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Regulatory Sanctions

Series 24 Principal Settles Complaint Away from His Firm

June 7, 2018

by Howard Haykin


For every reported FINRA case involving a customer complaint that's settled away from a broker's member firm, there must be a dozen such customer complaints that FINRA never detects. And so long as the rewards outweigh the apparent risks, 'away settlements' will continue unabated. UNLESS SOMEONE OFFERS A VIABLE SOLUTION - ANY VOLUNTEERS?


An experienced broker, holding a Series 24 General Securities Principal license, agreed to pay a $5K fine and serve a 15-day suspension to settle FINRA charges that he settled a customer complaint away from his member firm - Investors Capital (now Cetera Advisers).


FINRA Rule 2010 requires registered reps to "observe high standards of commercial honor and just and equitable principles of trade." Settling a customer complaint without the knowledge or approval of a registered rep’s member firm employer violates FINRA Rule 2010.


FINRA FINDINGS.    In April 2013, after the value of their joint account had declined by $75,000 over a 3-year period, customers complained to the broker - orally and by email – about his management of their account and the losses they had suffered.


The broker wrote the couple a $15,000 check from his personal checking account, explaining that the purpose of the check was to generate trading profits to recoup the losses they had suffered in the joint account. The broker instructed the couple to open a new account at Investors Capital and to deposit the $15,000 check into the new account, along with the funds that remained in the joint account, which the couple did.


The broker never disclosed the customer complaint to the firm and the complaint was never reported on his Form U4.


Unfortunately, FINRA does not explain how the firm and/or FINRA learned about the complaint. The broker is still associated with Cetera Advisers, the successor firm.


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

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2017053438501.