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Regulation and Compliance > Federal Regulation > FINRA

FINRA Bars Broker Accused of Trading in Dead Client’s Account

By Jeff Berman

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What You Need to Know

  • The ex-broker allegedly traded excessively without written authorization in the accounts of multiple clients.
  • He also allegedly forged client signatures on account documents.
  • He then did not cooperate with a FINRA investigation, which is a surefire way to be barred from the industry.

A broker formerly with the Advisor Group member firm SagePoint Financial and Cambridge Investment Research was barred by the Financial Industry Regulatory Authority after he allegedly traded without written authorization in the accounts of multiple clients, including one who had died, and then didn’t cooperate with FINRA’s investigation, the industry self-regulator said Monday.

Without admitting or denying FINRA’s findings, David John Melilli signed a FINRA letter of acceptance, waiver and consent Friday, barring him from associating with any FINRA member firm in all capacities. FINRA signed the letter Monday.

Melilli became a general securities representative through his association with SagePoint in January 2010, according to his report on FINRA’s BrokerCheck website.

But on Aug. 21, 2019, SagePoint filed a Form U5 Uniform Termination Notice on behalf of Melilli. A reason was not given on his report or in the AWC letter, and Advisor Group could not immediately be reached for comment Tuesday.

Melilli became registered with FINRA as through his association with Cambridge in September 2019. But on Feb. 4, 2020, Cambridge filed a Form U5 terminating Melilli’s association with the firm. According to a disclosure on his report dated Jan. 23, 2020, Cambridge said he was dismissed for placing “discretionary trades without authority.”

Cambridge did not immediately respond to a request for comment on Melilli’s being barred.

Client Complaints

Among the other disclosures on Melilli’s BrokerCheck report are two complaints from clients who in 2020 alleged he made unauthorized trades in their accounts. One requested damages of $140,000 and the other $5,000. Both cases are still pending, according to BrokerCheck.

Another client filed a complaint last year, alleging that Melilli “made risky investments that were not fully understood” and “management fees may not have been assessed correctly.” That complaint was denied.

Forgery Also Alleged

In a disclosure dated April 11, 2021, FINRA said it made a “preliminary determination to recommend that disciplinary action be brought against Melilli” for securities violations as a result of his conduct.

Specific alleged actions by Melilli included the unauthorized trading in the account of a deceased client and using discretion without written authorization in client accounts, according to FINRA.

The alleged actions also included forging client signatures on account documents and causing his member firm to maintain inaccurate books and records, using text messages to conduct securities-related business, and opening and maintaining outside securities accounts without the prior written consent of member firms, FINRA said.

Lack of Cooperation

Last month, in connection with FINRA’s investigation into, among other things, whether Melilli exercised discretion without written authorization in a client’s account, FINRA staff sent a request to Melilli for documents and information, it said. Melilli’s response was due Oct. 25.

However, as stated on Melilli’s phone call with FINRA staff on Nov. 3, and by signing the AWC letter, Melilli acknowledged that he had received FINRA’s request but would not produce the documents and information requested at any time. By refusing to produce the documents and information requested, he violated FINRA Rules 8210 and 2010, FINRA alleged.

Not cooperating with a FINRA investigation is a surefire way for a broker to be barred.

(Photo: Shutterstock)

Jeff Berman

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