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Regulatory Sanctions

Would You Buy Stocks from a Broker Who Owns No Investments?

September 12, 2017

By Howard Haykin

 

The headline for this post might sound crude, if not cruel. However, wouldn’t you be somewhat concerned as a brokerage customer to be getting investment advice from a broker who is not invested in the securities markets – i.e., has no “skin in the game?”

 

Scott Hedeman agreed to a $5K fine and a 3-month suspension to settle FINRA charges that he submitted 2 falsified brokerage account statements with a personal bank loan application.

 

BACKGROUND.    Hedeman, a resident of Grand Rapids, MI, entered the securities industry in October 2002. From 2007 until November 2016, Hedeman was registered as a General Securities Rep with Allstate Financial Services. He currently is not registered or associated with any FINRA-registered firm. Hedeman has no relevant prior disciplinary history.

 

FINRA FINDINGS.    In June 2016, Hedeman and his wife sought a $225,000 loan from a bank to refinance and remodel their home. As part of the loan application, Hedeman was asked to provide the bank with account statements for any securities accounts owned by Hedeman and his wife. That request was problematic, in that the account balances of their respective securities accounts with Allstate were $0.13 and $144.90.

 

Rather than use his family’s account statements with their paltry balances, Hedeman produced 2 viable client account statements - owned by two of his clients, with account balances of $28,043 and $58,502 - that he printed from the firm’s internal system. Hedeman then cut and pasted his and his wife’s names onto those account statements, and submitted these altered, falsified account statements to the bank.

 

FINANCIALISH TAKE AWAY.    I don’t know whether the Hedemans ever got their bank loan, but I can attest to the fact that Scott Hedeman completed his 3-month suspension as of 9/4. But just to return to the opening question, how should we view a broker who has no investments in the market and likely has little, if any, liquid net worth to his name? When we take into account all the facts and circumstances of this case, I’d say we’ve got a credibility issue. Sorry for being so frank!

 

And, just as an aside, I would have recommended a 6-month suspension for Mr. Hedeman – for moral turpitude.

 

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

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2016052023601.