RRBDlaw: FINRA Case Now Analyzed

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Sep 23, 2009 10:41 am

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An irreverent Wall Street Blog
by Bill Singer Subscribe to RSS Feed: Blog Home | Past Entries RRBDlaw.com: New FINRA cases now online and analyzed by Bill Singer Written: September 23, 2009

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Veteran regulatory lawyer Bill Singer's analysis of recent FINRA cases is now online at http://RRBDLAW.com.  Make sure to click on the links to read Bill's commentary about these matters and more.

Daniel Allen Abbott presented unapproved seminars to promote the sale of reverse mortgages and solicit various types of investments from senior citizens. Among conduct cited by FINRA, was Abbott's use of  improper invitations,  and of  a slide and handouts that projected unfounded claims of future performance.  Reverse Mortgages are coming under regulatory scrutiny because of reports of senior-citizen abuse, and this case seems to confirm that FINRA is indeed watching this area. Note that  seminar materials themselves may constitute advertising materials requiring filing and/or review -- as in the case of the slides.   Filiep Paul Sackx distributed newsletters and seminar invitations that a principal of his member firm had not approved for distribution. One of the newsletters referenced an unregistered entity through which Sackx engaged in business but did not disclose the relationship between his firm and the unregistered entity. The invitations and Sackx’ Web site misrepresented that he was the author of books. With prospecting for new clients proving daunting in this recessionary landscape, many RRs are turning to newsletters, seminars, and websites to reach potential customers.  As always, what may strike a stockbroker as fair and reasonable may be seen quite differently by the employing firm's Compliance Department or any number of regulators. Michael Timothy Williams provided a prospective client with a piece of sales literature for a variable annuity that he had falsified by deleting the original time periods for charges (replacing with handwritten shorter terms that falsely depicted lower charges for withdrawals) and crossed out certain expenses/charges.   Variable Annuities (VAs) are another area that has come under enhanced regulatory scrutiny in the past couple of years.  This case raises troubling questions -- what can customers rely on and who can they trust?  RRs may not be subject to a fiduciary standard that exalts the client's interests above all else but, still, (without first looking) tell me what you think the fine and suspension should be in this case -- and they tell me if you think the sanctions imposed seem fair. Kareem Isadore Washington assisted customers in opening fraudulent bank accounts through the use of falsified identifying information and with initial deposits via counterfeit checks drawn on the accounts of the firm’s other customers. Despite knowing the above, Washington made branch and automatic teller machine withdrawals for the customers. He received approximately $4,700 in compensation for assisting in the scheme. The bank lost a total of $43,093.81 from the scheme.  It's out there folks.  This isn't just the storyline of a new movie or television show.  Just because it's a bank, just because some guy is dressed in a suit, just because the checks look real and the ATM machine seems safe, no longer means squat.  As if the Madoff scam and others haven't made it clear by now: Wall Street is a world of appearances, smoke, and mirrors.  All in all, more good guys than bad but it only takes one Madoff or one Washington to cause a whole lot of hurt to a whole lot of victims. Preston Douglas Runyan affixed the signature of a public customer’s spouse to a spousal consent provision on an individual retirement account application without the spouse’s permission and authorization. Runyan signed his name on the application as witnessing the spouse’s signature, which he had not.  At the time -- and that's always the explanation my clients give to me -- this probably seemed like a good idea.  In the aftermath, the broker typically learns that the husband and wife were going through a separation or divorce, or that one spouse's promise that the other was okay with the transaction proves to have been false.  The road to Hell is paved with good intentions, but many of those intentions are simply poor business decisions and foolish risks.

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Sep 25, 2009 11:13 am

I read the Williams case and based on the fact that he altered the sales literature, I believe he should have been barred.  It's fraud, plain and simple.  I found the sanctions to be to lenient.

Sep 25, 2009 1:25 pm

Bill,

  As a former compliance officer & now an FA, here's what I think:   All of the people you highlighted in your post should be thrown out of the business. Everyone of them should be barred from ever being in the brokerage business or a related field.   D Abbott - unapproved seminar on reversed mortgagaes to senior citizens---an idiot.   Filiep s??? - It's troubling that FA's would use unapproved material - their careers and reputations are on the line. And what is also scary...there are a lot of fa's who don't realize that the compliance dept's approval is actually helping to protect them from using material that could be false or misleading.   M. Williams -  makes you wonder what other skeltons are in the closet. What else has he misled clients on? (I know---that's not part of this event)   K Washington - Also an idiot---fraudulent bank accounts...? - This guy must live on a different planet. Sooner or later it would be discovered. Extremely dishonest. There should be no place in finance for this guy.   P. Runyen - whether the best of intentions or not, this guy should be out of the business. Common sense or good business sense should prevail---never forge any clients signature. Even if a client asks you to sign on their behalf, won't standup. It's your word against theirs. You may as well pull out the checkbook.