by Howard Haykin

What do Broker #1, Broker #2 and Broker #3 have in common? They each "crossed the line" and, in doing so, violated FINRA regulations and Firm policies.

 

Each had conversations with customers which empowered them to carry out a perceived discretionary authority. Yet, while intending to serve the best interests of their customers, each acted inappropriately and knowingly or unknowingly violated long-standing requirements. Those requirements serve as a defense for the brokers, their firms and their customers - and it's fortunate, for at least two of them, that the duration of the suspensions were relatively short. 

BROKER #1 (FINRA AWC #2014040641902) - $5K Fine, 10-Day Suspension.    John Roach has 16 years’ experience with 4 firms. From 2007 to 2014, he was associated with CCO Investments Services.

On 2 occasions between December 2013 and March 2014, Roach executed on 2 occasions a total of $62,000 worth of mutual fund purchases for one customer. The 2 trades were executed one or more days after he got the customer’s authorization to go forward with each transaction.

BROKER #2 (FINRA AWC #2016052219202) - $7.5 Fine, 3-Month Suspension.    Ben Burton has 17 years’ experience with 1 firm. He entered the securities industry in 2000 with Dean Witter Reynold and (n/k/a Morgan Stanley) in a non-registered capacity. In 2012 he obtained his Series 7 license and remained with Morgan Stanley until November 2016, serving as a registered rep.

One of Burton’s customers gave Burton her verbal authorization to exercise discretion in her account and, pursuant to that ‘authorization’, he exercised discretion on at least 40 times. However, while Morgan Stanley permitted its brokers to exercise discretion subject to its approval, Burton failed to obtain prior written authorization from the customer and he never obtained his firm’s approval of the account as a discretionary account.

Burton compounded his errors by making false statements over a 3-year period on firm compliance questionnaires (ACQ’s) concerning his use of discretion.

BROKER #3 (FINRA AWC #2015045664601) $10K Fine, 20-Day Suspension.    Joseph Yanofsky has 37 years’ experience with 8 firms and holds various licenses including the Series 9 and 10 Sales Supervisor licenses. From 1990 to 2015, he was associated with Merrill Lynch.

Between 2012 and 2015, Yanofsky had 9 customer who verbally expressed their general desire and authorization to participate in every syndicate offering that Merrill Lynch made available. These customers did not have discretionary accounts and their verbal authorization to participate in every syndicate offering was never reduced to writing. On certain occasions, Yanofsky acted on that “understanding,” and purchased syndicate offering shares for these customers without having received the customer's specific authorization to participate in those offerings.

Yanofsky compounded his violations by directing a subordinate to use another RR’s login credentials and computer to enter syndicate offering orders as soon as ticketing opened – in an effort to maximize the number of his customers’ orders that could be filled in those share offerings.

These cases were reported in FINRA Disciplinary Actions for November 2017.

For details on any case, go to ...  FINRA Disciplinary Actions Online, and refer to the Respective Case Number.