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, Kristin Ocampo submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Kristin Ocampo, Respondent (AWC 2011029075901, March 13, 2013).
In August 2010, Ocampo entered the securities industry as a Junior Client Associate with Merrill Lynch, Pierce, Fenner and Smith, Incorporated ("Merrill Lynch") and first became registered in February 2011. Online FINRA records as of March 19, 2013, indicate that Ocampo was discharged on August 11, 2011.
Ocampo's primary role as a Junior Client Associateat Merrill Lynch was to provide administrative and operations support for a team of stockbrokers, and among her normal tasks was to process wire transfer requests, respond to balance inquiries, and open new accounts.
At Funeral Stop Urgent Stop Wire Cash
On the morning of August 8, 2011, the AWC alleges that Ocampo received an email from a Merrill Lynch customer's email account claiming that he was at his brother's funeral service and had "an urgent outstanding transaction." The customer sent specific wire instructions to Ocampo-including the name and address of a Nicosia,Cyprus bank - and requested that Ocampo wire $63,250 from the customer's 401(k) account to the bank account number provided.
Allegedly, Ocampo emailed the customer that she would only be able to proceed following her receipt of a Letter of Authorization ("LOA") for the 401(k) distribution; in response, the customer sent a signed LOA with what appeared to be a conforming signature matching that in Merrill Lynch's files.
In furtherance of processing the customer's wire transfer request, among the information that Ocampo allegedly entered into Merrill Lynch's computer system was the dollar amount of the wire, the destination, and the routing information. In the comments section of the Wire Transfer Form, Ocampo noted "client's identity was verified by last 4 of SSN and DOB . . . ."
SIDE BAR: You know where Ocampo allegedly informed Merrill Lynch that she had verified the client's information? Well, in fact, Ocampo hadnot verified the customer's social security number or date of birth. Maybe that was a big deal. Maybe not. It's all gonna depend on how everything turns out, right?
A Manager Saves The Day
At day's end on August 8, 2011, the customer's wire transfer request was apparently awaiting processing through Merrill Lynch's computer system, and bolstered by Ocampo's false assurance that she had verified the customer's information. The 401(k) wire transfer to Cyprus looked good to go. Uh oh.
On August 9, 2011, Ocampo's manager asked a Senior Client Associate on Ocampo's team to contact the customer. Why? Sadly, the AWC fails to inform us as to why the manager turned to a Senior Client Associate - did the superior not trust Ocampo or was this a situation where a more experienced Senior Client Associate's double-checking just seemed like the right thing to do? Unfortunately, your guess is as good as mine. Perhaps not the comprehensive explanation that should be forthcoming from a Wall Street regulator, but that's where FINRA leaves us with this AWC.
One thing is for sure: Kudos to the Merrill Lynch manager for following better compliance practices and not sleepwalking through supervision.
Turns out that the Senior Client Associate spoke with the customer and, surprise, surprise, surprise - the customer had not made any wire transfer request! Before the funds were withdrawn from the 401(k) and wired to some bogus account in Cyprus, the transfer was cancelled. A diligent Merrill Lynch manager saved the day. The disaster of withdrawing funds from a client's account and shipping them to some black hole overseas was averted.
The Cost Of Misplaced Trust
FINRA alleged that Ocampo's preparation of the Wire Transfer Form falsely stating that she had verified the customer's social security number and date of birth; and her causing Merrill Lynch to maintain false books and records constituted violations of FINRA Rule 2010 and NASD Rule 3110.
In accordance with the terms of the AWC, FINRA imposed upon Ocampo a $7,500 fine and a 45-day suspension from association with any FINRA member firm in all capacities
Bill Singer's Comment
Frankly, a wonderful story that demonstrates how Wall Street compliance and in-house supervision should work. Absent the hands-on oversight of one Merrill Lynch manager, a customer would have been victimized, some bad guys would have gotten away with a scam, and a brokerage firm would have had to make up the unauthorized transfer of funds.
Whatever tipped off this manager - and how helpful it would have been to be told what those red flags were - it is reassuring to see that not everyone on Wall Street is asleep at the switch. If you want to understand why you need effective compliance policies at brokerage firms and why you need to hire competent folks to supervise, this is a fact pattern that offers the convincing explanation.
As to the $7,500 fine and 45-day suspension, FINRA seems on very solid ground given the short cuts taken and the lapses in judgment by Ocampo. Hopefully, this AWC will serve as a teachable moment for other FINRA member firms.
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