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Regulatory Sanctions

Conversion of Funds: When Enough Isn’t Enough

April 16, 2019
[Mr. Greedy, 2nd book in the Mr. Men series by Roger Hargreaves]

by Howard Haykin


A Broker-Dealer sponsors a program by which it reimburses employees for personal computer equipment purchases. After obtaining the maximum reimbursement, a registered rep (with 4 years' experience) – who deemed himself shrewd - used the online login and password information for 3 of his co-workers to submit fraudulent reimbursement claims. TALK ABOUT BITING THE HAND THAT FEEDS YOU!



WHAT WENT WRONG.    Through its Computer Equipment Purchase Assistance Program (the "Program"), Fidelity Brokerage Services reimbursed its employees up to 20% of the purchase price for certain personal computer equipment, up to a maximum reimbursement of $2,000. Employees were entitled to reimbursement under the Program once every 3 years.


A registered rep purchased over $10,000 of computer equipment in August 2016 and shortly thereafter received $2,000 in reimbursement. The registered rep then derived a plan by which he would purchase additional computer equipment, submit those receipts and receive reimbursements on behalf of co-workers. To do so, he needed the online login and password information for each co-worker – which 3 other employees provided.


On 3 separate occasions the registered rep purchased over $10,000 of computer equipment, accessed the employee's online account through the login and password information each provided to him, and submitted the purchase receipt for reimbursement. Though the registered rep subsequently cancelled each order or returned the computer equipment, the 3 employees each received $2,000 in reimbursement from the Program, and each shared a portion of the reimbursement received with the registered rep. All told, the 3 employees paid $3,700 to the registered rep.


Later on, when Fidelity conducted an investigation of the Program, the registered rep told one of the employees to lie to Fidelity investigators by telling them that she was in possession of the computer, when, in fact, the registered rep had purchased and returned that computer.


For converting ill-gotten reimbursements and then trying to deceive firm investigators, Fidelity U5’d this individual and FINRA barred him from the industry. It's likely that the 3 accomplices were discharged, as well. 



This case was reported in FINRA Disciplinary Actions for April 2019.

For further details, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2017053262901.