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Regulation and Compliance > Federal Regulation > FINRA

FINRA Bars Ex-LPL Broker Over Outside Business Activities

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The Financial Industry Regulatory Authority says it has barred a former LPL Financial broker who was terminated after he was accused of violating his ex-firm’s outside business activity policy, as well as FINRA and Minnesota Department of Commerce rules.

Michael R. Severance failed to disclose providing bill payment services to a client for a fee and coordinating a gift or loan of more than $100 from his client to his son, according to the FINRA letter of acceptance, waiver and consent that he signed Nov. 14. He agreed to the letter without admitting or denying the findings. The letter was accepted by FINRA Friday.

Severance entered the securities industry in 1981, when he joined Voya Financial and registered with FINRA as an investment company and variable contracts products representative (IR), according to FINRA’s BrokerCheck website. He remained with Voya for 34 years. In 1982, he registered as a direct participation programs representative (DR), and then, in 1985, registered as a general securities representative.

After one year at National Planning Corp., Severance became associated with LPL and registered with FINRA as an IR, DR and GSR, according to FINRA.

But, on Jan. 2, 2019, the LPL filed a Uniform Termination Notice of Securities Industry Registration (Form U5), saying Severance was discharged Dec. 31, 2018 for violating its outside business activity policy, according to the AWC letter.

Severance then refused to cooperate with FINRA’s Nov. 11 request for documents and information sent pursuant to FINRA Rule 8210. As a result, Severance violated both FINRA Rules 8210 and 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,” according to FINRA.

LPL confirmed Tuesday that Severance was terminated Dec. 31, 2018, as stated in the disclosure on BrokerCheck. Severance isn’t currently associated with a FINRA member firm. He didn’t immediately respond to a request for comment sent via his LinkedIn account, which indicates he’s been operating his own firm, Integrated Planning Services, for 38 years.

But in a lengthy broker comment included on that disclosure, Severance said he met the client discussed in the AWC letter and her now-late husband in 1996. Over the years, they “became much more than clients to me and my family,” he said, noting they “became dear friends.”

The client suffered from “severe” arthritis that “prevented her from completing basic household tasks, such as writing checks,” he claimed, adding that after her husband was diagnosed with cancer, Severance promised to “take care of” his wife after he died. That help wound up including assistance in paying her bills, shopping and charitable efforts, he said, noting that she insisted on paying him for his help. Severance said he started charging her a flat weekly fee of $100, which he did not consider a business activity. However, his broker-dealer learned what he was doing and informed him it considered that work undisclosed business activity and “terminated my association,” he said, expressing regret for not disclosing his activity to LPL.

Severance said he believed the state of Minnesota started investigating him over a “suspicious check written to a longterm caregiver” that he insisted he “did not write, nor was I aware of.” He has since stopped helping the client pay her bills and “transferred that task to her new power of attorney,” he said.

Other Details

Also this year, Severance was fined $5,000 by the Minnesota Department of Commerce for “breaching his fiduciary duty, demonstrating incompetence and/or financial irresponsibility in his dealings, and failing to observe high standards of commercial honor and just and equitable principles of trade in the services he provided to his seventy-one year old client, all in violation of Minnesota state law,” according to the AWC letter. Severance was also subjected to a six-month suspension that was stayed, the letter said, adding that stay will be lifted and the stayed portion of the suspension will become effective “if there is a determination that Severance has committed further violations of any law, rule, or order over which the Commissioner of Commerce has authority within two years.”

That wasn’t Severance’s first run-in with the Minnesota Department of Commerce. In the first of only two disclosures in his 37 years registered with FINRA, that state agency fined him $2,500 for failing to adequately disclose information involving changes to a customer’s portfolio and for marking trade confirmations as unsolicited when they were actually solicited, violating Minnesota statutes requiring him to observe high standards of commercial honor, according to the AWC letter.

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


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