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FINRA Suspends Broker Who Allowed Barred Father to Work With Clients

FINRA Suspends Broker Who Allowed Barred Father to Work With Clients

FINRA claims that James Alan Schumaker allowed his father to continue working with clients, even after he was barred from the industry.

A former broker allowed his father who had permanently been barred from the securities industry to continue working with clients even after the son had become the official broker of business” for those clients, according to the Financial Industry Regulatory Authority. FINRA has suspended the younger broker, James Alan Schumaker, for nine months.

Schumaker entered the securities industry in 2017 and was associated with Cambridge Investment Research at a branch office based out of Lafayette, Ind. He conducted his brokerage business through Schumaker Financial, according to a letter of acceptance, waiver and consent signed on Feb. 11. 

His father was previously a FINRA registered broker, but the agency disqualified him in 2014 after he did not respond to inquiries about allegations that he had “converted funds.” Though the father is not named in the FINRA letter, a BrokerCheck profile for Jeffrey Alan Schumaker indicates he was barred from the industry in 2014; according to his profile, the elder Schumaker had worked for Transamerica Financial Advisors from 1997 through July 2014 while based out of Lafayette.

According to his BrokerCheck profile, Jeffrey Schumaker was fired from Transamerica for allegedly misappropriating about $8,200 from a homeowner association “for personal use” in 2011. According to a 2019 post from the blog, Schumaker allegedly took the funds from the homeowner association to pay medical bills, expecting a commission check would help him quickly recoup the funds (which apparently never came). But according to FINRA, the elder Schumaker never told his clients that he’d been barred from the industry and could no longer operate as their broker.

By September 2018, James had become the broker of record for his father’s clients, and he knew that his father had been barred from the industry altogether, according to FINRA. At Schumaker Financial, his father is still listed as president and CEO on the firm's website. James Schumaker did not return a request for comment as of press time. 

Despite being aware his father was banned from the industry, the younger Schumaker allowed his father to continue attending in-person customer meetings to talk about account strategy, email clients about account statements, keep an office at the branch location and share a phone line. Cambridge discovered that Jeffrey was continuing to operate at the branch office despite being barred during an on-site audit on Nov. 6, 2018, according to the FINRA letter.

“After the first audit, Cambridge warned Schumaker that his father could not be on the premises, use a conference room on the premises, or provide him with any investment advice relating to brokerage accounts,” the letter read. “Schumaker confirmed he understood.”

According to FINRA, Cambridge performed a second audit in February of the following year, and when they did, they discovered Schumaker’s father at the branch office in a meeting with his son and a customer inside a conference room. According to James' BrokerCheck profile, he stopped working with Cambridge in March 2019, and the firm declared it had fired him due to “a loss of confidence in the registered representative,” according to the FINRA letter. In addition to the nine-month suspension, the agency also levied a $5,000 fine against the younger Schumaker.

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