BrokeAndBroker: November FINRA Cases
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by Bill Singer
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RRBDLAW.com: FINRA November Cases
Written: November 30, 2008
RRBDLAW.com: November FINRA Cases Analyzed by Bill Singer
Numb is probably the best word I can use to describe Wall Street these days. Many folks on the Street seem burned out, confused, broken, and with little interest for the findings of any industry regulator. Nonetheless, life does go on and so does the task of overseeing the securities industry--or what is left of it. Be it sleepwalking or simply taking the first unsure steps along the road to rehabilitation and recovery, the regulators and the regulated must return to their dance. Painful to some. Annoying to others. For me, the initial signs of a return to at least a semblance of normalcy. As such, with that understanding and that worldview, let me continue in my role--pundit, to some; gadfly, to others.
FINRA barred Carlos Lopez III took $398.26 in public customer bank funds and converted the funds for his personal use. Step one, he took a $100 from one customer based upon a misunderstanding of the proceeds from a CD rollover CD. Step two, he took $171.81 from a third customer in the form of a bogus CD roll-over penalty fee. Step three, Lopez opened an unauthorized checking account at a non-affiliated bank for another customer (using his bank's mailing address) and created an ATM card with which he withdrew $126.45. Bill compliments FINRA for being on the ball with this case. As noted during the year, ATM fraud is bordering on an epidemic. Moreover, FINRA seems to be uncovering troubling instances of bank-related violations.
Lace Anne Daniels was barred by FINRA for fraudulently inducing the issuance to herself of a $22,000 check as a "bonus," and also for accessing her branch's payroll program to issue an additional $5,527 payment. In these difficult financial times, Wall Streeters may seek such self-help schemes with increasing frequency. Bill discusses how some of these scams can be short-circuited. He urges the industry to view these "symptoms" as signs that desperate registered persons may be more easily swayed to the dark side--a warning for vigilance by firms of their own funds and a call for heightened compliance on behalf of vulnerable customers.
FINRA barred Associated Person Yzaquirre for systematically misappropriating $45,500 by engaging in a check kiting scheme through miscoding checks on her firm's system that created artificial balances. Why does such a seemingly mundane set of facts and a wholly appropriate sanction send Bill Singer into one of his patented rants? As Bill explains it, it is not because of what FINRA did to Yzaquirre but because of what the regulator has not done -- and for which it has been historically questioned for not doing -- against those more senior executives at its most powerful member firms. Read Bill's full comment, but here's a tidbit of what to expect:
I'm sure that our zealous regulator is already sitting at the grinding wheel, honing the edge on its many enforcement knives, and preparing for its onslaught against the once well-heeled and powerful ne'er do wells of Wall Street who brought us to the edge of the present chasm, and then pushed us over the precipice and into our present state of freefall. With all the practice that FINRA's staff has going after the Yzaguirres of Wall Street, putting together a meaningful case against the big boys should be a slam dunk.
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Pursuant to a settlement, FINRA censured and imposed a $1 million fine on Raymond James & Associates, Inc. based upon stipulated findings that the firm:
permitted a person or entity not registered as a broker-dealer and who had been barred from the securities industry to perform duties that required registration;
permitted a person who was not registered with, qualified by or acceptable to the NYSE to regularly perform the duties customarily performed by a securities lending representative;
compensated alleged finders in connection with stock loan transactions when the finders had not performed any services in connection with the transactions;
transmitted transaction-based compensation to an unregistered person or entity operating as an unregistered broker-dealer;
reasonably supervise or control certain of its business activities;
provide for appropriate procedures of supervision and control;
establish a separate system of follow-up and review to determine that delegated authority and responsibility were being properly exercised; and
make and keep accurate records reflecting its stock loan activities.
Bill Singer asks you to visit FINRA's Press Release page and note the sub-$1 million settlements trumpeted and any number of actions against smaller firms. He then asks a provocative questions: How come this Raymond James & Assoc.'s million dollar settlement didn't make it into a publicized press release? Bill asks who at FINRA decides what makes it to the PR list--and if a $1 million fine doesn't earn that dubious accolade, why not?
In the oddity of Sloan Securities Corp. and James Curtis Ackerman, FINRA imposes sanctions pursuant to settlements that just don't seem to reconcile with the extensive nature of the stipulated violations. Frankly, Bill Singer says that this is one of the most panoramic cases he has seen in over a quarter of a century but thought the $65,000 fine imposed on the firm was a typo. Either this is an example of regulatory overkill designed to puff up a lighter case, or, something is just not adding up. As Bill muses:
A compliance meltdown of this magnitude does not occur all at once. So many things had to be wrong from day one, so many things had to take months to go wrong, that you have to wonder why FINRA just didn't catch any of this earlier.