Two registered persons associated with the Doylestown, PA, branch of Securian Financial Services were sanctioned by FINRA in connection with the same fraudulent wire transfers effected by an individual posing as a firm customer. Both individuals agreed to a 10-day suspension by FINRA, which took into account the fact that Securian had separately suspended and fined both individuals for their conduct.

PLAYERS.   

• Rosemary McGinley, a general securities rep, failed to follow her firm’s procedures when, in order to facilitate 2 separate wire transfer requests made by an individual posing as a firm customer, she accepted trade orders from an imposter via email and failed to obtain the customer’s verbal authorization to place the trades.

• Keith Tomer, a general principal, falsely attested to his firm that he had confirmed a customer’s intention to transfer funds out of the customer’s account, when in fact, an imposter had requested the transfer, and Tomer, through his false attestation, unwittingly enabled the fraudulent transfer..

FACTS AND VIOLATIVE CONDUCT ACCORDING TO FINRA.   

Between October 8 and October 19, 2015, a Securian branch office in Doylestown, PA, received 4 email requests to transfer funds from a customer’s account to multiple outside bank accounts. Unbeknownst to the registered rep (RR) for the account, these requests didn’t come from the customer, but from an imposter who had gained unlawful access to the customer’s email. After receiving the first request to transfer funds, the RR forwarded it to McGinley for processing.

• Believing the imposter to be the customer, McGinley replied by email, advised the imposter that the account had only $37,000 available to transfer, and provided an Outgoing Wire request form.
• After the required paperwork was completed and returned via email, McGinley submitted it to Securian, which authorized and processed the fraudulent $37,000 transfer.

On 10/12, a second transfer request was received – this time for $50,000.

• Since the account didn’t have sufficient funds, McGinley discussed options with other individuals in the office.
• She then contacted the imposter by email and recommended specific securities to Iiquidate so that funds would be available to satisfy the requested transfer.
• The imposter responded, again by email, agreeing to McGinley's recommendations.
• McGinley placed the trades as directed in the email and facilitated completion of the wire-transfer paperwork.
• Tomer, covering for the branch manager who was unavailable, signed the outgoing wire form, after which the firm transferred $50,000 out of the customer’s account on 10/13.

►  By signing the outgoing wire form, Tomer attested that he had confirmed the customer’s intention to transfer funds by placing an outbound call to the customer’s phone. In fact, Tomer had neither telephoned nor otherwise attempted to contact the customer about the request to transfer funds.

On 10/14, a third transfer request was received a third transfer - this time for $60,000.

• A scenario similar to the 10/12 request ensued – except for the fact that Tomer was not involved in the authorization.
• On 10/15, the $60,000 transfer was effected.

On or about 10/19, a fourth transfer request was received. This time, McGinley was suspicious and elevated the matter. The firm investigated the matter and determined that all requests were fraudulent.

The customer was compensated for the $147,000 that had been withdrawn.

FINANCIALISH COMMENTARY. FINRA notes that Securian's WSPs expressly prohibited registered persons from accepting trade orders via email, and required verbal confirmation before executing any written trade order. That’s all fine and good. Except, Securian’s WSPs were deficient in several respects.

• First, verification should have been required for any type of transaction that impacts securities and/or funds in an account - either by telephone or by signed fax transmission.
• Second, wire transfers to a third-party account should raise red flags, but that issue was never noted.
• Third, there’s no mention of the RR of record for the accounts being brought into the discussions regarding the second and possible the third transfer requests. A broker should always be the firm’s first line of defense, since he or she is likely to be most familiar with the customer.

This case was reported in FINRA Disciplinary Actions for April 2017.

For details on this case, go to … FINRA Disciplinary Actions Online, and refer to Case #2015047705903.