Perhaps the single most common lament I hear from my stockbroker clients is “They can't do that to me…can they?” And more often than not, my reply is “They can, they will, and they have.” In that spirit, let me present you with some recent Financial Industry Regulatory Authority (FINRA) disciplinary decisions. Please note that Offers of Settlement (OS) and Letters of Acceptance, Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions and to the entry of findings. For more details on the reported cases, please visit http://rrbdlaw.com/RegulatoryLinks/CASESOFNOTE/NASD/2009.htm
Comings and Goings
In order to convince his former customers to switch to his new firm, Louis Gerald Mohlman Jr. offered to pay another employee at his old firm for fee and performance information on client accounts. (He presumably wanted to be able to compare price points at his new firm favorably.) While a nice idea, paying someone to do indirectly what you are not allowed to do directly just is not a legal option. You know the litany of no-no's by now: invasion of financial privacy, theft of proprietary information, etc. Pursuant to an AWC, Mohlman was fined $10,000 and suspended for 3 months.
Shortly before resigning from her firm, Donna Rae Jordan deleted or inaccurately updated certain customer telephone numbers in order to impede the future efforts by registered representatives assigned to call her customers after she quit. Not that you ever thought about doing that — no, of course not. But now that you know this isn't an okay option, you won't do it. Right? Pursuant to an AWC, Jordan was fined $5,000 and suspended for 30 business days.
Ryan Muneo Kimura intercepted checkbooks linked to some relatives' accounts that he managed, forged checks to himself and his creditors (apparently as much as $1.29 million), fabricated statements for the clients, and diverted the actual statements to a personal address. When things unraveled, he then failed to respond to FINRA requests for information. Pursuant to an AWC, he was barred.
Shawn Steven Keller stole computer monitors and a telephone worth $4,400 from his member firm and pawned them for cash. Not surprisingly, he failed to respond to FINRA requests for information and was subsequently barred.
Hide and Seek
Gail Sylvenia Frick was provided a money order by a customer in order to open an account on behalf of the customer's children. Unfortunately, Frick misplaced the money order and in an attempt to settle the anticipated customer complaint, she deposited $1,100 of her personal funds. For this and some other violations, Frick entered into an AWC whereby she was fined $25,000 and suspended for 15 months.
Just Not Registering?
While associated with a member firm in Texas, James Christopher Dinwoodie sold Financial Advisory Service Agreements to Arkansas customers prior to having his state registration updated. Moreover, Dinwoodie altered the Agreements to falsely reflect that they were signed by customers located in Texas. Additionally, Dinwoodie falsified other customers' signatures and failed to respond to FINRA requests for an on-the-record sworn statement. Pursuant to an AWC, he was barred.
Dinosaur Securities, L.L.C. allowed representatives to effect trades for their customers and earn commissions totaling $19,506.42 while the representatives were not registered with FINRA. The Firm paid the representatives “retention payments/advances” based on commissions generated from account activity. Pursuant to an AWC, the firm was censured and fined $25,000.
Mortgaging the Future
James Kelly Breeze purchased a building from a customer for $850,000 (Breeze had a personal relationship with the customer outside of work), and the customer financed the entire purchase. Breeze's firm allowed its registered representatives to borrow from customers, but Breeze failed to obtain his firm's required prior written approval. Pursuant to an AWC, Breeze was fined $5,000 and suspended 60 days. Yeah, I know, this doesn't really sound like the kind of borrowing that FINRA's rule prohibits, and it's pretty likely that Breeze never thought this was anything more than a simple real estate transaction. But rules are rules.