June 13, 2013
You got your brokerage customer with a will and/or a trust. You got your customer's stockbroker, who becomes an executor, a trustee, or a beneficiary. And, finally, you got a nightmare of Wall Street regulatory and compliance problems, as this recent case shows.
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, Warren L. Troutman submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Warren L. Troutman, Respondent (AWC 2011029186101, June 5, 2013).
In 1958, Troutman became associated with MetLife Securities, Inc. and Metropolitan Life Insurance Company in May 1958. The AWC asserts that Troutman had no prior formal disciplinary history.
Between 2008 and June 2011, Troutman was the registered representative for a customer for whom the stockbroker was listed as executor of the customer's will and also maintained a power of attorney. In 2011, Troutman allegedly asked the customer to list him as a $20,000 beneficiary in the will, but the customer declined. For whatever reason, it seems like the broker's request may have upset the customer because in July 2011, the customer removed Troutman as executor of his will and revoked the power of attorney.
Battle of Wills
The AWC alleges that upon learning of the customer's removal of him as executor and holder of the POA, in July 2011, Troutman requested $8,500 for "services rendered" in connection with his work as executor; moreover, in the event of non-payment, Troutman threatened that he would go to court to charge estate the $8,500 plus interest from that time forward until the customer's death.
The Fine Compliance Print
At all relevant times, MetLife Securities' procedures prohibited its registered representatives from:
- being an owner or beneficial owner of a non-family member customer's contract, policy or account; and
- serving in a fiduciary capacity, such as trustee, executor, or attorney in-fact under a power of attorney unless the customer is a family member.
According to the AWC, Troutman never informed MetLife Securities that he was acting in a fiduciary capacity and sought to become a beneficiary in the will of a non-family customer of the firm. Troutman's attempt to receive compensation for services rendered as executor of a will is also outside the scope of the firm's business. The AWC asserts that Troutman was obligated but failed to disclose such outside business activity.
Troutman's employment with MetLife Securities ended on August 16, 2011, when he was
permitted to resign while under internal review in this matter for serving in a fiduciary capacity for a non-family member.
The FINRA Codicil
The AWC alleged that Troutman violated NASD Rules 3030 and 2110 and FINRA Rules 3270 and 2010. In accordance with the terms of the AWC, FINRA imposed upon Troutman a $5,000 fine and a 2-months suspension from associating with any FINRA member firm in any capacity.