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Industry Spotlight > Broker Dealers

No absolution from FINRA

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FINRA has thrown a wire-house broker out of the securities business for victimizing a 64-year-old nun. According to FINRA, the nun received a $531,000 inheritance from her mother, who also was a client of the broker. After her mother died, the nun transferred the funds in her mother’s mutual fund account to a new account under her own name. Because of her vow of poverty, she planned to donate the money to her religious order. The broker persuaded the nun to withdraw $125,000 to invest elsewhere. When the nun received the proceeds, the broker instructed her to sign it and return it to him. Instead of investing the money, the broker deposited it into his personal bank account and used it for his own benefit. For the reminder of the inheritance, the broker got the nun to sign a letter authorizing him to deposit $406,000 into an outside tax-exempt fund. He then used the money to fund a sports management company.

A California insurance agent was sentenced to three years in state prison for two counts of felony grant theft against elder clients. The agent initially invested his clients’ funds into legitimate annuity accounts. However, he then persuaded them to invest the funds in another financial services company that promised higher returns. But he failed to disclose that he was the owner of the firm and that their money would not be deposited in a legitimate investment. Five senior clients incurred losses of more than $300,000 as a result of the agent’s scam.

The SEC charged a New York investment advisor with orchestrating a scheme in which he stole more than $6 million in investor funds for his own personal use. According to the SEC, the advisor in some cases victimized clients who were terminally ill or mentally impaired. The advisor’s scheme involved selling securities in client accounts and then illegally funneling the money to a bank account he secretly controlled. The advisor then spent the money on a multi-million dollar home, cars, and other luxury items. To cover his tracks, he provided his broker-dealer with fake client authorizations and his clients with account statements showing inflated balances. In one case, the advisor misappropriated roughly $430,000 from a client who was terminally ill. After the client died, the advisor went on to steal $85,000 from the widow.


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