Working under the supervision of the SEC, one of FINRA’s tasks is to write and enforce rules governing the ethical activities of brokerage firms and brokers. With respect to discretion, FINRA Rule 3260(b) (aka NASD Rule 2510(b)) provides that for a broker to exercise discretionary power in a customer’s account, the customer must provide prior written authorization and that the broker’s firm must approve the discretionary arrangement.
FINRA’s Monthly Disciplinary Actions for December 2019 include several instances of brokers who ran afoul of FINRA Rule 3260:
- Charles Harper Bridgers (CRD #1226108, Wilson, North Carolina) October 16, 2019 – Bridgers entered into an AWC with FINRA in which he was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in all capacities for three months. Without admitting or denying the findings, Bridgers consented to FINRA’s findings that he entered municipal-bond orders in a customer’s brokerage account without the customer’s specific authorization and without authorization to exercise discretion over the account. FINRA further found that before learning the customer had died, Bridgers entered the orders in the customer’s account, and entered notes in the firm’s system that falsely stated that he had conferred with the customer before executing these transactions. FINRA found that both the trades and the system notes post-dated the customer’s death, and therefore, the trades were unauthorized. The suspension is in effect from October 21, 2019, through January 20, 2020. See FINRA Case #2018057553801. Bridgers previously was registered with Wells Fargo Clearing Firm LLC (1999-2018).
- Steven Tarasius Yellen (CRD #1281663, El Paso, Texas) October 22, 2019 – Yellen entered into an AWC with FINRA in which he was assessed a deferred fine of $25,000 and suspended from association with any FINRA member in all capacities for one year. Without admitting or denying the findings, Yellen consented to FINRA’s findings that he engaged in unauthorized trading, amongst other things. In particular, FINRA found that Yellen exercised discretion in a customer’s account without written authorization or acceptance of the account as a discretionary account while registered with Morgan Stanley. Yellen also completed false annual compliance questionnaires wherein he denied having any accounts in which business was transacted on a discretionary basis. Yellen further opened a second account for the customer without her knowledge or authorization and subsequently made an unauthorized transfer of $30,000 from her original account to the second account and used the funds to execute two unauthorized transactions. After Yellen left Morgan Stanley and became associated with Ameriprise Financial Services, he continued to engage in unauthorized trading by entering trades for customers that were beyond the option trading risk levels authorized by the customers. FINRA found that in so doing Yellen mismarked options order tickets as unsolicited when they were solicited, which was intended to circumvent the firm’s systems. The suspension is in effect from November 4, 2019, through November 3, 2020. See FINRA Case #2018057175001. Yellen previously was registered with Morgan Stanley entities (1984-2016), then Ameriprise Financial Services (2016-2018).
- Louis Mark Miller (CRD #3054955, Syosset, New York) October 14, 2019 – Miller accepted an Offer of Settlement barring him from association with any FINRA member in all capacities. Without admitting or denying the allegations, Miller consented to FINRA findings that he failed to provide documents and information and appear for on-the-record testimony for FINRA’s investigation into allegations that he improperly exercised discretion in customer accounts without prior written authorization. See FINRA Case #2017056829901. Miller previously was registered with LPL Financial LLC who terminated his employment for “Violation of firm policy with respect to time and price discretion in brokerage accounts.”
Farrar Law, PLLC, currently is investigating allegations of misconduct such as unauthorized trading. Farrar Law PLLC represents investors (including individuals, trusts, corporations, and institutions) in claims against brokerage firms, investment advisors, clearing firms, banks, and insurance companies. If you have experienced investment losses or financial irregularities, please contact us for a free consultation. Farrar Law PLLC handles cases big and small on contingency.