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Regulatory Sanctions

Uh, That’s My Account, Dude!

June 18, 2018

by Howard Haykin


Yes, there’s a rule for that - FINRA Rule 2150(a), which provides that “[n]o member or person associated with a member shall make improper use of a customer's securities or funds."­


An Oregon-based broker with LPL Financial was barred from the industry after accessing a customer’s funds for her personal use. Turns out she converted around $124,000 in customer funds.


FINRA FINDINGS.  This broker had 21 years’ experience with 2 firms and held 5 licenses including the Series 24. [So, in some respects, she wouldn’t seem to fit the profile for committing such a theft.]


That said, on 6 occasions between March 2017 and October 2017, the broker made tax payments for her own benefit to the IRS by improperly directing the IRS to debit funds from a customer's brokerage account. After the misconduct was discovered, the customer was reimbursed in full by having certain of the transfers reversed and by the broker making additional reimbursement.


FINANCIALISH TAKE AWAYS.    Don’t know – is it that easy to arrange for unauthorized 3rd party remote access to a customer’s account - and over a period of 7 months? If so, why hasn’t this sort of crime been more prevalent in the past? There probably are safeguards out there, but without further details in this case we’re not able to deter what might be applicable.


In any event, it would be prudent for firms to ensure that safeguards are in place to prevent, and certainly to detect within a shorter timeframe, such unauthorized activities.


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

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2017056236901.