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Regulatory Sanctions

Rookie Mistakes by an Experienced Broker

November 5, 2018

by Howard Haykin


A broker with 29 years’ experience – the last 23 years with Robert W. Baird & Co - along with an enviable CRD disclosure record (no priors and just 2 customer disputes - one denied, the other pending). So you don't necessarily expect such carelessness from a person like this. Except 'mistakes happen', and it’s 15 months since he was last associated with a broker-dealer.


In January 2012 a woman established a Transfer on Death account for the benefit of her children. The customer explained to the broker that she was funding the account with her own funds and stated that she was not giving her husband access to the account.


In late November 2015, the customer’s husband called the broker to withdraw funds from the account – explaining that the customer's health was deteriorating, and she required $20,000 for an urgent treatment.

  • The broker asked to speak to the customer, but the husband said she was too ill to speak.
  • The broker told the husband that a power of attorney was required, and the husband claimed he had a power of attorney and would provide it – although he never did.
  • The broker carried out the husband's instructions to withdraw $20,000 from the account without receiving a power of attorney – raising the necessary funds by selling $20,000 worth of a mutual fund in the account.
  • Under the broker’s authorization, the Firm issued a $20,000 check to the customer.


On 2 more occasions – in January 2016 and then in late January / early February 2016 - the husband requested additional withdrawals, each for $10,000. On both occasions …

  • The broker acted without authority by selling mutual funds in the account to raise funds.
  • Under his authorization, the Firm issued $10,000 checks to the customer.


AN APT CONCLUSION.    Needless to say, ...

  • the husband never delivered the POA, and at no time did he ever have any authority over the account.
  • the customer's account was reimbursed and her investment positions (prior to the husband's withdrawal requests) were reinstated - by whom, we don't know. 
  • the broker settled with FINRA, paying a $7.5K fine and serving a 45-day suspension. 



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

For details on either case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2016049887101.