FINRA charged a Registered Principal from Manahawkin, NJ, with improperly sharing in the losses in a customer account.  Scott McLean first registered with FINRA as an Investment Company and Variable Contracts Products Representative.  From 7/31/08 through 10/6/10, he was associated in that capacity through Sicor Securities.  He currently is not associated with a FINRA member firm. FINRA Findings and Allegations. In January 2010, McLean recommended to a customer that he transfer his existing mutual funds to the Firm, and assured the customer that if he became dissatisfied, the account could be liquidated at no expense.  Shortly thereafter, the customer transferred the mutual funds to Sicor. By late June 2010, however, the customer had suffered losses in those mutual fund investments and wanted to liquidate his holdings.  On 6/30/10, McLean reimbursed the customer $252 for the charges he incurred in selling the mutual funds.  The reimbursement was viewed by FINRA as sharing in any benefits or losses with clients resulting from securities transactions - which was prohibited by the Firm.

[C-I Note: C-I has a hard time accepting the FINRA charges.  Our doubts and uncertainties are expressed in the 5 issues noted below.  WHAT'S YOUR TAKE?

First, there's no indication in the AWC that McLean had anything to do with any securities purchases by this customer.  Instead, the customer he held existing mutual funds that he transferred to a Sicor account - and McLean was his registered broker. This is inferred in the AWC because, no where is it stated that the customer purchased new securities in his Sicor account - either on a solicited or unsolicited basis.

Second, it's unclear as to what the $252 in expenses represented.  Perhaps back-end loads?  Or realized capital losses upon selling the mutual funds?  For all we know, it might have been some sort of administrative fee.  Note FINRA's wording:  "... he could liquidate the account at no expense."  What specific account expenses might McLean have been referring to?

Third, the guarantee, as described by FINRA, seems somewhat similar to a broker receiving a signing bonus or non-reimbursable loan if and when he switches firms.  Here, the customer if offered some form of compensation to move his account - if and when he's dissatisfied.  However, if McLean was involved in not new investments, why would he offer to reimburse the customer - this aspect makes little sense.

Fourth, we cannot determine whether the $252 was material to the value of the customer's holdings - or to the capital losses incurred by the customer?  Were they de minimus?  We have no answers to any of these questions.

Fifth, presuming that McLean did not violate the spirit of FINRA rules or Firm Policy, we don't see a justification for FINRA's sanctions - especially the $5K fine.

FINRA Sanctions. To settle charges he violated FINRA Rules 2150 and 2010, Scott McLean accepted a $5K fine and full 10-day suspension.  You may refer to:  [FINRA AWC #2010024607501]. [Disciplinary Actions for November 2011]