Independent Firm to Pay $400,000 for Failing to Catch Brokers Who Stole Millions
Independent broker-dealer Royal Alliance Associates has agreed to pay $400,000 for failing to catch two former brokers who separately stole more than $3.8 million from the accounts of four customers and are now imprisoned.
In a consent letter issued on Thursday, Finra alleged that between 2009 and 2017, a New Jersey broker wire-transferred $1.4 million in more than 60 transactions from a “disabled widow” in New Hampshire to the bank account of a limited liability company he created and to a law firm. In spite of the company’s address being the same as the broker’s office, firm prohibitions against third-party wire transfers, and red flags about the customer’s name being used on the broker’s outside account, Royal Alliance’s cashiering group failed to stop the transfers.
The broker also forged requests for unauthorized third-party checks from the widow and another customer’s account without the cashiering group verifying the address the checks were sent to, according to Finra.
The consent letter, which Royal Alliance signed without admitting or denying the findings, also alleged that a Massachusetts broker stole more than $2.3 million from two customers between June 2013 and June 2017 by forging 65 third-party wire transfer requests from their accounts to the bank account that the broker controlled.
When one cashiering group employee questioned a discrepancy in signatures, the broker claimed the customer “always signed her name differently,” without further investigation. The broker also allegedly falsified papers when questions were raised about the account receiving the checks, which had the broker’s home address.
The consent letter did not identify the brokers but said both pled guilty to criminal charges and are barred from the securities industry.
In December 2017, Royal Alliance terminated its relationship with Gary Basralian, a Maplewood, NJ, broker who is serving 70 months in prison after pleading guilty to fraud.
In November 2017 it discharged Kimberly Pitts, a Palmer, Mass. broker who was sentenced to 87 months in prison and three years of supervised release.
Royal Alliance, which works with about 4,000 registered reps in more than 1,500 branches, has compensated all of the customers whose money was stolen, the consent letter said.
Spokespeople for AdvisorGroup, which is in the process of buying rival independent broker Ladenburg Thalmann, did not respond to a request for comment.