The Financial Industry Regulatory Authority suspended an ex-Merrill Lynch general securities representative for nine months and fined him $10,000 for not disclosing a felony indictment and allegedly making multiple unauthorized transactions in client accounts, according to FINRA.
On or about March 18, 2015, Sylvester Knox was indicted on, and pleaded not guilty to, a third-degree charge of aggravated assault with bodily injury, FINRA said.
Without admitting or denying the findings, Knox submitted a letter of acceptance, waiver and consent to FINRA last week in which he agreed to the regulator’s sanctions. FINRA accepted the letter Thursday.
Merrill Lynch spokesman Bill Halldin told ThinkAdvisor on Friday that Knox didn’t disclose the felony until March 2017 — ”two months after he was gone from Merrill.”
While his actions were being investigated, Knox voluntarily resigned on Jan. 5, 2017, according to his FINRA’s BrokerCheck report. The disclosure was made by Knox “nearly two years late,” according to the AWC letter.
Unauthorized Trades, 18 Complaints
In a disclosure on BrokerCheck report, Merrill Lynch cited “conduct including engaging in unauthorized transactions in certain client accounts, making misrepresentations to certain clients and conduct inconsistent with firm policies related to client complaints and outside speaking engagements.”
Knox and attorneys at the New York law firm Gusrae Kaplan Nusbaum who represented him in the dispute with FINRA did not immediately respond to requests for comment Friday.
In August 2000, Knox became registered with FINRA as a GSR through his association with Merrill Lynch.
While with the firm, he was the subject of 18 client complaints, according to BrokerCheck. The vast majority of them were in 2016 and involved claims of unauthorized account activity and misrepresentation.
From June 2015 through October 2016, Knox violated FINRA Rule 2010 (governing standards of commercial honor and principles of trade) when he effected 36 transactions with a total principal value of about $1.7 million in three of his customers’ accounts without their authorization or consent for the trades, according to FINRA.
During the same period, Knox also violated NASD Rule 2510(b) and FINRA Rule 2010 by exercising discretionary trading authority and making 36 transactions with a total principal value of about $2 million in the accounts of four clients without first obtaining their written authorization or approval from Merrill to treat the accounts as discretionary, the regulator alleged.
Knox also violated FINRA Rules 1122 and 2010 when he “willfully failed to timely disclose” the March 2015 felony indictment by filing an amended Form U4, according to the FINRA AWC letter.
After leaving Merrill Lynch, Knox went on to become associated as a rep with Advisor Group subsidiary FSC Securities in 2017, but left in 2018.
No reason was cited for his separation from FSC and Advisor Group did not immediately respond to a request for comment.
He is no longer registered as a broker, but is still registered as an RIA, according to the SEC, which says he has been in the business for 30 years and has 30 disclosures.
On June 18, 2020, FINRA made a preliminary determination to recommend that disciplinary action be brought against Knox, alleging he violated FINRA Rules 2010 and 2150(a) for multiple violations that included unauthorized transactions in customer accounts, not disclosing the felony, and misusing customer funds by disbursing funds disguised as dividends, according to BrokerCheck.