By Howard Haykin

In March, FINRA reported sanctions against 4 brokers who exercised discretion without receiving prior written authorization from the customers. The specific extraneous issues exacerbated the violative nature of the brokers’ conduct and likely prompted FINRA to increase its sanctions.  

UBS Financial Services broker (2009 to present) – fined $5K, suspended 15 days.    From November 2015 through November 2016, the broker effected discretionary transactions in 4 customers' accounts. While the customers had given the broker their express or implied authority to exercise discretion in their accounts, those authorizations were not in writing. Also, the firm never accepted the accounts as discretionary, UBS’s WSPs prohibited reps from exercising discretion, and UBS previously warned him not to do so.  [FINRA AWC #2017054919301]

Morgan Stanley Broker (2009 to present) – fined $5K, suspended 10 days.    From January 2014 through March 2016, the broker effected 400 discretionary transactions in 5 accounts belonging to 3 customers, all of whom were members of the same household. The customers had given the broker their express or implied authority to exercise discretion in their accounts. However, those authorizations were not in writing and Morgan Stanley never accepted the accounts as discretionary. The broker also provided false responses on 3 Annual Compliance Questionnaires (ACQs) submitted to Morgan Stanley - specifically indicating that he had not exercised discretion in any customer account. [Note: This likely added $2.5K to the fine.]  [FINRA AWC #2016051302001]

Sigma Financial Corp. Broker (2011 to 2017) – fined $5K, suspended 15 days.    Between March 2014 and May 2017, the broker effected 140 trades in 2 customer accounts without speaking to the customers on the day of each transaction. The broker never received prior written authorization from the customers or Sigma's written approval for discretionary trading in the customers’ accounts, and Sigma's WSPs generally prohibited reps from exercising discretionary authority, except in limited situations (none of which applied here). Additionally, the broker provided false responses on 3 Annual Compliance Questionnaires (ACQs) submitted to Sigma Financial - specifically indicating that did not have accounts in which clients had authorized him to exercise discretion. Sigma discharged the broker shortly after customers complained about activity in their accounts.  [FINRA AWC #2017055797701]

Merrill Lynch, Pierce, Fenner & Smith Broker (2016 to 2017) – fined $5K , 20 days.    Between December 2016 and October 2017, the broker exercised discretion in the accounts of 5 customers who, collectively, maintained 19 accounts at the Firm. The broker had not obtained prior written authorization from the customers to exercise discretion in their accounts, and Merrill had not approved any of the accounts for discretionary trading. Merrill Lynch discharged him for exercising discretion and mismarking trades as unsolicited.  [FINRA AWC #2017056676201]

These cases were reported in FINRA Disciplinary Actions for March 2019.

For further details, go to ...  FINRA Disciplinary Actions Online, and refer to the Respective AWC Numbers.