WealthManagement Magazine

A Rule Not Meant to Be Broken

The way things started out, William Scott seemed like a class act. In 2002, when his employer, Prudential Securities, decided to create a complex by merging his Dayton, Ohio, branch with one in Cincinnati, Scott won the competition to manage it. Instead of burying the manager he beat out for the job and let's face it, such a move would hardly come as a shock in this industry Scott offered him the

The way things started out, William Scott seemed like a class act.

In 2002, when his employer, Prudential Securities, decided to create a complex by merging his Dayton, Ohio, branch with one in Cincinnati, Scott won the competition to manage it. Instead of burying the manager he beat out for the job — and let's face it, such a move would hardly come as a shock in this industry — Scott offered him the position of administrative manager of the complex.

Unfortunately, Scott's next move would take his generosity a step too far, and his attempts to fix that mistake would create problems he probably never anticipated when he first extended his olive branch.

Too Efficient

Scott's major mistake was in giving his computer's username and password to the new administrative manager (who we'll call Steve) and to other employees. The intention was innocent enough: Scott wanted people to be able to forward messages when he was out of the office. He also occasionally asked them to respond to messages in his name — even though the firm's policy specifically stated that sharing passwords was prohibited and that those failing to abide by these rules could be terminated.

The real trouble for Scott started in January 2003, when Steve referred two job candidates to the firm. When the candidates were hired, Scott inquired about whether Steve was entitled to a referral fee. Management determined that Steve was not. Soon after that, but before Scott had relayed the rejection to Steve, Steve sent an email in Scott's name to two supervisors at the firm requesting authorization for the finder's fees.

After receiving the email, one or both of Scott's supervisors contacted Scott, and Scott denied writing the email. Then Scott's nice-guy reputation really took a vacation. He stated that Steve was not authorized to author emails for him and that he never allowed Steve to use his workstation, nor had he given Steve his password, he said. Scott then was directed to terminate Steve, which he did on Feb. 7, 2003.

Tell Me Lies

In an Oct. 21, 2003 letter to the NYSE, Scott denied having authorized Steve to use his workstation and having given Steve his password. On Feb. 12, 2004, during sworn NYSE testimony, Scott stated that he understood his firm's no-share policy and attested that he did not share his computer sign-on or email password with anyone. Scott further testified that he could provide his assistants, and other employees, access to reading and sending emails on his behalf without providing his password. According to Scott, employees would be allowed to read and respond to Scott's email, but the actual response would come from them.

When confronted with numerous emails sent directly from Scott's office computer to his Blackberry, Scott admitted to providing Steve and other employees with his passwords. In fact, Scott directed at least three employees to write messages to others under his signature without indicating that they were the authors of the messages.

Accordingly, the NYSE charged Scott with failing to reasonably discharge his duties and obligations in connection with his supervisory responsibilities as a branch office and complex manager and with engaging in conduct inconsistent with just and equitable principles of trade.

Scott, who did not admit or deny the NYSE's allegation, was censured and barred in all capacities for eight months. He also was required to retake the examinations for the Series 9 (general securities sales supervisor options module) and Series 10 (general securities sales supervisor general module).

In the end, these penalties were rather light, given that Scott lied in writing and under oath to the NYSE. Still, had Scott been more truthful about his password (mis)management earlier in the process, the matter might well have been settled in-house.

The truth doesn't always set you free, but in a case like this where all the original intentions were pure, it might very well have.

Writer's BIO: Bill Singer is a practicing regulatory lawyer and the publisher of RRBDLAW.com

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish