Finra Suspends Broker Who Let a Client Direct Trades in Husband’s Account
In another reminder of the importance of thinking twice about accommodating a trade request, a broker discharged by Morgan Stanley for helping a woman move money from her husband’s retirement account to their joint bank account has been suspended for three months by a regulator.Both the husband and wife were Morgan Stanley customers but the wife had no authorization over the IRA account in question.
The Financial Industry Regulatory Authority last week fined Eugene Nathan Gordon $5,000 and suspended him for 90 days for the activities that it said violated its far-reaching Rule 2010 requiring registered reps to “observe high standards of commercial honor and just and equitable principles of trade.”
Gordon, who now works at WealthSource Partners, a Palo Alto, Calif., registered investment advisory firm, declined to comment on the circumstances behind the acceptance, waiver and consent letter that Finra accepted last Wednesday. He previously worked for 14 years at Morgan Stanley and predecessor firm Smith Barney in Palo Alto.
Gordon followed the wife’s instructions to make mutual fund trades resulting in 32 transfers of almost $317,705 from his client’s individual retirement account to their joint bank account over four years ending March 2017, according to the consent letter. The wife had no authorization over the IRA account for which Gordon was broker of record, according to the consent letter.
“It is inexcusable for a financial advisor to make 32 transactions without getting the customer’s consent,” said Brandon Reif,” a California-based securities lawyer who was not involved in the case. “A spouse, even a benevolent one, is not a surrogate. Perhaps one trade accommodation, in a pinch, could be forgivable, but 32 is just plain reckless.”
In addition to violating Morgan Stanley’s written policies prohibiting trading without a customer’s prior authorization, Gordon entered inaccurate notes about the transaction indicating he spoke with the customer, rather than the wife. That caused Morgan Stanley to keep inaccurate records, according to the consent letter.
Gordon, who Morgan Stanley discharged in February 2018, agreed to the penalty without admitting or denying the allegations.
His BrokerCheck record says he is subject to a pending customer claim for $1.9 million over similar spousal allegations of unauthorized trading and withdrawals from 2010 through 2017. Sean Posser, a lawyer who represented Gordon before Finra, said he and Gordon are pleased to have resolved the Finra matter but declined further comment.
Gordon worked at Morgan Stanley in Palo Alto for eight years before being discharged on February 2, 2018, Finra said.