An irreverent Wall Street Blog
by Bill Singer
 
Join BrokeAndBroker blog on Facebook  Follow the BrokeAndBroker blog on Twitter  Connect with BrokeAndBroker on LinkedIn  Join Bill Singer on Google+  Subscribe to RSS Feed

Stockbroker Victimized By Husband's Withdrawals From Wife's and Child's Accounts
Written: July 19, 2012

Long Wedding Dress for Couple with Flowers

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, James Hugh Caperton, Jr. submitted a Letter of Acceptance, Waiver and Consent (“AWC”), which FINRA accepted. In the Matter of James Hugh Caperton, Jr., Respondent (AWC 2010023836801,July 11,2012).

Caperton entered the securities industry in August 1994, and in January 2004 was employed by FINRA member firm Investment Professionals, Inc. (“IPI”) as a general securities representative until December 2008.  On July 22, 2010, IPI filed an Amended Uniform Termination Notice for Securities Industry Registration (“Amended Form U5″) on behalf of Caperton disclosing a customer complaint alleging that the husband of the customer had been permitted to make distributions from her account without her knowledge or authorization.

In 2005, a customer opened an individual account in her name and also a custodial account for her daughter through Caperton.  At the time these accounts were open, the customer’s husband was present.

Through December 2008, Caperton serviced the wife’s and daughter’s account, during which time there were 28 withdrawals requested by the customer’s husband totaling $61,246.90 and $16,100, respectively in the wife’s and daughter’s accounts. Caperton accepted the husband’s instructions to make the withdrawals and submitted those requests to IPI.  Thereafter, checks were issued to the wife and sent to her address of record – however, at no time had Caperton obtained from the wife a Letter of Authorization (“LOA”) or a Power of Attorney  (“POA”) permitting her husband to issue instructions for her or her daughter’s accounts.  Consequently, the wife never authorized the 28 withdrawals.

FINRA deemed Caperton’s conduct as described above to constitute violations of NASD Conduct Rule 2110; and, in accordance with the terms of the AWC, FINRA imposed upon Caperton a $5,000 fine and a three-month suspension from association with any FINRA member firm in all capacities.

Bill Singer‘s Comment

Time and time again, these marital scenarios arise with often unanticipated results and troubling consequences to the servicing registered person.  I have often compared these matters to  the “Boiling Frog” theory, which posits that a frog placed immediately into a pot of boiling water will try to jump out. In contrast, if a frog is placed in room-temperature water, which is gradually heated to a boil, the relaxed frog will kick back, stretch out, and calmly allow itself to be boiled to death.

Caperton’s situation seems to support that theBoiling Frog Theory has some validity when it comes to the gradual increase in the degrees of compliance problems for stockbrokers. In fairness to the respondent in this case, a lot of brokers likely would not have sensed that their actions were improper.  It’s human nature to “assume” that if one spouse instructs you — 28 times over an extended period of time — to withdraw something in the neighborhood of $77,000 from the other spouse’s and a child’s accounts, that if anything were amiss, the victimized spouse would be screaming bloody murder after the first few allegedly unauthorized withdrawals.  On the other hand, good compliance policies anticipate that human nature, being what it is, we need to protect ourselves from the possibilities that all is not what it seems and that even married couples and parents may do wrong.  Hence, brokerage firms require that an LOA or POA be on file to permit anyone other than the account holder to give instructions to the servicing broker — and that means anyone!

When a registered person should have recognized that he or she crossed the line of compliant behavior is often far easier to discern in hindsight than when one is rambling and ambling into danger. Nor is this a problem only found at indie and regional firms — or a firms such as IPI. To the contrary, it’s a challenge faced by brokers at Merrill LynchMorgan StanleyWells Fargo, JP Morgan, as well as smaller firms. Not realizing that the room-temperature water is beginning to dangerously bubble around you is a common danger for many registered persons.

For additional cases involving marital problems and their impact upon registered persons and their firms, read these “Street Sweeper” columns:

Stockbroker’s Friend, Cousin, And Ex-Wife Collide Into One Regulatory Mess (June 6, 2012)

  • A broker borrows money from a friend to buy-out his ex-wife’s share of their home

Crumbling Marriage Collapses On Citigroup In Dispute Over Wife’s Withdrawals (June 5, 2012)

  • A customer alleges that his ex-wife gutted his brokerage account and blames the broker and firm

Notary Duped Into Signing Off On Insurance Loans Fined And Suspended By FINRA (June 1, 2012)

  • A  Merrill, Lynch, Pierce, Fenner & Smith, Inc. registered person gets duped into notarizing a husband’s and wife’s signatures on a life insurance loan request.

Hubby Dips Into Wife’s Retirement Account And She Successfully Sues Brokerage Firm (May 21, 2012)

  • Brokerage firm sued for allowing customer’s husband to make withdrawals

Mother And Daughter’s Convenient Joint Account Leads to Odd Arbitration Win Against Wells Fargo (December 9, 2011)

  • A quirky Decision that seems to suggest that a Joint Account between mother and daughter wasn’t really a joint account but for the fact that it was — but, you know, not really.

Estate Sues Over Lawyer’s Designation of Ex-Wife as IRA Beneficiary (May 17, 2011)

  • A truly superb FINRA Arbitration Decision involving the issue of a divorced couple’s IRA account at Capital One Investment Services LLC.

 
[^top^]

Previous Entries
April 1, 2015
On March 31, 2015, the Department of Justice announced that it had issued a new policy to restrict the use of asset forfeiture in structuring offenses... Read On
April 1, 2015
At first blush, the FINRA AWC discussed in today's BrokeAndBroker.com Blog seems a commendable effort by FINRA to delve into matters involving a vic... Read On
March 31, 2015
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page BrokeAndBroker.com Jobs#wallstreetjobs@brokeandbrokerNOTICE TO EMPLOYERS: BrokeA... Read On
March 30, 2015
For 20 years, one registered person timely and fully disclosed her outside business activity to her employer FINRA member firm. Inexplicably, a few ye... Read On
March 28, 2015
FULL TEXT Complaints And Answers in Pao v. Kleiner PerkinsOn March 27, 2015, after a month of trial testimony and three days of deliberations, a Calif... Read On
March 27, 2015
On March 27, 2015, after a month of trial testimony and three days of deliberations, a California Superior Court jury found that Plaintiff Ellen Pao... Read On
March 27, 2015
In today's BrokeAndBroker.com Blog, we have what I often refer to as a "yes, but" case. I'm sure you have encountered such ambivalence with many matte... Read On
March 26, 2015
Wall Street is supposed to be protected by smoke detectors in the form of endless amounts of rules and regulations, massive volumes of written superv... Read On
BrokeAndBroker.com Job Search


Related Topics
Tag Cloud
Internet FINRA Bear Stearns Bloomberg SEC NASD NYSE Money Laundering Due Diligence Waiver Forbes China Chepucavage Broy Woody Allen Madoff NAC NPR Marketplace Stanford UBS Ketchum Antitrust NASDAQ RRBDLAW Schapiro Bill Singer BrokerAndBroker USERRA Brokeandbroker.com Morgan Keegan Arbitration Counterclaim BrokeAndBroker.com Khuzami BrokeAndBroker Aleynikov Goldman Sachs brokeandbroker Promissory Note U4 Bill SInger EFL CFTC Huffington Post Flash Crash arbitration RBC RRBDLAW.com Ponzi Affinity Fraud Wachovia Raymond James BrokeandBroker.com Expungement Fraud Securities Fraud Outside Business Activity Registered Rep Magazine FOREX BrokerAndBroker.com FBI Banc of America Pro Se PCAOB Supreme Court Morgan Stanley Smith Barney E*Trade Margin email Galleon Penson U5 Defamation Protocol Wells Fargo Punitive Damages Citigroup Merrill Lynch ARS Employee Forgivable Loan Street Legal Morgan Stanley AWC Fidelity Bankruptcy Broke And Broker HFT David Sobel Day Trading Ameriprise Commissions Spouse Schwab Commission CRD Kenneth Starr IRS CNBC Complaint ATM Skimming Hacking Phishing Malware Naskovets Poteroba Koval Lincoln Financial Selling Away Outside Business Activities Rakoff 2nd Circuit Second Circuit IRA 401k Forgery Tax RRBDlaw.com Email Netschi Moore Whistleblower Street Sweeper Countrywide Tran Bharara Facebook Online Severance Bonus Eligibility Rule TD Ameritrade Hedge Fund SAC 1099 Smith Barney Lehman Brothers SIPC IC3 Scottrade Lehman JPMorgan Chase Hertz Insider Trading Bank of America Department of Justice Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Thain Walter Bid Rigging Real Estate Discrimination Wall Street Statutory Disqualification Form U4 Form U5 Indictment Boyland DOJ Corruption bill singer FTC Do Not Call FINRA Arbitration Costa Rica Settlement LIBOR Varney Plea Rule 8210 Eligibility RRBDlaw Appeal Fowler LPL Johnson Cellphone US Airways JPM Reg D MSSB Vault Loan SunTrust Discovery Employment Rosenthal Recruiting Lawyer Trading Platform JP Morgan Employment Tuesday Wrongful Termination Bank Guarantee WaMu Solicitation REIT Martin Credit Cards Rule 3050 Away Account Credit Repair PN Advisor Placement Group Fifth Amendment Forex Mortgage Private Placement Moon CGMI Failure to Supervise Merrill Anderson Exam Lee Borrowing Tax Lien Conversion Oppenheimer Wedbush Felony Misdemeanor Expenses ING Lien OTR Estate Jobs Florida Credit Card Elderly Flash Drive Annuity Expense Reimbursement FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker Deferred Compensation RIA Prison Disclosure NASAA Aguilar FCPA Subway Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank Hospital Due Process God HSBC Private Placements Eric Stein Wire Fraud FINOP CCO Compliance Audit Joshua Brown Backstage Wall Street Obstruction of Justice Reuters Retaliation Variable Annuity Arbitraiton Outside Account Options Telephone Wine Series 7 Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud Retirement OBA Equity Indexed Annuities EIA Disability MetLife Continuing Education Cheating OIP Tax Liens Willful CE Unregistered Impersonation Annuities BBVA Business Expenses ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Impersonator Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks RMBS AML PST Solicited Unsolicited Congress SRO Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement Money Market employment jobs Great Recession Chase Investment Services Arrest Barclays Liens Failure To Supervise Apple Time And Price T&P Willfully Husband Letter of Authorization LOA Sexism Debit Card Knight Test Practice Sale Unfair Competition Signature Judgments Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Charge Sexist NML Argentina Embezzlement Silver Investor Alert Judgment Bank Fraud Deceased Bill Singer BrokeAndBroker TSSB OHO Leveraged ETF Mary Jo White Trustee Motion To Dismiss Frumento Conspiracy 6th Circuit Proctor Rule 3040 Class Action Beneficiary NYAG Schneiderman 11th Circuit Insurance Gallagher White Self Regulation Short Sale Compromise Website Rule 2010 TRO Supervision Vacatur Remand SDNY Rule 12206 BrokeAndBroker Bill Singer Piwowar Stifel Rule 1122 Article V signature Confidential Inside Information Reg SP VA Regulation SP Customer Rule 3270 Rule 3240 Annual Compliance Questionnaire OWB 2Cir Red Flags Payroll Stockbrokers Cybercrime Loans Altered Records
 
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+