by Bill Singer
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority (“FINRA”), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Rochelle Leininger submitted a Letter of Acceptance, Waiver and Consent (“AWC”), which FINRA accepted. In the Matter of Rochelle Leininger, Respondent (AWC 2010024175201, May 29, 2012).
Leininger entered the securities industry as an employee of Merrill, Lynch, Pierce, Fenner & Smith, Inc. in November 1996, and subsequently obtained a Series 7 in 1999 and a Series 66 in 2003. The firm terminated her on August 23, 2010.
Bill SingerContributor
During the relevant times in this matter, Leininger was a California notary public. In September 2007, a former colleague registered at another firm asked Leininger to notarize customers’ signatures on three loan requests from their life insurance policies. Apparently, the former colleague assured Leininger that the three customers had personally signed the documents; moreover, the AWC alleges that Leininger knew the three customers.
Unknown to Leininger, her former colleague had forged the customers’ signatures on the loan requests. Leininger notarized the doucments by attesting to the veracity of the signatures. Notably, the three customers were not present before her when she executed the notarizations and there is no indication that Leininger personally attempted to contact each of those individuals prior to affixing her seal and signature. Thereafter, she faxed the notarized documents to the Hartford Life Insurance Company, which processed the requests without the customers’ prior knowledge and sent the funds to the former colleague. The AWC alleges that the former colleague misappropriated the funds.
FINRA deemed that Leininger’s notarizations violated NASD Rule 2110, which requires the observance of high standards of commercial honor and just and equitable principles of trade. According to the terms of the AWC, Leininger was fined $5,000 and suspended for 90 days from association with any FINRA member firm in any capacity.
Bill Singer’s Comment
I publish this case to remind all brokerage industry employees who are also notaries that we are living in tough times, which prompt folks to do desperate things. Your friends, your pals, your colleagues, your family – sometimes you just never really know what’s going on in their personal lives. If you want to dig into your own pocket and lend a beleaguered buddy a few bucks, that’s one thing. But when someone asks you to bend the rules because they forgot to get some paperwork or they’re in a rush or the client is gonna kill them if they don’t get this out, be afraid, be very afraid. Notably, never, ever, notarize a document that isn’t signed in front of you by someone whose identity you’ve confirmed. If you’re lucky, in most states, that act of stupidity could result in a fine and/or loss of your notary commission; however, in some states, depending upon what you knew and what you notarized, you could be charged with a felony.
It’s easy enough to feel sympathy for Leininger. She was duped by a former colleague into doing a “who’s gonna know” favor. She likely took dangerously false comfort from the fact that she apparently knew the three customers. Notwithstanding, this seems a bit of a stretch for a self-regulatory organization to charge a notary for false notarizations — there are state laws to address such misconduct. On the other hand, what Leininger did was wrong and could easily have caused dramatic harm.
Many years ago when I served as a notary for a brokerage firm, a senior executive came into my office and asked me to notarize a real estate document that had his and his wife’s signature already on it. He became irate when I refused to affix my notary seal and signature, and he actually went into my boss, the General Counsel, and tried to get me fired. A few months later, it turned out that this executive had been in the midst of a bitter divorce and had forged his wife’s signature on a number of documents in an effort to transfer some assets. Ultimately, I kept my job and the forger lost his.