October 23, 2013
That wall that's supposed to separate bank and brokerage accounts at affiliated institutions -- it ain't all it's cracked up to be. Neither is the purported scrutiny that financial institutions give to the account activity of elderly clients. Consider yet another case in which elderly customers fall prey to unscrupulous practices.
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 Arnold Busch submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of James Arnold Busch, Respondent (AWC 2013038441201, October 11, 2013).
Busch was first registered in 1989 and by 2000, he was associated with Wells Fargo Advisors, LLC, until his October 2013 termination.
During all times relevant to this matter, the AWC asserts that Busch worked in various Wells Fargo Advisors' branch offices that were located in the firm's affiliated bank. As a result of the affiliated relationships, many of Busch's customers had both Wells Fargo brokerage and bank accounts, and Busch had access to his customers' bank account information.
From approximately 2006 to 2013, Busch allegedly utilized his customers' bank account information to misappropriate approximately $1.3 million from approximately eight of his Wells Fargo brokerage customers, most of whom were elderly women.
Give Him Some Credit
Prior to 2009, the AWC alleges that Busch engineered the thefts from his clients' accounts by contacting his credit card company via a paper debit memo that authorized payments from his customers' bank account to his credit card account. Busch provided his credit card company with the customers' Wells Fargo bank routing and bank account numbers to effectuate the transactions. Thereafter, between approximately 2009 and 2013, the AWC alleges that Busch typically called his credit card company's automated system to process the same transfers.
Moreover, the AWC alleges that at times, Busch purportedly liquidated securities from the customers' brokerage accounts in order to generate cash. The cash proceeds were transferred from the customers' brokerage accounts to the customers' bank accounts prior to Busch's misappropriation of the funds.
FINRA alleged that Busch's conduct above constituted violations of NASD Rule 2330(a) (for conduct before December 14, 2009) and FINRA Rule 2150(a) (for conduct after December 14, 2009); and NASD Rule 2110 (for conduct before December 15, 2008) and FINRA Rule 2010 (for conduct after December 15, 2008).
In accordance with the terms of the AWC, FINRA imposed upon Busch a Bar from associating with any FINRA member in all capacities.
Bill Singer's Comment
Frankly, I'm sort of getting tired of writing about these rip-offs of elderly customers involving con artists who find a way to straddle the supposed line between brokerage and bank accounts at affiliated institutions. Sure, it's nice that Wells Fargo managed to detect Busch's activity; however, let's not lose sight of the fact that the fraud (if not crimes) started as far back as 2006 and went on without setting off any internal compliance alarms until apparently as recently as 2013 -- that's some seven years of smoke before anyone grabbed a fire extinguisher to put out the fire. Also, keep in mind that Busch converted $1.3 million. We ain't talking about someone dippin' into a few unwatched accounts and taking out a few handfuls of chump change. Finally, let's remember that the victims were elderly individuals -- among the most vulnerable targets.
Although both Wells Fargo and FINRA deserve credit for going after Busch, let's not get too carried away with what essentially amounts to reading toe-tags in the morgue. Much of what passes these days for in-house compliance and industry regulation is little more than after-the-fact action -- pretty much the guy with the broom behind the elephants in the circus parade.