Brokers and Associates Slip Doing Apparent Solids for Customers
The Financial Industry Regulatory Authority on Thursday sent another message to brokers and sales associates about following the letter of its rules, even when they may be trying to help customers.
It imposed an eight-month suspension on Bridgett L. Perry, a former Morgan Stanley sales associate in Texas who copied clients’ signatures on blank disbursement forms to facilitate loan payments they requested, according to a consent order she accepted from the regulator’s enforcement department. Perry also was fined $5,000.
The regulator also suspended former LPL Financial broker Michael P. Spolar for writing nine personal checks totaling about $2,100, without the firm’s permission, to reimburse a client for losses in options trades the broker encouraged the client to make.
Perry used a master disbursement form with a customer’s signature that she had photocopied, or signed directly, to facilitate payment of about 60 loans backed by a customer’s securities portfolio from 2012 to 2016, according to the consent order. The customer “was aware that Perry was reusing the Master Disbursement Request and authorized each of the transactions,” according to the agreement.
The registered sales associate, who worked at Morgan Stanley from early 2008 until she was fired in July 2016 for signature and form violations, also facilitated similar transactions for two other customers who authorized the loan disbursements, but not the reuse of their signatures, approximately 21 times, according to the consent letter. Morgan Stanley noted on her dismissal notice that the forms she filled out “were consistent with the clients’ instructions,” according to her BrokerCheck history.
The Finra enforcers said that Perry’s conduct violated its broad Rule 2010 requiring licensed brokers and associates to observe “high standards of commercial honor and just and equitable principles of trade,” and its Rule 4511 requiring firms to keep and preserve accurate books and records.
Perry “greatly regrets her errors in judgment,” her Cleveland-based lawyer Scott Matasar said in an e-mailed comment.
Finra was presented “credible evidence” that one of the sales associate’s superiors, ”a more successful, more powerful advisor, was aware of, condoned and even at times pressured Ms. Perry into the misconduct she committed,” Matasar added.
Noting that he was stating his personal opinion, the lawyer said that the Finra decision and Morgan Stanley’s apparent failure to discipline the superior “appear to be a troubling example of how disparities in people’s economic circumstances affect—for good or ill—the outcomes of their legal proceedings.”
Perry, who now works at registered investment advisor firm Smith Group Asset Management in Dallas, declined to comment directly.
Spolar, whose brokerage career began in 1991 at Lehman Brothers, worked out a deal to reimburse a client who lost about $188,000 on two options contracts in 2015 and 2016. “Spolar expressed dismay with the losses that [the client] had incurred and unilaterally offered to begin making monthly payments…in amounts equal to the monthly return that the lost principal would have earned had it been invested in a high-yield bond fund,” his consent order says.
He worked out the deal without seeking or obtaining approval from LPL, violating Rule 2150(c) that prohibits registered reps and firms from sharing directly or indirectly in profits or losses in customer accounts. He also was charged with violating Rule 2010 requiring “high standards” and just and equitable principles of trade.
Spolar, who settled five customer disputes between late 2015 and early 2017, has not worked as a broker since he was discharged in October 2016 by International Assets Advisory for contacting clients during a previous suspension, according to his BrokerCheck record. LPL had discharged him in April 2015 for discretionary trading in brokerage accounts in violation of its policies.
Spolar did not respond to a telephone request for comment.
The curious thing about this industry is a client can verbally tell you to buy a 1 Million Dollar Treasury Note but they can’t tell you to move $1.00 from one account to another without paperwork.
The clients trust their Advisors the firms don’t.
If a verbal is used to buy a $1MM Bond that bond stays in account substantially safe but for market action. If a verbal is accepted to wire $500 that money is gone with minimal recourse for error or malfeasance. If a verbal is used to move money to different ownership titled accounts those funds too are substantially lost to the sender. Not the same…
Issue here is she copied a signature. That is a very well known no-no. I hate that the advisor had nothing happen to him. All of us who have been in the Assistant position know the pressure that can be put to bear to do something.
Advisor I used to work with wanted me to move funds that clients had signed on a joint account not withstanding that I found that one spouse forged the other’s signature. Advisor told me to proceed and that he had approval from management which I knew wasn’t true. I gave him the form and told him HE would need to enter the transfer that I would process a forged form. Of course, he didn’t do it.
Funny thing was client had a tremendous loss from the investments he told the Advisor to sell for the transfer. Karma always comes.