissed within the last few weeks they have all been dismissed so we need to really limit our our selves to the facts here which are nobody decided that this was a commission and a factual finding was contrary to that that it was nine transaction based and in that instance there was no duty to disclose and the ten p five charge has to be thrown out and finra can read decide what punishment is fit for mr harris thank you thank you thank you both