by Howard Haykin

Between 2009 and 2017, a New Jersey-based broker used 66 wire transfers and one check payment to steal over $1.5 million from 2 customers – one of whom was a disabled widow. Most of the payments were directed to a single bank account that was not titled in the customers’ names. Yet, the firm never bothered to identify the rightful owner of that account.

Between 2013 and 2017, a Massachusetts-based broker used 65 wire transfers and two check payments to steal over $2.3 million from 2 customers. All wires were unauthorized, while customers were coerced into having Royal Alliance issue checks against their accounts. The wires found their way into a bank account registered in the name of an LLC (limited liability company) and not in the customers’ names. Nevertheless, the firm treated all as first-party transfers.

CUSTOMER TAKE-AWAYS.    Criminal theft, incompetence, and plain negligence can occur at financial services firms. So, it’s incumbent upon customers to monitor their monthly account statements for large, unusual and unauthorized transactions. Individuals who are unable to conduct such reviews should seek the assistance of an independent financial watchdog, who can look over the person's financial affairs. Where appropriate, the 'financial watchdog' role can be filled by a trusted family member or friend.

FITTING CONCLUSION TO THE CASE.    In the end, Royal Alliance fully compensated its customers for their losses. The firm was also fined a total of $840,000 and ordered to revise its deficient policies, procedures and internal controls.The New Jersey registered rep and the Massachusetts registered rep were both barred from the industry in 2018, and both pleaded guilty to criminal charges. The NJ registered rep is now serving 70 months in prison, while the MA registered rep is serving 87 months, to be followed by 3 years of supervised release. As for the cashiering personnel and supervisors, it’s anyone’s guess as to what, if any, punishment they received. But termination of employment would certainly seem a fitting consequence, at least for some.

[For further details – in particular, the failings of the cashiering personnel – click on FINRA Case #2017056769402.]