FINRA Bars Ex-Schwab Broker for Taking Clients’ Social Security Checks

A former Charles Schwab broker has been barred by the Financial Industry Regulatory Authority from associating with any FINRA member firms after he improperly used clients’ Social Security funds for his own benefit and then refused to provide information requested by the regulator while it was investigating him, according to FINRA.

Not cooperating with a FINRA request for information results in a bar from the industry under Rule 8210.

Between June and September 2022, while associated with Schwab, Ethan Christopher Martin “converted and improperly used funds from a married couple who held a joint brokerage account at the firm, one of whom was a senior” client, according to a FINRA letter of acceptance, waiver and consent.

When the clients asked Martin for their account information to initiate direct deposits for their Social Security checks, Martin provided them with the number for his personal Schwab account rather than the clients’ account number. He then allegedly received three electronic deposits of the clients’ Social Security payments, totaling $6,981, which he “retained and used for personal investments and expenditures,” according to FINRA.

Without admitting or denying the regulator’s findings, Martin signed the letter on Aug. 29, consenting to the FINRA bar. In return, FINRA agreed to not bring any future actions against Martin based on the factual findings described in the letter.

Jasmine L. Abraham, counsel for FINRA Department of Enforcement in Rockville, Maryland, signed the letter Tuesday.

“We are disappointed in the conduct of this former representative who did not adhere to the high ethical standards that we expect of our employees,” a Schwab spokesperson told ThinkAdvisor on Friday. “Once we discovered his actions, we terminated his employment, escalated the matter to FINRA, and made the clients whole.”

Martin first became registered as a general securities representative in November 2021 through an association with Schwab, according to his report on FINRA’s BrokerCheck website.

In a Form U5 dated Oct.10, 2022, the firm reported that “Martin was terminated in connection with allegations of the misappropriation of customer funds from the account of a senior investor.”

As a result of his actions, Martin violated FINRA Rules 2150(a) and 2010, the regulator said. He also violated FINRA Rules 8210 and 2010 by failing to provide documents and information requested by FINRA staff in July 2023, FINRA said.

During the period in question, Martin worked as a brokerage service specialist with Schwab and was responsible for answering telephone calls from customers regarding, among other things, establishing direct deposits, according to FINRA.

On May 26, 2022, the married couple contacted Martin at the firm’s customer service phone number, seeking assistance with setting up a direct deposit of monthly social security payments into their joint firm brokerage account. That same day, Martin emailed the clients instructions for setting up a direct deposit, but using his own account number, FINRA said.

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