Dark Side of the Moon
Citigroup Global Markets agreed in August to pay a $500,000 fine for failing to supervise a sales assistant, Tamara Moon, who allegedly stole about $750,000 from 22 customers, according to FINRA. Moon, who worked out of the firm's Palo Alto, Calif. branch, falsified records and made unauthorized trades for customers, which included elderly widows, a senior with Parkinson's disease and even her own father, FINRA said.
FINRA had barred Moon in August 2009 for her actions. The agency found that Citigroup did not pick up on a number of “red flags” that required further inquiry and investigation, including exception reports with conflicting information in new account applications and account records with suspicious transfers of funds. The firm also failed to put in place systems and controls for supervising customer accounts.
In one incident, Moon stole $150,000 from a customer's account and put the money into a fraudulent account she created in her father's name. A few days later, she transferred $90,000 from that account to her own account.
Better Luck NEXT Time
William Bailey, a former NEXT Financial Group broker, was suspended from the securities industry for two years for unsuitable and excessive trading of mutual funds and variable annuities, FINRA said. He also made trades without getting his clients' written permission.
Over the course of about two years, Bailey recommended 484 short-term mutual fund switch transactions for seven clients, who were unsophisticated investors aged 66 or older. On average, his clients held mutual funds for only 60 days. This cost his clients $147,000 in sales charges and trading fees, and Bailey made over $120,000 in commissions from these sales, FINRA said. Not only did he trade in his customers' accounts without their approval, he also made it appear as though they had approved the trading.
In addition, after holding their variable annuities for a short period of time, Bailey advised three clients to switch to new ones, an unsuitable move based on their financial needs, FINRA said.
“Brokers who engage in excessive trading will be held accountable,” said Brad Bennett, FINRA executive vice president and chief of enforcement. “In this case, Mr. Bailey rapidly switched his elderly and unsophisticated customers in and out of mutual funds with high costs, providing a benefit to Bailey instead of to his customers.”