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Regulatory Sanctions

A Broker Learns … To Give is Divine, To Receive is Prohibited

May 25, 2017

by Howard Haykin


The securities industry is, for good reason, one of the most highly regulated industries. So, if this is your chosen field, you best be prepared to follow the rules and regulations – or else you risk incurring the wrath of your firm and regulators.  


Adam Smith agreed to a $10K fine and a 1-year suspension to settle FINRA charges he accepted gifts totaling $105,000 from two customers in contravention of his member firm’s prohibition against accepting such gifts. The findings stated that Smith denied having received any gifts from clients in response to an inquiry from the firm.


BACKGROUND.    Adam Smith, a resident of Rogers, AK, entered the securities industry in 2002. He was registered with Merrill Lynch, Pierce, Fenner & Smith, Inc. from April 2002 until May 5, 2016, when his registration was terminated in connection with the matters described herein. Smith had no relevant disciplinary history.


FINRA FINDINGS.    Beginning in or about 2006, Smith served as a registered rep for Merrill customers, a married couple. Between October 2010 and January 2011, the couple gave Smith and his wife checks totaling $52,000 to be used for the education of the Smiths' children.


After one of the spouses died, Smith continued to serve as registered rep for the surviving spouse who, between January 2012 and December 2013, gave Smith and his wife additional checks totaling $53,000 - again for their children's education.


Smith's firm prohibited its employees from accepting gifts in the form of checks or cash from customers. Smith compounded the firm violation when he responded to an inquiry by the firm's compliance personnel by denying that he received money from either of customer.


FINANCIALISH TAKE-AWAY.    The gifts probably got him the 6-month suspension. The lying doubled he punishment. The one question I have is, “How’d the firm ever find out about the gifts?” But, all seriousness aside, if you’re going to violate firm policies and/or industry rules, be smart about it.


This case was reported in FINRA Disciplinary Actions for May 2017.

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2016048922301.