[ by Howard Haykin ]

Ameriprise Financial Services, Inc. ("Ameriprise") and its affiliated clearing firm, American Enterprise Investment Services Inc. (AEIS), agreed to settle FINRA charges that they failed to adequately supervise wire transfer requests and the transmittal of customer funds to third-party accounts.

Profiles of Respondents and Relevant Disciplinary History.   Ameriprise became a FINRA member in 1972. It conducts a general securities business with its principal office in Minneapolis, MN.  The firm employs over 14,000 registered individuals and maintains over 3,700 branch offices.  AEIS became a FINRA member in August 1990, and is the affiliated clearing firm for Ameriprise.  It employs over 200 registered individuals at its office in Minneapolis, MN.

In April 2011, Ameriprise was censured and fined $50K by FINRA for allegedly failing to establish, maintain and enforce supervisory systems that could adequately detect and prevent repeated forgeries by one of the firm’s registered reps ("RRs").   AEIS has not been the subject of any FINRA disciplinary actions that are relevant to this matter.

 FINRA Findings and Allegations.   From December 2006 until October 2010, an Ameriprise RR converted nearly $800,000 from 2 customers by submitting false wire requests to move funds from their customer brokerage accounts directly to bank accounts that the Ameriprise RR controlled.  Neither the firm nor any of its supervisory personnel detected this misconduct for nearly 4 years, during which time they allegedly missed numerous supervisory red flags.  

Ameriprise is alleged to have further exposed its customers and their accounts by not promptly preventing RRs who had been terminated from continuing to access the firm’s computer systems.  Access to firm records containing confidential and sensitive customer information would be a very serious gap in security.  

 Conversion of Customer Funds by Ameriprise RR.  From December 2006 through October 2010, former Ameriprise RR Jennifer Guelinas converted about $790,000 from 2 customers by forging their signatures on about 85 wire transfer requests.  Guelinas provided instructions for the customers’ funds to be wired from their brokerage accounts to various 3^rd-party bank accounts that she controlled. All such transfers were processed through the AEIS clearing firm. 

Ameriprise failed to detect Guelinas' scheme despite multiple "red flags."

• No inquiries were made about the details of 3 fund wire requests that Geulinas submitted – even though the recipient bank account appeared to be under Guelinas' control.
• On at least 3 other occasions, Ameriprise initially rejected Guelinas' forged wire transfer requests - once for an apparent signature discrepancy.  Yet, Guelinas simply resubmitted these requests later that day or the next day - and those requests were all processed.
• Ameriprise suspected misconduct and began to investigate the RR’s customer accounts.  During the investigation, the firm did not place any restrictions on the  accounts, nor did it place heightened supervisory procedures.  This enabled the RR to continue "doing business as usual - forging and submitting erroneous wire transfer requests that were processed and disbursed, even during the investigation. 
• After Ameriprise terminated the RR, she continued to have access to the firm’s systems - and was able to submit another forged wire transfer request – which, again, was processed as per the forged instructions.

     ►However, the firm discovered the error and prevented Guelinas from accessing those funds.

In February 2011, FINRA barred former Ameriprise RR Jennifer Guelinas …  for allegedly forging transfer documents and converting customer funds for her own use.   Following the investigation, Ameriprise paid full restitution to the two customers.

Stated Violations and Disciplinary Action.   Failure by a firm to maintain adequate supervisory pols and procedures over wire transfers to 3^rd party accounts would violate NASD Conduct Rules 3010, 3012 and 2110 and FINRA Rule 2010.  Failure by a firm to protect customer information by allowing unauthorized access to the firm’s systems, would  violate Rule 30 of Regulation S-P, NASD Conduct Rule 3010 and F1NRA Rule 2010.   Ameriprise and AEIS agreed to pay a $750K fine to settle FINRA charges.

And, of course, Ameriprise and AEIS neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

[C-I Note:  Having served as a compliance consultant and conducting numerous mock FINRA audits, I was surprised to see how lax firm procedures could be with the handling of customer funds.  When control procedures were in place, operations personnel and their supervisors oftentimes took a much-too-relaxed attitude with regard to their work. They gave the benefit of the doubt to RRs and others who they befriended. 

Such behavior is not merely negligent, it's grossly negligent because once funds leave the firm - through the front or back doors - it's gone and often too late to reverse the error.

The key measure I always likely to quote, was the need to pick up on any large or unusual or suspicious activities.  If something seems a little off, then that person must act on his or her suspicions - or else elevate the responsibility to a supervisor.  There can be no wiggle room here.]  

For further details, go to:  [ FINRA News Release, 3/4/13 ]     and     [ FINRA AWC No.  2010025157301 ].