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Regulatory Sanctions

'New Customer' Wasn't Buying What This Broker Was Selling

June 20, 2018

by Howard Haykin


Talk about "Putting the Cart Ahead of the Horse." This broker thought he had landed a new customer, so he took premature steps to reel her in. Unfortunately, this individual wasn't buying what he was selling.


A broker with NYLife Securities was barred from the industry for submitting to an insurance company affiliated with his member firm an unauthorized application for a $150,000 fixed annuity, purportedly on behalf of an individual. The broker had earlier been placed on probation and hit with a $500 fine by the Mississippi Department of Insurance.


FINRA FINDINGS.    In February 2017, this broker, with 9 years’ experience for 1 firm, submitted to the affiliated insurance company an unauthorized application for a $150,000 fixed annuity purportedly on behalf of a 79-year-old individual who, at that time, maintained a brokerage account at a broker-dealer that was not affiliated with NYLife Securities.


Along with the unauthorized application, the broker:

  • included a “Rollover Form,” instructing the individual’s brokerage account to be liquidated and transferred so as to fund the annuity;
  • submitted a "Disclosure Form" to the insurance company regarding replacement of life insurance or annuities.
  • electronically affixed the individual’s signature and initials on the transaction forms.


However, the potential customer never authorized the purchase of an annuity nor the liquidation or transfer of her brokerage account. Furthermore, she did not know about or approve the forms in question or the broker’s signing of her name or initials.


FINANCIALISH TAKE AWAY.    As it turned out, the individual’s brokerage account was never liquidated or transferred and no annuity was issued. The broker-dealer that maintained the brokerage account requested additional documentation and its customer, upon learning of the attempt to liquidate the brokerage account, complained.


While the NYLife Securities broker may have had good reason to believe he had landed a new customer, he never was justified in making the decision to submit the annuity application on the individual’s behalf, nor to ‘forge’ her e-signature. The broker lost any potential commission and his financial services career.


Let this be a lesson to all (over)anxious brokers to ‘cool their heels’ and never ‘put the cart ahead of the horse’.


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

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2017053798602.