The Financial Industry Regulatory Authority sanctioned a former Summit Brokerage Services representative after he altered customers’ documents, according to FINRA.
Without admitting or denying the findings, John Stuart Crain signed a FINRA letter of acceptance, waiver and consent Feb. 25 in which he agreed to a three-month suspension from associating with any FINRA member firm and a $5,000 fine. FINRA accepted the letter Friday.
Crain is currently associated with FINRA member Chapin Davis Investments, according to his profile on FINRA’s BrokerCheck website.
Cetera Financial broker-dealer Summit, Chapin Davis and Gregory T. Lawrence, a partner at Lawrence Law in Baltimore, Maryland, who represented Crain in the dispute with FINRA, did not immediately respond to requests for comment Tuesday.
Crain entered the securities industry in 1996, when he became registered with FINRA as a general securities representative via his association with Morgan Stanley. In December 2002, he became registered as a GSR and general securities principal via his association with Summit, where he remained for 15 years.
In October 2012, Summit warned Crain that altering customers’ forms was prohibited by the firm, after discovering a blank customer-signed document in his files, according to the FINRA AWC letter.
However, from March 2017 through February 2018, Crain asked seven of his Summit customers to sign a total of nine blank or incomplete documents and then return them to him for completion, FINRA said. Crain then altered those forms by filling in the missing information and submitted them as originals to Summit, FINRA said.
The customers understood that Crain would add the missing information and all the information that Crain added to the documents was accurate, according to the FINRA AWC letter. Crain submitted the documents as originals to Summit “to effect transactions, all of which were requested by the customers,” FINRA said. Regardless, his actions still violated FINRA and Summit rules.
Summit discharged Crain in February 2018 and filed a Form U5 termination notice March 6, 2018, reporting that the rep’s employment was terminated for accepting “incomplete forms signed by clients,” according to the FINRA AWC letter.
In a comment on his BrokerCheck profile, Crain explained that a client of his passed away Feb. 14, 2018, and he emailed an IRA Beneficiary Form and Letter of Authorization Form for that client’s beneficiary and spouse to sign to start the process of moving her joint account to her single account, as well as to claim assets of an IRA and Roth IRA.
One day later, on Feb. 20, 2018, the client faxed to the compliance office the signed blank forms that she did not complete, Crain said in the comment. The firm’s compliance department rejected them and called him to ask if he ever did that before with customers’ documents, he recalled, adding he replied that he did not recall doing so. Crain then filled out the forms for the client and she signed the forms and faxed it to the firm’s compliance department, he said.
There was, however, no explanation by Crain included about the multiple other clients FINRA claimed he did the same thing for.
FINRA said he violated FINRA Rule 2010, governing standards of commercial honor and principles of trade.
Crain’s suspension is scheduled to start April 6 and end July 5, according to BrokerCheck.
— Check out FINRA Suspends Ex-Morgan Stanley Rep Over Gunsmith Business on ThinkAdvisor.