WealthManagement Magazine

Signed, Sealed and Suspended

When I was a small boy and I went out with my mother to see her signature notarized, I admired the people who signed their names next to hers and then embossed that really neat seal on the document. It seemed like a great job. Alas, I settled on a career as a lowly lawyer. Still, I learned something valuable watching the notaries do their special work: Follow the rules. Seems to me that a lot of brokers

When I was a small boy and I went out with my mother to see her signature notarized, I admired the people who signed their names next to hers and then embossed that really neat seal on the document. It seemed like a great job. Alas, I settled on a career as a lowly lawyer.

Still, I learned something valuable watching the notaries do their special work: Follow the rules. Seems to me that a lot of brokers would be well-advised to heed that warning concerning notary seals, no matter how much they want that signature and seal on a piece of paper.

Where No Trouble Is Big Trouble

Rolling over a 401(k) plan may present just such a temptation. This is often a royal pain. Frequently, the clients return their completed and notarized rollover forms, but the back office calls you to say you used last month's form. “Sorry, we can't process this. Get the new forms completed and the signatures notarized — again,” they tell you. Sometimes the clients are on vacation, sometimes they're just plain upset by the delay and you begin to wonder if there isn't short cut.

Avoid the temptation or share the fate of Ray Kelsey (In the Matters of Ray Kelsey and Roger Dean Harper, Jr., (NASD AWC/20050006024-01 and -02/October 2005)). His clients wanted to do 401(k) rollovers. For whatever reasons, Kelsey had a batch of rollover forms on which the signatures of the participants' spouse were not genuine. Worse, he apparently knew of these shortcomings. OK, so what did Kelsey do? Did he return the forms to the clients and ask them to resign? No.

Kelsey took the rollovers with the bogus signatures to his colleague Roger Harper, who was a notary, and asked him to notarize the signatures.

Rule No. 1 in the notary's official handbook is to never notarize any signature that isn't signed by a person standing in front of you and whose identity you have not confirmed. Sadly, Harper notarized the documents.

For asking Harper to notarize the forms, Kelsey was fined $5,000, suspended six months in all capacities and required to qualify again in all capacities. For notarizing the forms, Harper was fined $10,000, suspended 18 months in all capacities and required to qualify again.

Improvising a Play

In another case, someone got the idea to locate college athletes destined to become professionals, and to entice them into opening accounts by having the firm guarantee new car loans (which the soon-to-be highly paid athlete would subsequently take over).

At some point, Mark Mizenko (In the Matter of the Application of Mark F. Mizenko for Review of Disciplinary Action Taken by the NASD (SEC/34-52600/, October 13, 2005)), formerly associated with American Express Financial Advisors, got involved with this brainstorm and was asked to provide the auto dealership with a corporate resolution obligating his firm to guarantee the car loans and leases. According to the NASD and the Securities and Exchange Commission, Mizenko forged the signature of an AEFA executive vice president on the resolution and returned it to the dealership. A few days later, the dealership returned that document to Mizenko because it lacked a corporate seal.

Mizenko testified at his NASD hearing that he didn't know what a corporate seal was, and that the dealership assured him that any seal would do. Having previously served as a notary public, Mizenko dug up his old notary embosser and repeatedly squeezed the device at different angles onto the document — apparently hoping to produce a blurred seal. He then returned this mess of a resolution to the dealership.

The credit company called AEFA to confirm the transactions and spoke to the executive vice president. No one at AEFA seems to have been pleased with Mizenko's conduct. After he was terminated, the NASD barred him in all capacities. The SEC sustained the sanction.

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

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