FINRA Sanction Includes $7,500 Fine.

[ by Howard Haykin ]

A Pampano Beach, FL-based Registered Principal tried to deceive an elderly, terminally-ill customer out of $3 million by creating paperwork that would have, upon her death, transferred the assets in her Merrill Lynch account to a personal company he controlled.  

Profile of Respondent.   Charles Bishop Jr., at age 31, entered the securities industry in 1989 and, prior to his joining Merrill Lynch, Pierce, Fenner & Smith, Inc. in August 2008, had been employed at over a dozen FINRA-regulated and nonregulated firms.   Eight months later, on 4/1/09, Merrill Lynch terminated Bishop's employment for "...violating the Firm's policies regarding financial arrangements with clients by inheriting assets from the accounts of a deceased client who was not a family member and for failing to disclose an outside business interest."

In October 2009, Merrill filed an arbitration claim against Bishop to recover the balance due on a promissory note that Bishop failed to repay;  the Firm asserted that the amount was due because his employment was terminated for violating firm policy as stated in the Form U5.  Bishop disputed that the amount was due, alleging that he had not inherited the client's assets or violated Firm policy.  In January 2011, Bishop was found liable for breach of contract/promissory note, and liable to refund Merrill Lynch approximately $993,000 of his sign-on bonus plus interest and attorney's fees.

Bishop currently is employed as an RIA at National Asset Management, a non-FINRA regulated entity.

FINRA Findings and Allegations.   In 2005, Bishop, prior to his joining Merrill Lynch, began servicing the accounts of an elderly couple.  The couple followed Bishop to Merrill Lynch in 2008, transferring their accounts worth approximately $2 million to the new firm.  The husband died in early 2009, leaving the entirety of his estate to his wife, who had a terminal illness.

Pursuant to her wish to provide for her dog-breeding business and her dogs after her death, the widow executed an undated Transfer on Death Form ("TOD"), and a Merrill Lynch Client Relationship Agreement - both of which named the breeding business as the sole beneficiary of her brokerage account.  

However, the customer had never applied for a tax identification number for the business.  So, 3 days prior to the customer's death, and 10 days after the customer had executed the forms, Bishop applied for and obtained a Tax ID Number for a business using the same name as the customer's unregistered business, and received an IRS letter identifying Bishop as the sole managing member of the business.  Bishop altered the forms altered, but kept the name unchanged.  

Shortly thereafter, Bishop retained a lawyer, who prepared and filed with Probate Court a "Notice of Interested Person and Request for Notice and Copies - which represented that Bishop "has an interest in the woman's estate.  

The curator for the woman's estate petitioned the Probate Court requesting an order "invalidating the beneficiary designations" that Bishop had established for the Merrill brokerage securities account, and further requested that the assets in the Merrill account be transferred to the curator on behalf of the estate.  The Court agreed and invalidated Bishop's claims.

Eleven days later Merrill terminated Bishop's employment.

FINRA Sanctions.   Bishop settled the FINRA charges of having violated FINRA Rule 2010, agreeing to a $7,500 fine and a 2-year suspension.   How's that for pairing offf the punishment to the (attempted) crime?

For further details, go to:   [FINRA AWC #2009017699201] and [FINRA Disciplinary Actions for November 2012].