by Howard Haykin

WHAT WENT WRONG.    In December 2016, a customer initiated a non-ACAT transfer of $500,000 from an outside account to the customer's account at Vanguard. The broker on the account, who relied on the administrator to complete the transfer, followed up in February 2017 because the transfer had not yet hit the customer’s account. Rather than admit her mistake (forgetfulness), the administrator told the RR that the transfer would be processed that day.

Instead of transferring funds between the customer's outside and Vanguard accounts, the administrator transferred $500,000 from Vanguard’s clearance account into the customer's account. From that point through April 2017, the administrator engaged in a series of 9 additional transactions moving funds from the accounts of 5 customers and the firm in a failed attempt to conceal the $500,000 she took from Vanguard’s clearance account.

Needless to say, in order to process the 10 improper transfers, the administrator input false information into the firm's system, and the transfers were all made without the customers’ knowledge or authorization.

When approached about the transfers, the administrator opted to lie to the Firm, claiming the mistake was an error by another firm.

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

For further details, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2017055910201.