BROWSE BY TOPIC
- Compliance Concepts
- Investor Protection
- Investments - Unsuitable
- Investments - Strategies
- Wall Street News
- Bad Brokers
- Investments - Private
- Rules & Regulations
- Bad Advisors
- Boiler Rooms
- Terminations/Cost Cutting
- General News
- Donald Trump & Co.
- Big Banks
- Regulatory Sanctions
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
Hard to Pinpoint How the ‘Wheels Fell Off the Wagon’ for this Broker
by Howard Haykin
FIVE CUSTOMER DISPUTES THAT WERE SETTLED OR WENT TO ARBITRATION. The broker settled four of the customer disputes, while a fifth went to arbitration (claimant awarded $445K); all told, the five disputes cost this broker around $1.3 million. A common theme of these disputes was that the broker conducted unauthorized, unsuitable, and/or excessive trading in the customer accounts. One customer claimed that, as early as 2011, the broker's failure to properly diversify his or her account, exposing the portfolio to significant risk.
SIX CUSTOMER DISPUTES THAT REMAIN PENDING. The large number of pending cases means that the broker is likely to be burdened for years to come. And, here too, the broker was accused of conducting unauthorized, unsuitable, and/or excessive trading in the customer accounts.
FINRA INVESTIGATION AND SETTLEMENT. In February 2019, broker agreed to pay a $5K fine and serve a 15-day suspension to settle FINRA charges that he exercised unauthorized discretionary trading in customer accounts. FINRA found that the broker placed 75 total trades in 4 customers accounts between January 2014 and December 2015 - which averages to just over 3 trades per month in all the accounts combined. [REALLY!?] And of course, FINRA found that the broker failed to obtain express or written authorization from those customers for those trades prior to placing them. The broker also never sought or obtained Hilliard Lyons’s acceptance of the accounts as discretionary.
FINANCIALISH TAKE AWAYS. Not only was it difficult to pinpoint how the ‘Wheels Fell Off the Wagon’ for this broker, it was hard identifying an overarching theme for this FINRA case. After all, how does one reconcile FINRA’s light findings and sanctions against the litany of serious charges leveled at the broker by his customers - other than to postulate that attorneys often exaggerate the charges against their clients' brokers?
Armed with accusations of unauthorized, unsuitable and excessive trading, FINRA managed to find ... just 75 trades over a 2-year period that were exercised without proper authorization. And the slap-on-the-wrist sanctions are further indication that FINRA was unable to substantiate the more serious customer accusations leveled by 11 of the broker's former customers.
Perhaps the biggest take away of the case: Success on Wall Street can be fleeting, and everyone is susceptible or capable of violative conduct.
This case was reported in FINRA Disciplinary Actions for April 2019.
For further details, go to ... FINRA Disciplinary Actions Online, and refer to Case #2017054060301.