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Regulatory Sanctions

Newbie Broker Gets 2-Year Suspension After Impersonating Fund Shareholders

March 20, 2018

[Photo:  'Bad Actors']


by Howard Haykin


A first-year registered rep, fresh out of college, was penalized for his part in a proxy voting fraud – one that was so wide-scaled that it eventually took down the broker-dealer. [See NYTimes Dealbook (12/2/15), and (3/20/18)]  Because this young guy was under such enormous pressure to ‘drum up' proxy votes, I’m betwixt condoning and chiding him for his actions. In either case, I think it's regrettable that FINRA severely punished this individual to the point where he likely has no future in the securities business.


A young registered rep for Realty Capital Securities (“RCS”) agreed to serve a 2-year suspension to settle FINRA charges that he impersonated shareholders and participated in several telephone calls where others impersonated financial advisors or shareholders. The purpose of these calls was to cast false proxy votes on the shareholders’ behalf in connection with annual shareholder meetings for various funds.


FINRA FINDINGS.    As an entry level, junior internal wholesaler at RCS, this broker was largely responsible for contacting financial advisors to discuss investment opportunities in certain non-traded REITs and other funds. In 2015, his responsibilities changed when RCS was retained by its affiliate, American Realty Capital ("AR Capital"), to conduct proxy solicitation services for the annual shareholder meetings of several of AR Capital's sponsored funds.


RCS required its junior internal wholesalers to contact shareholders and encourage them to record their vote with AR Capital's proxy tabulation service, BFS. For the various funds to achieve a quorum to hold the meetings, tens of thousands of shareholder votes were required. Accordingly, proxy season was a high-pressure environment, and RCS employees were encouraged to work long hours and make no less than 200 calls to shareholders per day. Between May and September 2015, this young broker made thousands of phone calls to shareholders and encouraged them to vote.


  • But, on 3 occasions, at the direction of his supervisor, he impersonated 3 shareholders in phone calls with representatives of BFS and voted their shares in favor of Board and management proposals.


  • At the direction of his supervisor, this broker also participated on several telephone calls where he introduced his supervisor as certain shareholders or their financial advisors. His supervisor then impersonated the shareholder or financial advisor and fabricated shareholder votes in favor of the proposals by the Board and management for the various AR Capital funds.


  • None of the votes were authorized by the shareholders or their financial advisors.


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

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2015047826301.