May 13, 2013
Although a trifecta in horse racing is a wonderful thing to win, when dealing with Wall Street regulators, stockbrokers ought not be betting their career on hitting the jackpot of three separate violations. In this case, FINRA finds the winning ticket of conversion, borrowing, and undisclosed settlement -- for the broker, it's the equivalent of getting scratched.
A Cascade of Compliance No-No's
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, Timothy R. Ward submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Timothy R. Ward, Respondent (AWC 2013036640801, May 9, 2013).
Ward first became registered in 1994. From 1996 through July 2008, he was registered with five FINRA member firms; and in July 2008, he registered with Investment Professionals, Inc. ("IPI"), where he remained until his April 15, 2013 termination.
Around October 2010, Ward allegedly solicited two customers to buy a mutual fund. The customers gave Ward $10,000 in cash to invest in the mutual fund; however, he converted the funds for his own personal use. Ward provided the customers with false quarterly account statements, which showed that the funds had been invested in the mutual fund.
In November 2012, without prior written notice to IPI or with the firm's approval, Ward allegedly borrowed at least $10,000 in total from three IPI customers in violation of the firm's written policy prohibiting customer loans.
Show: Undisclosed Settlement
In November 2012, an IPI customer purchased a variable annuity contract for $52,000. Apparently, the customer misunderstood certain terms of the product and decided to terminate the contract; however, the "free look" period had expired and triggered $4,454.54 in surrender charges. On February 6, 2013, and March 12, 2013, Ward allegedly paid the customer in two cashier checks the total of the surrender charges. FINRA deemed these payments as constituting settlements of a customer complaint without prior notice to the IPI.
As a result of the foregoing conduct involving alleged acts of conversion, improper borrowing, and undisclosed settlements, and in accordance with the terms of the AWC, FINRA imposed upon Ward a Bar.