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Regulation and Compliance > Federal Regulation > FINRA

A Broker Impersonated His Client … Twice. It Didn’t Go Well.

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An ex-Royal Alliance Associates broker allegedly impersonated one of his clients during not one, but two telephone calls with the customer services hotline of an annuity company, and things went badly from there for him, according to a Financial Industry Regulatory Authority letter of acceptance, waiver and consent he signed Nov. 5.

Harold A. Schwartz wound up being “permitted to resign” from Advisor Group’s Royal Alliance wealth management firm, according to a Uniform Termination Notice for Securities Industry Registration (Form U5) filed Feb. 22.

FINRA has now suspended him for 15 days and slapped him with a $5,000 fine. In his AWC letter, Schwartz agreed to accept those sanctions without admitting or denying the findings. FINRA accepted the letter Nov. 21.

In July 2018, Schwartz received permission from a client of his to lower the periodic withdrawals from an annuity the customer had bought previously, according to the AWC letter. “Thereafter, Schwartz impersonated the customer during two telephone calls with the customer service hotline of the annuity company and was successful in obtaining a reduction of the periodic withdrawals from the customer’s annuity,” the letter said. It added: “Although the customer gave Schwartz permission to effect the reduction of withdrawals, he did not give Schwartz permission to impersonate him with the annuity company.”

In the process, Schwartz violated FINRA Rule 2010, which calls for a member, in the conduct of his or her business, to “observe high standards of commercial honor and just and equitable principles of trade.”

Royal Alliance/Alliance Group, Schwartz and his current firm — Stephen A. Kohn & Associates in Lakewood, Colorado — didn’t immediately respond to requests for comment.

But, in the broker comment on his employment separation disclosure, Schwartz admitted that he did something wrong by impersonating his client, stating: “In reviewing a client’s annuity distribution I suggested he reduce the monthly [amount,] which he agreed was in his interest. The paperwork was signed and submitted to the company on 2 separate occasions with no results. He still received the higher [amount]. We finally did a 3-way call with the company & were on hold 20+ minutes. The client was mad, hung up & called us back telling us to ‘Just get it done.’ The client’s brother was a registered asst. of mine & informed his brother he wasn’t talking to the company again & I needed to get this done. So I did something I know I shouldn’t have.”

Noting that he was accused of “making an improper call,” he went on to say that “after an internal review in which the client admitted he told me to get it done, Royal Alliance & I worked out an early retirement.” However, he added: “I do not believe the punishment fit the crime as I was working, as I have for 45 years, in the best interest of my client.”

Schwartz first became registered with FINRA in 1977, while he was with New York Life Variable Contracts Corp., according to FINRA’s BrokerCheck website. Since leaving that firm in 1979, he’s been registered with eight other firms. After leaving Royal Alliance, he joined Stephen A. Kohn & Associates.

In addition to two disclosures listed on BrokerCheck related to the impersonation of a client, Schwartz has had two other disclosures over the course of his 38 years registered with FINRA. The first was related to a customer dispute during the 19 years he was with The Leaders Group, according to BrokerCheck. That dispute was over market conditions changing and his client believing a policy was no longer viable. It was settled Dec. 1, 2001, for $118,000, BrokerCheck shows.

The other disclosure concerned a customer dispute in which a client alleged that Schwartz guaranteed that person’s money would double in 10 years, but the income base was what doubled in that time period instead, according to BrokerCheck. The dispute was settled Aug. 27, 2018, with Schwartz paying the client the $100,000 in damages requested.

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