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Regulatory Sanctions

Broker Barred After Collecting $2.4Mn Inheritance from Client

September 11, 2017

By Howard Haykin


James Schaedler, Jr. agreed to be barred from the industry to settle FINRA charges that he refused to produce FINRA-requested information and documents during the course of an investigation. The subject of the investigation, which will be addressed later in this post, involved allegations of elder investor abuse.

  • The registered rep exercised influence over an elderly former client, who ultimately amended her trust to name him a partial beneficiary and the residual beneficiary of her $2.3 million dollar estate.
  • The registered rep improperly received a $200,000 gift from a 2nd elderly client.


BACKGROUND.    Schaedler, a resident of Corona, CA, entered the securities industry in August 2000 as a Series 7 General Securities Rep. After working for Morgan Stanley DW, Banc of America, and Merrill Lynch, Schaedler joined Wells Fargo Clearing Services in July 2010. He remained there until 1/20/17, when the firm U5’d him over “allegations that the financial advisor's daughter received funds via a check from a client. The majority of those funds were subsequently received by the financial advisor." Schaedler is not currently associated with a FINRA-regulated broker-dealer. Schaedler has no previous disciplinary history.


FINRA FINDINGS.    FINRA commenced an investigation in January 2016 into allegations that Schaedler exercised influence over a former elderly client, who ultimately amended her trust making Schaedler a partial beneficiary and the residual beneficiary of her $2.3 million dollar estate. The investigation was later expanded to include allegations that Schaedler also improperly received a $200,000 gift from a second elderly client. On 5/9/17, FINRA requested information and documents pursuant to the investigation. However, Schaedler never provided documents or information, and his attorney acknowledged that his client would not be complying with the requests.


FINANCIALISH TAKE AWAYS.    Unfortunately, FINRA does not address the “human interest” element of this case – namely, the issue of possible abuse of senior investors. If FINRA had done so, we might have learned if ...

  • FINRA took actions to comport with its highly publicized concerns for senior investors?
  • Wells Fargo Clearing Services took any actions to protect the customers – or is that a silly question, given the bank's protracted account scandals that have been perpetuated since 2002?  


Fortunately, we have a partial postscript to this story, based on an 12/16/15 article posted on the Press-Telegram web site.


A Seal Beach-based charity (The Los Angeles Thoracic and Cardiovascular Foundation) sued Schaedler and one of his earlier employers - Merrill Lynch, the wealth management arm of Bank of America – for $2.4 million, alleging financial elder abuse and negligent supervision of investment adviser James Schaedler. The complaint states, in part, that "seizing on her vulnerability, Mr. Schaedler systematically insinuated himself into [96-year-old Juanita] Earley's personal life."


The suit claimed that prior to her death, Schaedler made a slew of changes in the elderly Earley's life, including changing her doctor against her wishes, isolating Earley from her family and friends, putting her into a nursing home while claiming to be her conservator, and ordering that the facility not allow her to take calls or have visitors.


The suit claimed that Earley was declared incompetent by a facility physician approximately one month after amending her trust in Schaedler's favor.


After Earley died in 2012, Schaedler purportedly received approximately $2.4 million from her trust and "attested to a spending spree of hundreds of thousands of dollars," according to the charity's complaint.


The suit alleges Schaedler “knew he could get away with his self- serving methods involving Mrs. Earley because BAIS [Banc of America Investment Services] was neither holding him accountable nor otherwise subjecting him to any meaningful oversight about his client relationships.”


The 2009 trust amendment resulted in “practically eliminating Los Angeles Thoracic as the sole trust beneficiary in favor of Mr. Schaedler,” the suit states.


Worst of all, the suit claimed that before she died, Juanita Earley “expressed to at least two disinterested witnesses her fear of Mr. Schaedler and her distress at having been pressured to change key documents,” the suit states.


Unfortunately, there’s no indication as to whether the suit was settled or brought to trial.


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 #2016048560401.