The Financial Industry Regulatory Authority has suspended an ex-Schwab rep for two years, fined him $15,000 and ordered him to pay $80,747 for concealing a profit-sharing agreement with a Schwab client.
According to FINRA's order, Daniel Michael Roper registered with FINRA in March 2019 through an association with Charles Schwab & Co. Inc.
On Sept. 15, 2023, Schwab filed a Uniform Termination Notice of Securities Industry Registration, or Form U5, on Roper's behalf after he voluntarily terminated his association with the firm on Aug. 30, 2023.
The Form U5 disclosed that a customer had filed an arbitration alleging, among other things, that Roper "trade[d] the [customer's] account, in exchange for a share of the profits," the order states.
From October 2020 through January 2022, Roper entered more than 14,000 equity trades and 6,300 options trades in his client's self-directed Schwab retail account for a share of the customer's profits, with written authorization from neither Schwab nor the client, according to the order.
"Roper violated FINRA Rules 2150(c) and 2010" through this conduct, FINRA's order states. "He also violated FINRA Rules 3260(b) and 2010 by exercising discretion in the customer's account in connection with more than 20,300 trades without receiving written authorization from the customer or Schwab accepting the account as discretionary."
In addition, FINRA said, Roper used unapproved communication channels to conceal his conduct.
Roper is suspended in all capacities for two years, fined $15,000, ordered to pay $80,747 plus interest in disgorgement, and required to re-qualify by examination before registering as a general securities rep.
Personal Texts, Emails
"Roper knew that the profit-sharing agreement violated firm policies, and took numerous steps to conceal his conduct from Schwab, including by accessing the customer's Schwab account using the customer's login credentials; communicating with the customer by text messages on his personal device and through his personal email address; and receiving profit-sharing payments that were transferred from an account that the customer held away from Schwab to a checking account that Roper held away from Schwab," according to the order.
Roper did not obtain prior written authorization from the customer or make any financial contributions to the customer's account.
In total, Roper received $80,747 in profit-sharing payments from the customer.
In 2021 and 2022, "Roper also attested in Schwab's annual compliance questionnaires that his disclosures were complete and accurate, even though Roper did not disclose the customer's account as a securities account maintained with Schwab over which Roper exercised discretion," the order continues.
From October 2020 through January 2022, "Roper exchanged thousands of text messages and emails with the customer with whom he had a profit-sharing agreement using his personal mobile device," the order states.
"These messages and emails included, among other things, communications about account performance information, the trades that Roper entered in the customer's account, and profit-sharing payments that the customer made to Roper."
A Schwab spokesperson said: “At Schwab, we hold ourselves to the highest standards of ethical conduct. The actions of this former representative fell short of those expectations.”
Credit: Diego M. Radzinschi/ALM
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