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Regulatory Sanctions

Broker Caught Sharing Commissions with Sales Assistant

January 28, 2019

by Howard Haykin


It probably happens more often than firms are willing to admit – a broker covers for an unregistered sales assistant who sold a security or financial product to a firm customer. Yet, here’s one of the downsides – the secret can be upended by a customer complaint.



In April 2017, a customer complained to MML Investors Services about a variable annuity she purchased through the Firm after learning that an unlicensed sales assistant had sold her the annuity. The customer said she wouldn’t have purchased the product had she known that the individual was not registered.


The Firm followed up with an investigation, which confirmed that the sales assistant had solicited the customer's investment and that a broker had signed his name on the variable annuity application. But beyond that, over a 21 month period (July 2014 to March 2016), the broker’s unregistered sales assistant had managed to solicit 9 other customers to purchase variable annuities contracts – even though he was never licensed to do so. The broker further compounded the problem by sharing the commissions derived from the sale of the variable annuities with the unregistered sales assistant - paying him $5,500 of the $13,760 in earned commissions.


By causing the firm’s books and records to be inaccurate, the broker violated FINRA Rule 4511. By sharing the commissions with an unregistered individual, he further violated NASD Rule 2420 and FINRA Rule 2040




The broker agreed to a $5K fine and a 3-month suspension; he also was terminated by MML.

[For details on the broker's case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2018057036201.


As for the unregistered sales assistant, he ended up paying FINRA a $5K fine and he served a 1-month suspension. And before you feel sorry for this sales assistant, consider the fact that he took the Series 7 exam three times – in 2015, 2016 and 2017 – and never passed. That said, this individual went out and showed he could sell financial products – with or without a license.

[For details on this related case, click on ... Customer Complaint Upends V/A Sale by Unregistered Person