[Image: Rest in Peace / WeNeedFun.com]

by Howard Haykin

Take, for example, the broker who was terminated by Wells Fargo Clearing Services “after a review concluded he placed trades in a customer’s accounts without sufficient authorization.” According to the timeline, provided by FINRA:

• In June 2014, the broker began providing brokerage services to a customer who maintained 2 accounts with the firm.
• In February 2017, the customer passed away.
• In March 2017, the broker learned from an assistant that someone had called to say the customer had passed away.
• Later in March 2017, the broker exchanged emails and had a phone call with the customer’s nephew, who confirmed that the customer had passed away.

• Six months later, in October and November 2017, the broker executed 26 unauthorized transactions in the 2 accounts, involving an aggregate amount of $381,000.
• In July 2018, Wells Fargo terminated the broker, and subsequently reversed the 26 unauthorized transactions, returned the accounts to their positions prior to the customer’s death, and refunded all associated commissions.

THE BROKER’S ERRANT CONDUCT.    Because FINRA provided very few details in its write-up of the case, we were hard-pressed to understand the "cause and effect" (or the “why’s and wherefores”) of the above activities. That said, several violative aspects of this case are crystal clear.

• The broker - with 31 years’ experience – never reported the customer’s death to the firm, as he was required to do.
• The broker likely never obtained documentation to evidence the customer’s death or to clarify how Wells Fargo should deal with (financial assets in) the deceased customer’s accounts.
• The broker proceeded contrary to industry protocol by: (i) failing to set up a new account for a beneficiary or the customer’s estate; and, (ii) not halting all activity in the accounts until legal authority was established and the new account was opened.
• The broker exercised unauthorized discretion in the deceased customer’s account – since he obviously never consulted with, or received authority from, the customer when the 26 trades were executed.

[For further details on the above case, click on … FINRA Case #2018059146801​.]

[For guidance to heirs and beneficiaries of deceased brokerage customers, click on ... Financialish 9/10/20 Post.]