[ by Howard Haykin ]

FINRA Quarterly Disciplinary Review for January 2013 calls attention to recent disciplinary actions involving alleged misconduct by registered representatives ("RRs").  Today's cases involve:  (i) use of pre-signed blank customer forms and signature photocopies;  (ii) misuse of confidential customer information;  and, (iii) improper discretionary authority. 

To access Tuesday's posting, with Cases 1-2-3, go to:  [FINRA Disc. Priorities - First of 3 Part, 2/5/13].

Note:  The highlighted violations in these case studies are on FINRA's radar – i.e., they've been singled out by FINRA because they're viewed as having the potential to cause significant harm to investors, and/or because RRs have committed these violative actions in all too often. 

[C-I Take Away:  FINRA member firms should place these violations on their own radars, and should make the effort to work with sales reps on containing or preventing such high-profile violations.  Failure to heed from others' mistakes can lead your RRs to becoming FINRA's next message cases, or worse.]

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Case 4.   Obtaining Signed, Blank Securities-Related Customer Forms.   An RR allegedly obtained and maintained blank securities-related forms that clients had previously signed, and securities-related documents containing photocopied client signatures and dates.  The RR secured at least 6 clients’ signatures on blank securities-related business forms, that he retained in his office. The RR also photocopied customer signatures and dates onto securities-related customer business records.  One day, the rep's firm discovered a folder in his desk containing the following:

• 17 blank pre-signed client securities-related business forms;
• 5 securities-related business documents containing a photocopy of clients’ signatures; and,
• 6 securities-related business documents containing a photocopy of the clients’ signatures and dates.

The RR's alleged actions violated his firm's policies, which prohibited the use or retention of pre-signed documents, of photocopies of customer signatures, etc. 

Violations and Sanctions.   The RR's alleged conduct would be in violation of FINRA Rule 2010 (ethical standards).  The RR accepted a 90-day suspension in all capacities and a $7.5K fine. 

Case 5.   Misusing Confidential Customer Information.   An RR allegedly misused customer information by providing confidential information regarding firm customers to unauthorized 3rd parties in exchange for money.  Over the course of 8 months:

• 3rd parties periodically provided the RR with a specific name or Social Security number and asked him to provide confidential financial information pertaining to that individual.
• 3rd parties sometimes provided the RR with a profile that set forth general parameters - e.g., gender, age, geographic location - and requested confidential financial information regarding customers who fit the profile.
• The RR received as much as $500 each time he provided confidential customer information.  He allegedly did this 12 times, and received $6,000 in total from 3rd parties in exchange for confidential, customer information.  The 3rd parties used such information, causing the customers to lose over $600,000. 

Violations & Sanctions.   The RR's alleged actions would be in violation of FINRA Rule 2010 (ethical standards).  To settle FINRA charges, the RR was barred from the industry. 
 

Case 6.  Improperly Exercising Time and Price Discretion.   An RR allegedly exercised time and price discretion in 2 customers’ accounts beyond the limited allowable scope of discretion.  He also operated without the employer's acceptance of the accounts as discretionary.  The RR utilized time and price discretion in 2 customer accounts beyond the end of the business days for which the customers had granted time and price discretion.  Neither customer had extended his grant of discretion, nor had the firm accepted either account for discretionary trading beyond the end of the business day.

Violations and Sanctions.   The RR's alleged conduct would be a violation of NASD Rule 2510 (discretionary accounts) and FINRA Rule 2010 (ethical standards).  The RR settled FINRA charges by accepting a 10 day suspension in any capacity amd a $2.5K Fine.
 

For further details in these and other cases, go to:   [FINRA Quarterly Disciplinary Review, January 2013].