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Wall Street's Women Set Up For Regulatory Failure
Written: July 25, 2012

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, Donna Katherine Monk submitted a Letter of Acceptance, Waiver and Consent (“AWC”), which FINRA accepted. In the Matter of Donna Katherine Monk, Respondent (AWC 20100213555, July 16, 2012).

Background

Monk entered the securities industry in 1994, when she became employed as a client associate at Merrill, Lynch, Pierce, Fenner & Smith Incorporated; and, thereafter, in 1996, she became registered as a General Securities Representative at Merrill, where she remained until her resignation in July 2002.  Subsequently, she became a registered Independent Contractor with Raymond James & Associates until she was terminated on January 11, 2010. On February 25, 2010, Monk became re-employed at Merrill, where she is a registered associate.  The AWC asserts that Monk had no prior disciplinary history.

The New Team

In July 2002, Monk joined with two former Merrill brokers who are identified in the AWC as “JMR” and “RRJ,”and, in conjunction, the three acted as Raymond James’ Independent Contractors from their own three-person branch office in Charleston, WV. With Raymond James’ consent, JMR and RRJ formed a limited liability company of which they were the only two LLC members with Monk as the sole employee.

Monk primarily functioned as the office administrator while JMR (the branch office manager) and RRJ were responsible for developing securities business. Generally, Monk answered telephones, handled correspondence, and other customer service duties.  Also, Monk served as registered representative for a limited number of her family’s Raymond James securities accounts.

ST’s LOAs

On June 4, 2008, ST, a client of RRJ, signed an Letter of Authorization (“LOA”) authorizing the issuance of a certified check in the amount of $20,098 made payable to a real estate settlement firm retained by the client in connection with a home purchase. Because the closing was scheduled for early in the day on June 6, the client had requested overnight delivery of the check.

On June 5, 2008, RRJ and Monk realized that the overnight package would not arrive in time and RRJ attempted to contact ST in order to get her to return to the office to sign a document authorizing the sending of the funds via wire transfer – unfortunately, ST was unavailable when the contacts were initiated.  Later that day, Monk contacted the client and explained the delivery problem and the need for the wire transfer.  Accordingly, the client verbally authorized Monk to send the funds via wire transfer, but Monk was unable to timely obtain the customer’s signature on a new LOA authorizing the wire.

At this juncture, the signed LOA on file was limited to authorizing the issuance of a check, which was contemplated to be delivered by overnight delivery. Although the client had verbally authorized the alternative delivery by wire transfer, the customer had not signed a new LOA authorizing the use wiring the funds. Faced with this dilemma, Monk copied ST’s signature from the original LOA and pasted the signature onto a new LOA instructing the Firm to wire $20,098 to the closing agent.

Both of ST’s LOAs required the signature of Branch Manager JMR, which Monk had signed.  According to the AWC, Monk understood that she had authority to sign the Branch Manager’s name when necessary for business reasons.

SIDE BAR:It appears that the AWC intended to imply that Monk’s belief that she could sign on behalf of her manager was erroneous, or that Monk should have known that it was improper and likely a rule violation for her to sign on behalf of JMR. Unfortunately, the AWC fails to clarify precisely what the issue was here and we are, at best, left to infer.  Clearly, an AWC should present the facts and the allegations with more precision.

Family LOAs

In addition to the LOA issues involving ST’s transaction, the AWC alleges that from April 3, 2005 through January 15, 2008, Monk initiated nine LOAs to transfer funds from the accounts of two immediate family members who were customers. Monk signed the customers’ names on the nine LOAs in accordance with their explicit instruction; however, she again signed the Branch Manager’s name to affirm his supervisory approval. These LOAs pertained to five transfers between accounts of the immediate family members; and a further four transfers of funds to Monk’s account for the purpose of reimburse her for monies owed by the family members:

(1) $44.72 on September 26, 2005,

(2) $67.60 on July 23, 2007,

(3) $28 on August 27, 2007, and

(4) $50 on January 15, 2008.

IRS Forms 941

The AWC alleges that from 2003 to 2009, Monk signed JMR’s name on behalf of the LLC on approximately twenty IRS Forms 941: Employer’s Quarterly Federal Tax Return. She then submitted the forms to the IRS.  It appears that the AWC is implying that Monk lacked prior written authorization to specifically sign the manager’s name on these IRS forms.

Sanctions

The AWC alleges that by signing and affixing customer and manager’s signatures on the LOAs and IRS forms, Monk violated NASD Rule 2110 and FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon Monk a $5,000 fine and a three-month suspension.

A Word From The Respondent

In response to FINRA’s policy of permitting Respondent’s the opportunity to submit a “Statement of Corrective Action” (which does not constitute factual or legal findings by FINRA nor reflects its or its staff’s views), Monk submitted the following:

Statement of Corrective Action

I understand the gravity and significance of my prior actions and the investigation process alone has been sufficient in deterring me from engaging in any similar misguided conduct in the future. I will never, never allow myself to be placed in this type of situation again. Also, the compliance and supervision at Merrill Lynch is far more diligence and supportive. I can refuse violative conduct and not be threaten with unemployment as was the case at JMR LLC. Merrill Lynch has processes in place that better serve the client especially transactions less than $50,000. They have in place voice instructions with proper client authentication and recorded phone lines. I have been a “Far Exceeds” employee for Merrill Lynch during all 10+ years.

I have kept Merrill abreast of this investigation and was told that my U4 will be updated.

Donna K Monk

Respondent

Bill Singer‘s Comment

In a “Street Sweeper” column: Morgan Stanley Smith Barney Female Employee Suspended and Fined for Unauthorized Signatures (September 23, 2011), I discussed a similar case: In the Matter of Carmela L. Knieriem, Respondent (AWC/20100247249, July 12, 2011), in which Carmela Knieriem, another industry female, a 32-year  industry veteran, was employed at Morgan Stanley Smith Barney as a registered customer service associate assigned to assist branch financial advisors, branch managers, and other employees with administrative duties. As part of those duties, the branch manager and other financial advisors often asked Knieriem to prepare certain internal administrative forms in documenting and processing requests that the branch manager or financial advisor received verbally from a customer (the “Verbal Forms”).

The AWC alleged that Knieriem prepared a number of Verbal Forms for approval and signed the names of the relevant MSSB employee who had received the verbal instruction. The AWC alleged that in violation of FINRA Rule 2010, on ten occasions between March and September 2010, Knieriem signed, without authorization, the names of her branch manager and other financial advisors to Verbal Forms:

  • On six occasions, at the request of financial advisor EP, Knieriem was asked to prepare an instruction form documenting a customer’s verbal request for the:
    • release of account statements to a third party;
    • transfer $3,505.00 from the customer’s account;
    • transfer $75,000.00 from the customer’s account
    • journal funds between the customer’s accounts (twice); and
    • issuance of a check for $75,397.22 from the customer’s account.
  • On one occasion, at the request of financial advisor GT, Knieriem was asked to prepare an instruction form documenting a customer’s verbal request to stop payment on a check from his account.
  • On one occasion, at the request of financial advisor CL, Knieriem was asked to prepare an instruction form documenting a customer’s verbal request to issue a check for $95.62 from the customer’s account
  • On two occasions, at the request of branch manager RL, Knieriem was asked to prepare an instruction form documenting a customer’s verbal request to journal funds between the customer’s accounts.

Accordingly, FINRA charged Knieriem with violating FINRA Rule 2010. Pursuant to the terms of the AWC, FINRA imposed upon Knieriem a $5,000 fine and 60-day suspension in all capacities from the securities industry.

A Tinge of Sexism?

Say what?  How does FINRA justify giving Knieriem a $5,000 fine and 60-day suspension but Monk gets a $5,000 fine and a 90-day suspension?  I’m not sure that I understand why there is a 30-day disparity between the two cases. Moreover, both women are respectively 32- and 18-year industry veterans with no prior regulatory histories.  Please consider my commentary in Knierem and consider it pretty much the same broadside on Monk’s behalf:

[M]oreover, for what it’s worth, Wall Street hasn’t exactly been a worker’s paradise for many of its women.

As I and many other industry commentators have long noted, slightly more than 50% of the U.S. population is female but when it comes to the profitable jobs on Wall Street — traders, brokers, and management — the numbers of women in such jobs are not proportionate. Of course, when it comes to receptionists, secretaries, sales assistants, back-office, and Human Resources, well, you know, there always seem to be lots of women, often far more than men. Although that’s not solely Wall Street’s shame because that disproportionate participation carries over to many industries and professions, it is still a sad commentary on how much further we still need to go in terms of equality.  READ: “Bill Singer Replies to SEC Commissioner Aguialar’s Call For Diversity (“Street Sweeper”, May 4, 2011).

In this FINRA disciplinary case, Knieriem, a 32-year veteran, was charged with engaging in misconduct during a six-month period in 2010. At the request of four registered persons, she allegedly prepared ten Verbal Forms, and then she signed the names of four registered persons without their authorization or that of MSSB. The four registered persons asked Knieriem to prepare the Verbal Forms — she’s not charged with fabricating those forms on her own initiative; it’s solely the act of the purportedly unauthorized signing.

And not one of those four registered persons had an inkling that Knieriem was signing their names? How the hell did those folks think that the customers’ verbal requests got processed if they didn’t sign the forms? And MSSB was shocked, shocked, I say, to learn that, omigod!, branch assistants are filling out forms and signing the names of brokers to those forms when the company’s rules specifically prohibit such a practice? As if such a practice doesn’t occur everyday at virtually every branch office at virtually every brokerage firm? Hey, honey, do me a favor, take care of this — I gotta get this processed ASAP. 

As if such a practice doesn’t occur, in some fashion, at FINRA itself?

I have long expressed my approval, even if sometimes grudgingly, for FINRA’s enforcement of its rules and policies against forgeries. I reiterate that support without any ifs or buts. However — ah, there is still that — in this case, I think some mitigation was warranted before FINRA slammed Knieriem into the mud.  I mean, seriously, a $5,000 fine and a 60-day suspension on top of Knieriem losing her job?

Next time, maybe someone at FINRA might sit down, scribble some words in the dirt, and tell Knieriem to get on with her life and not to sign anyone’s name to any documents again?  There are lots of stones scattered on Wall Street.  This one did not need to be thrown.



Topics: FINRA  Women  Sexism  Bill Singer  BrokeAndBroker  
 
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