BROWSE BY TOPIC
- Bad Brokers
- Compliance Concepts
- Investor Protection
- Investments - Unsuitable
- Investments - Strategies
- Investments - Private
- Rules & Regulations
- Bad Advisors
- Boiler Rooms
- Terminations/Cost Cutting
- Wall Street News
- General News
- Donald Trump & Co.
- Regulatory Sanctions
- Big Banks
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
An Opportunity for Elder Abuse: Dual-Employment with Broker-Dealer and its Affiliated Bank
by Howard Haykin
WHAT WENT WRONG. SR initially assisted the widow with closing her husband's safety deposit box at the bank. Soon the widow began calling SR, asking for help with personal tasks, such as purchasing groceries and removing garbage from her home. On at least a monthly basis during 2017, SR visited the widow in person.
QUESTION: Was SR being just trying to be courteous or did he have an ulterior motive? FINRA offers no indication.
Between June 25 and August 8, 2017, the widow wrote (and RS accepted) 5 checks totaling $390,045 that the widow wrote from her checking account at an unaffiliated bank. On August 11, 2017, SR opened a new savings account at ABC Bank – i.e., away from JPMorgan Chase bank. Eight days later, on August 19, 2017, SR voluntarily resigned from the Firm and thereafter deposited all the checks that MW had given him into his ABC Bank account. SR also received and deposited a 6th check for $20,000.
COMMENT: My interpretation is that, early on, SR seemed unsure as to how to handle the “gifts” from this elderly customer. However, by August, he ‘figured out’ he had a good thing going – though it was inappropriate, if not illegal. That might explain why he opened a savings account away from JPMorgan Chase and that, only after voluntarily resigning from the broker-dealer, did he deposit those checks. A 6th check for $20,000 was issued to SR, which he deposited.
By early September 2017, it all came crashing down. Upon being admitted to a nursing home, the widow was diagnosed with dementia, and it was determined that she lacked the mental capacity to make financial decisions. A Public Guardian was appointed to oversee her affairs, and that individual began conducting an investigation into possible exploitation of the widow’s finances.
'JUST DESERTS': Realizing that he had to come clean', SR had 2 cashier's checks totaling $410,045 issued to the widow (as per FINRA, to repay the cash gifts he had accepted from her).
In October 2017, JPMS amended SR’s Form U5 to note that he had been the subject of an internal review "for accepting funds ... from an affiliate bank customer for personal use." In February 2019, FINRA barred the individual from the securities industry.
FINANCIALISH TAKE AWAYS. Hindsight is "20/20." Yet, this isn't the first time a registered associate has crossed the line into an inappropriate or violative personal relationship with a customer - particularly one who's elderly, alone and financially illiterate.
And this isn't the first time a young registered rep might not have known or recognized that he or she has crossed into an inappropriate relationship with a customer – or that, once they're confronted with entering such a relationship, it's imperative that they contact their direct report or manager .
Considering the facts and circumstances of the above case ...
- it may be too much to expect that supervisory personnel at JPMS, the broker-dealer, would anticipate the risks presented by the players - in particular, the dependence or reliance that this customer ultimately seemed to require.
- or perhaps broker-dealer personnel were so focused on the opportunity to cross-market their services to a customer of the affiliated bank that they knowingly minimized any due diligence efforts.
Either way, shouldn't "Know Your Customer," in part, be about exploring numerous angles - even those that may extend beyond typical responsibilities? SOMETIMES WE NEED TO ACT IN ANTICIPATION OF RISKS - EVEN THOSE THAT INITIALLY EXTEND BEYOND THE PROVINCE OF SECURITIES RULES AND REGULATIONS.
That clearly was not the case, here. And even FINRA focused its findings on the receipt of excessive gifts - rather than elder abuse.
This case was reported in FINRA Disciplinary Actions for April 2019.
For further details, go to ... FINRA Disciplinary Actions Online, and refer to Case #2017056077301.