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, Douglas A. Rought submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Douglas A. Rought, Respondent (AWC 2010025262801, July 5, 2012).
Rought entered the securities industry in 1987 as an Investment Company Products/Variable Contracts Representative with Nationwide Securities, LLC, where he remained until his November 23, 2010, termination. The AWC asserts that he has no prior disciplinary history.
Up In Flames
According to the AWC, in August 2010, a fire occurred in a residence owned by one of Rought's customers and which was rented by the customer's relative. As these messes often go, it was the relative who apparently started the fire.
Apparently, the customer whose residence was damaged in the fire did a significant amount of insurance business with Rought through Nationwide Mutual Insurance Company ("Nationwide Mutual"), an affiliate of Rought's brokerage firm. In fact, the customer had a Nationwide Mutual policy that covered his fire losses. Not so thankfully, the customer's relative didn't have a policy. The AWC asserts that Rought believed that the relative could have liability for losses or claims from the fire.
At this point, Rought appears to be plodding down the road to Hell. Whatever his good intentions, Rought created documentation that falsely indicated that Nationwide Mutual had issued a policy to the relative - and Rought backdated the documentation he fabricated so as to suggest that the policy had been issued weeks before the fire. As an added fillip, Rought used a firm account to pay the initial premium and generated a receipt that falsely indicated that the customer had paid the premium.
In creating the false policy documents and generating the false receipt, the AWC alleged that Rought violated FINRA Rule 2010 by failing to adhere to high standards of commercial honor and just and equitable principles of trade. In accordance with the terms of the AWC, FINRA imposed upon Rought a $5,000 fine and a one-year suspension from association with any FINRA member in any capacity for a period.
In this modern Wall Street of cross-selling and more products than you could point a stick at, it's not uncommon to find stockbrokers also working as insurance agents. Whether you have your brokerage account at a regional firm such as LPL or a discounter such as Schwab, or you deal with Bank of America,Wells Fargo, or Citigroup, there's a likely chance that you're going to get some solicitation piece from some insurance company that was directed to you by your registered person, the brokerage firm, the bank, or from who knows what list of names that is being sold to who knows how many firms.
In this case, we see how those multiple roles and products can dangerously combine - and in a truly combustible way. In possibly trying to curry favor with a brokerage customer at his FINRA member firm, Rought went over the line in what seems like an effort to defraud his insurance firm. I'm also guessing that the customer had to answer more than a few questions - perhaps from civil and/or criminal investigators - as to what he knew and when he knew it about the whole fabricated policy. In the end, this was a bad idea and a bad plan from day one.