More On Legal & Compliancefrom The Advisor's Professional Library
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
- Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients financial well-being may be jeopardized. RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.
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.