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Regulatory Sanctions

Non-Registered Person Pays Dearly for Managing Small Undisclosed Brokerage Account

June 19, 2019

by Howard Haykin


When will associated persons come to their senses about managing someone else’s outside brokerage account? Regardless of size and regardless of the person’s registration status, the activity must be disclosed to the member firm. When caught, the consequences can be enormous. Take, for example, this non-registered fingerprint (NRF) person working for Ameriprise Financial Services.



In April 2016, around the time he became associated with Ameriprise as a non-registered fingerprint person, this individual agreed to continue managing a brokerage account for one of his former investment advisory customers. The brokerage account was held at another FINRA member firm and was valued at $9,339.  And the NFR person would receive no selling compensation. That said, the NRF person never notified Ameriprise of his intentions – which FINRA considered private securities transactions - and he obviously never obtained the firm’s written approval.


Between April 2016 and November 2017, this NRF person executed 132 securities transactions in the small brokerage account, primarily in blue chip or large-cap stocks in the technology, energy, and financial sectors. And he successfully increased the account value by 33%, from $9,339 to $12,476.


Yet, by virtue of his conduct, this individual violated FINRA Rule 3280Private Securities Transactions by an Associated Person.
Ameriprise terminated its relationship with this individual, and FINRA followed with a $7.5K fine and a 3-month suspension.



FINANCIALISH TAKE AWAYS.    While FINRA’s sanctions seem severe, they are probably appropriate given the large number of trades that were executed – notwithstanding the relatively small principal balance of this undisclosed outside brokerage account.


Perhaps this NRF person may have remained in the clear by following one of 2 possible alternatives - though some may consider 'Plan A'  borderline violative in nature:


  • Plan A - A strictly conversational relationship between the NRF person and his former advisory customer, whereby the NRF person offers recommendations that his former advisory customer could/would then execute in her brokerage account.
  • Plan B - The NRF person would notify Ameriprise of his intentions, presenting his reasons for the request and offering to copy the firm in on all trade confirms and account statements. [If rejected, he could always resort ot ‘Plan A’.]



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

For further details, click on...  FINRA AWC #2018057602801.