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Regulation and Compliance > Federal Regulation > FINRA

FINRA Bars Brokers Who Wronged Elderly Clients

By Jeff Berman

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The Financial Industry Regulatory Authority separately barred two brokers who, among other infractions, allegedly treated elderly clients badly and then didn’t cooperate with FINRA’s investigations into their actions, according to the regulator.

Without admitting or denying the findings, John Joseph Cahill and Stephen Carver each signed a FINRA letter of acceptance, waiver and consent in which they agreed to be barred from associating with any FINRA member in any capacity.

Cahill signed his letter Dec. 11 and Carver signed his letter Dec. 10. Both letters were accepted by FINRA Jan. 2.

Cahill was a broker with Morgan Stanley from 1984 to 2005 and then again from 2009 to 2013, according to his profile on FINRA’s BrokerCheck website. As part of a March 13, 2012 settlement with a customer who claimed Cahill made unsuitable investments from October 2008 to March 2010, there was a $42,100 payment, according to FINRA. Cahill was allowed to resign from the firm as of Aug. 21, 2013 due to “allegations relating to employee’s compliance” with the firm’s requirement to contact clients prior to executing securities transactions, according to BrokerCheck.

Cahill then joined Janney Montgomery Scott as a broker in 2013, but was discharged from that firm March 1, 2019, while he was under internal review over his receipt of funds while acting as a power of attorney for a client at his prior firm, according to BrokerCheck.

In a Uniform Termination Notice (Form U5) dated March 5, Janney reported Cahill was terminated for failing to report his fiduciary relationship with that former client. In an amended U5 on March 8, the firm reported its internal review of Cahill’s receipt of funds while acting on behalf of that former client.

In the AWC letter, FINRA identified Cahill’s former client as elderly. In December 2019, Cahill violated FINRA Rules 8210 and 2010 by “refusing to provide documents and information,” as well as on-the-record testimony requested by its enforcement investigation into Cahill’s “potential commingling and/or conversion of funds belonging to an elderly individual who was Cahill’s customer at his prior FINRA member firm employer,” according to the letter.

FINRA Rule 8210(a)(1) states that FINRA has the right to “require a … person associated with a member, or any other person subject to FINRA’s jurisdiction to provide information orally, in writing, or electronically and to testify at a location specified by FINRA Staff, under oath or affirmation with respect to any matter involved in the investigation, complaint, examination or proceeding.” Rule 2010 requires FINRA members to “observe high standards of commercial honor and just and equitable principles of trade.”

Morgan Stanley declined to comment Friday. Janney and Cahill’s attorney, S.M. Chris Franzblau, a partner at the law firm Franzblau Dratch in Livingston, New Jersey, didn’t immediately respond to requests for comment.

Carver, meanwhile, first registered with FINRA in 1992, as a broker with Dean Witter Reynolds, according to his BrokerCheck profile. He then worked as a broker with seven other firms, including Baird & Co. from 2000 to 2002, LPL Financial from 2002 to 2009 and LifeMark Securities from 2017 to 2018.

There are 10 disclosures listed on his BrokerCheck profile for the course of his 26-year broker career. First, he was permitted to resign from Baird Oct. 10, 2002, after a customer complained that he made an unauthorized trade in his account, according to FINRA. He was later permitted to resign from LPL Jan. 29, 2009, after the firm reviewed documents indicating he was involved in an outside business activity without the prior written approval of the firm, according to FINRA.

In addition, Cetera Advisors discharged Carver Sept. 19, 2017, for violating firm policy by not disclosing gifts from a client, according to FINRA. In a broker comment listed on his BrokerCheck profile for that disclosure, Carver said the client was his 87-year-old uncle and he was a co-signee on his bank account to pay his uncle’s bills and manage expenses. “In return he gave me some compensation for doing this for him,” Carver said.

Carver was then accused of “elder abuse” in a 2018 customer dispute, according to FINRA. As part of that dispute, still pending, the claimant requested damages of $9.3 million.

LifeMark later filed a Form U5 stating Carver would be voluntarily terminated on Dec. 31, 2018, according to FINRA. On June 4, 2019, LifeMark filed an amended Form U5 stating that Carver was the subject of an “investment-related, consumer-initiated, written complaint for events that occurred while Carver was associated” with it, the AWC letter said.

On May 13, 2019, FINRA’s Office of Hearing Officers issued a default decision stating that Carver was suspended from associating with any FINRA member firm in any capacity for seven months and fined $7,500 for willfully failing to timely disclose three tax liens on his Uniform Application for Securities Industry Registration or Transfer (Form U4) and falsely attesting to his employer on an annual questionnaire that he had made required disclosures on his Form U4. That decision became final on June 10, 2019, FINRA said.

Carver “refused to provide information and documents that were requested pursuant to FINRA Rule 8210, in violation of FINRA Rules 8210 and 2010,” according to the AWC letter.

LifeMark didn’t immediately respond to a request for comment. There was no attorney listed for Carver on the letter.

Jeff Berman

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