by Howard Haykin

A broker ('RR') with RBC Capital Markets agreed to a $5K fine and a 20-day suspension to settle FINRA charges that, in order to generate funds for a supposed wire transfer request, she sold securities from the customer's account without obtaining verbal or written authorization from the customer - among other violations and careless conduct.

FINRA's sanctions took into consideration the disciplinary action imposed by RBC - i.e., broker was suspended 10 days and required to: (i) review the firm’s pols and procedures, and (ii) complete selected Firm and FINRA e-learning courses.  

FINRA FINDINGS.    On June 12, 2017, an RR received an email – thought to be from an RBC customer, but really from an imposter who had hacked that customer’s email account. The email requested a $33,000 wire transfer to a 3rd-party contractor for home improvements. From there …

• That same day, the RR replied stating that she would need to sell securities in the account to raise the requested funds. The RR then executed 5 sell transactions in the customer's account totaling $42,980, without obtaining verbal or written authorization from the customer or the imposter.

   ►    ISSUES: Order tickets were mismarked as "unsolicited" and were not marked as discretionary.

• On June 13^th, the RR sent an email asking the customer to sign an authorization form granting permission for her to accept his wire transfer instructions verbally. The imposter intercepted the email, forged the customer's signature on the form and returned the form to George.

   ►    ISSUE: RR never received the wire instructions verbally.

• On June 14th, the RR entered the wire request into RBC's system, and falsely attested in the Firm's systems that she received the customer's wire instructions verbally, even though she actually received the instructions via email. RBC approved and processed.

   ►    ISSUE:  Funds are wired out based on RR’s false attestation.

• On June 16th, after receiving an email from the customer questioning the activity in the account, the RR discovered that an imposter sent the wire request and informed the Firm. The Firm recalled the wire and returned the funds to the customer's account.

FINANCIALISH TAKE AWAYS.    That this RR violated FINRA Rules 2010 (Standards of Commercial Honor and Principles of Trade) and 4511 (General Requirements – Books and Records) is of secondary importance. What matters most is that she acted in an extremely careless manner, then compounded the situation with a series of errors: (i) using unauthorized discretion in a customer’s account; (ii) mismarking order tickets; and, (iii) falsely attesting to verbal instructions.

While RBC Capital Markets made a rightful decision to ultimately discharge this RR for her conduct, FINRA acted improperly with its light-weight sanctions -effectively, a $5K fine and a 30-day suspension. Seems as though FINRA made its determination based on a “No Harm, No Foul” scenario – i.e., where RBC fully recovered the funds.

This case was reported in FINRA Disciplinary Actions for September 2018.

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2017055453801.