More On Legal & Compliancefrom The Advisor's Professional Library
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
Wedbush Securities and an advisor were ordered to pay an investor more than $2.5 million in a dispute that FINRA ruled on last Friday. The dispute concerned the treatment of Lauretta Kuppennan, whose son, Rick Cooper, brought charges on behalf of her estate against advisor Debbie Michelle Saleh.
In its findings, the three-member panel concluded that Saleh’s conduct was “premeditated, egregious and unconscionable and part of a plan or scheme to defraud her customers.”
Saleh's actions, the arbitration panel noted, included “forging the client's signature on various documents, making gross misrepresentations about the securities in the client's account and the value of those securities, providing the client with false monthly account statements and executing unauthorized redemptions and/or partial withdrawals in the client's annuities in violation of her fiduciary duties.”
Saleh is now an advisor with Wedbush Morgan Securities and formerly was with Wells Fargo Advisors/Wachovia and its predecessor First Union Securities.
Cooper asserted that Saleh had negligently misrepresented his mothers’ interests, committed fraud and intentional misrepresentations and/or omissions, failed to properly supervise Kuppennan’s accounts, breached fiduciary duties, engaged in unsuitable and unauthorized transactions, committed elder abuse, caused the client emotional distress and failed to abide by certain contractual duties.
These charges related to multiple investments in unspecified variable annuities.
According to FINRA, Wedbush Securities denied the allegations. (It did not issue a statement on the matter.)
During the proceedings, Saleh “choose not to appear” at the hearings, the self-regulatory group noted in its report on the dispute resolution.
FINRA concluded that Saleh and Wedbush Securities are “jointly and severally liable” and decided they should pay compensatory damages of $470,885.00, as well as interest on this amount at the rate of 10% per year from Sept. 30, 2008, until the date the award is paid in full.
The group also ruled that Saleh has to pay a fine of $500,000 in special damages for emotional distress, Wedbush has to pay $300,000 for distress, and Edward Wedbush must pay $200,000 emotional distress.
Saleh must pay an additional $1 million in punitive damages related to elder-abuse charges, while Saleh and Wedbush Securities must jointly cover the investor’s legal fees of $390,000 and other costs of $5,000.
“Saleh's conduct certainly borders on criminal misconduct, if not actually elevating her actions to actual criminal misconduct,” the arbitration order stated.