FINRA Podcast: Quarterly Disciplinary Review - April 2013
FINRA released a podcast discussing examples of misconduct by registered representatives. See below.
Misusing Customer's Personal Information and Submitting Falsified Reimbursement Requests
A registered representative misused customer information listing the customer as a guarantor of a loan without the customer's consent, and including the customer's private information in the loan documents. The representative also falsified checks and submitted false expense reports. The representative sought reimbursement for several expenses he had incurred, but not paid. He altered personal checks to give the false impression that he had in fact paid the expenses. FINRA's National Adjudicatory Council ("NAC") concluded that this conduct violated the ethical standards rule, barred him from associating with any member firm, and had him pay hearing and appeal costs.
Falsifying an Expense Report and Supporting Documents
A registered representative made a fake hotel invoice and letter, and falsified a personal check to obtain reimbursement for a work-related seminar that was never conducted. When confronted, the representative admitted his misconduct. The NAC found that this conduct violated the ethical standards rule, suspended him for six months and fined him $5,000.
Backdating Insurance Documents
A registered representative backdated two insurance forms. His customer faced a fine from her homeowner's association for failing to provide proof of homeowner's insurance. The representative backdated two insurance documents by eight months and signed one of them. FINRA found that this conduct violated the ethical standards rule, suspended him for eight months, and fined him $5,000.
Making Exaggerated, Unwarranted, and Misleading Statements
A registered representative sent to clients several emails which contained exaggerated, unwarranted, and misleading statements. He solicited interest in two unregistered offerings of special purpose vehicles established to purchase pre-IPO shares in two issuers. The representative made exaggerated and unwarranted claims about both issuers, including that the value of one issuer was $300 billion and that the stock price would quintuple. He also made misleading claims about an issuer's sales and business prospects. FINRA concluded that the representative did not have a reasonable basis for his claims and did not provide prospective investors with a sound basis to evaluate them. FINRA found that this conduct violated communications with the public and ethical standards rules, fined him $10,000, and suspended him for one month.
Excessive Trading and Exercising Discretion without Authorization
A registered representative traded excessively and used unauthorized discretion in a customer account. When the representative became the sole representative of record on a 69-year old retired widow's IRA account, she had $14,000 in annual income and a liquid net worth of $100,000. At the time, the IRA was valued at just over $18,000, and the customer lacked investment experience. Over the course of a year, the representative effected 76 transactions in the account, which generated nearly $17,000 in costs, and $15,000 in commissions. The representative exercised discretion in the majority of the trades without the customer's authorization and his firm did not permit discretionary trading. FINRA concluded that this conduct violated suitability, discretionary accounts, fair dealing with customers, and ethical standard rules, suspended him for six months, fined him $5,000, and ordered $2,000 in restitution.
Acting Improperly as a Notary Public
A registered representative acted improperly as a notary public while associated with his firm. He was registered with his state as a notary public, and he notarized the signature of a firm customer's on a power of attorney affidavit. When the customer signed the document, the representative was not present. When the representative notarized the document, the customer was not present. FINRA concluded that this conduct violated the ethical standards rule, suspended him for one month, and fined him $5,000.
Other cases involved:
- a registered representative who provided continuing education exam questions and answers to his co-workers; and
- a registered representative who participated in private securities transactions, improperly borrowed money from a customer, and failed to amend his Form U4.
Listen to Podcast here (links externally to FINRA website).