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Broker Placed Orders in Account, ... Days After Customer Died
by Howard Haykin
A broker with MetLife Securities agreed to pay a $15K fine and serve a 6-month suspension to settle FINRA charges that he used discretion in 5 customers’ accounts without written authorization or acceptance of the accounts as discretionary – including orders in the account of a customer who had died 2 days earlier.
At the time of his suspension, the broker had 17 years' experience with 6 firms.
FINRA FINDINGS. On May 25, 2015, one of the broker’s customers died of a heart attack. Unaware of his customer’s death, this broker effected trades in that customer’s account …
- 3 trades on May 27th – selling 2 ETFs and purchasing one ETF.
- 2 trades on May 29th – selling one ETF and purchasing a UIT.
Prior to May 25, 2015, the customer had orally granted the broker discretionary authority to place trades in the account – although nothing was in writing and the firm had never accepted the account as a discretionary account.
In addition, throughout 2014 and 2015, the broker exercised discretion in 4 other customer accounts – having been granted verbal, but not written, by each customer authority to use discretion in their accounts. All told, the broker executed 25 discretionary trades in the accounts of those 4 customers.
By virtue of his actions, the broker violated NASD Conduct Rule 2510(b), … which generally prohibits registered reps from exercising discretion in a customer account unless the customer has provided written authorization to the registered rep to exercise discretion, and the account has been accepted as a discretionary account, in writing, by the registered rep's firm.
This case was reported in FINRA Disciplinary Actions for July 2018.
For details on this case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2015048320901.