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Regulatory Sanctions

Broker Exercises Discretion on Customer’s Verbal Permission - Not OK

May 7, 2018

by Howard Haykin


A broker with Money Concepts Capital Corp. agreed to pay a $15K fine and serve a 6-month suspension to settle FINRA charges that he improperly used discretion to place trades in customers’ accounts. The broker was further charged with: (i) causing his firm’s books and records to be inaccurate; and, (ii) falsely answering the firm’s annual compliance questionnaires.


FINRA FINDINGS.    At various times from January 2014 through August 2016, the broker improperly used discretion in 2 customer accounts to place over 200 trades. While the broker received the customers’ verbal permission to use discretion in their accounts, he had nothing in writing to evidence this authority and Money Concepts had not accepted the accounts as discretionary.


The broker compounded his violative conduct with, the following:

  • He caused his firm's books and records to be inaccurate by mismarking approximately 2,000 order tickets as "unsolicited" when they were "solicited" and mismarking at least 200 order tickets as not discretionary trades when they were discretionary.


  • He falsely completed 3 annual compliance attestations stating that he had not used discretion in customer accounts during the prior year, when, in fact, he had.


  • From September 2015 to May 2016, he made misleading and unwarranted statements in e-mail communications with customers.


FINANCIALISH TAKE AWAYS.    When his violative actions began, this broker had 16 years’ experience with 5 firms – including 11 years with Money Concepts - so it’s not as if the broker didn’t know 'right from wrong'. And he probably was aware that, if caught, his violations would warrant significant sanctions - like a 6-month suspension, which is harsh given the probability that this broker apparently did not churn his customers’ accounts or engage in speculative tradingHad he done so, he undoubtedly would have been barred from the industry.


That said, it's worth reminding industry professionals of the harsh sanctions - i.e., suspensions - they face if caught repeatedly committing any or all of these violations: (i) exercising unauthorized discretion; (ii) mismarking large numbers of order tickets; and, (iii) lying on firm annual certifications.


This case was reported in FINRA Disciplinary Actions for April 2018.

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2016050220701.