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Investor Protection

Customer/Broker Relationships Matter

April 16, 2020

[Photo Image: Faceless /]



by Howard Haykin



Customers involved in faceless relationships are soon forgotten.
A young registered representative (“broker”) took over a Wells Fargo Clearing Services customer account that his father had been serving until his death in 2014. Between 2011 and 2014, the customer, in her 80s, took systematic withdrawals ($6,000 each month) from her IRA account - pursuant to a Letter of Authorization (“LOA”).



The son, who had entered the securities industry in 2009, naturally continued those distributions, which he funded from the customer’s $200,000 money market fund holdings. After that position was depleted in June 2017, the broker began funding the $6,000 monthly distributions by selling off stocks in the account. In June 2018, Wells Fargo asked the broker whether the customer had authorized him to sell stocks in her account.


It turned out that the broker never received any such authorization ("LOA"). Nor had he ever spoken to, or otherwise communicated with, the customer - including any discussion about which stocks he should liquidate to fund her distributions. And wasn’t it a surprise to everyone when they learned the customer had died in April 2018, which means 3 equity sales occurred after her death.



CUSTOMER TAKE-AWAYS.    Circumstances frequently change. Brokers pass away. Customers pass away. Financial markets change, as do individuals’ financial priorities. Which all add up to the critical nature of customer-broker relationships, which should never be taken for granted. So, if and when brokers fail to reach out to you, their customer, then go ahead and reach out to them – if only to confirm the status quo of the relationship. A CUSTOMER IN A FACELESS RELATIONSHIP IS SOON FORGOTTEN.



[For further details, click on … FINRA Case #2018060812901.]