Tepid FINRA Response To Forgeries Of Elderly Victims In Assisted Living

January 3, 2014

Now here's a lovely bit of misconduct and dubious Wall Street regulation. We got elderly customers living in assisted living. We got forgeries. We got a bogus letter witnessing something that never happened. And then we got the self-regulatory organization Financial Industry Regulatory Authority ("FINRA") giving what looks to be little more than a relatively half-hearted slap on the wrist to the registered representative.

For the purpose of proposing a settlement of rule violations alleged by FINRA, without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Michael Cox submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Michael Cox, Respondent (AWC 2013036215801, December 18, 2013).

During the times relevant to this matter, Cox was associated with FINRA member firm Fulcrum Securities, LLC (''Fulcrum") from September 2010 until his February  28, 2013 termination.  According to the AWC, Cox had no prior disciplinary history.

SIDE BARAlthough the AWC asserts that "Cox entered the securities industry in August 1987," online FINRA records as of December 28, 2013, indicate that he entered the industry in 1977. 

All In The Family

The AWC alleges that without authorization, Cox signed an elderly family member's name on an IRA Form dated:
  • December 24, 2011, requesting a $3,614.25 distribution to the family member; and 
  • November 30, 2012, requesting a $3,551 distribution to the family member. 
Cox submitted the IRA Forms to Fulcrum, and Fulcrum's clearing firm sent checks payable to the family member at the individual's address. The AWC asserts that Cox's conduct constituted violations of FINRA Rule 2010 by forging the family member's name on two IRA Forms. Cox also allegedly violated FINRA Rules 4511 and 2010 by causing Fulcrum's books and records to be inaccurate.

Not LOL About LOA

In January 2013, Cox was allegedly negotiating a property settlement, which required him either to sell his home or pay $100,000. In an apparent effort to demonstrate his access to $100,000 if the home did not timely sell, Cox created a Letter of Authorization ("LOA") sometime around January 12, 2013, in which the aforementioned elderly family member and another elderly family member purportedly authorized the transfer of $100,000 from "their Fulcrum securities account" to Cox's personal account. These two individual were residents at an assisted living facility. In furtherance of that scheme, the AWC alleges that Cox forged both family member's signatures on the LOA.

Thereafter, the AWC alleges that Cox prepared a letter ("Witness Letter") attesting to the fact that a nurse at the assisted living facility had witnessed the two elderly family members signed the LOA. In reality, the AWC asserts that Cox had taken a letter written on the facility's letterhead and had it altered to delete all of the writing - leaving a blank letterhead. Cox purportedly forged that nurse's signature on the Witness Letter. In fact, Cox never used the LOA to transfer money to his account because his home sold quickly.

Violations

According to online FINRA records as of December 29, 2013, Fulcrum permitted Cox to resign on February 28, 2013 based upon allegations that:

AN INTERNAL INVESTIGATION RESULTED IN THE FIRM DETERMINING THAT THE INDIVIDUAL HAD VIOLATED FINRA RULE 200 AS WELL AS FIRM POLICIES AND PROCEDURES

FINRA asserted that Cox violated FINRA Rules:
  • 2010 by forging the names on the IRA Forms and the Witness Letter; and
  • 4511 and 2010 by causing Fulcrum's books and records to be inaccurate.
In accordance with the terms of the AWC, FINRA imposed upon Cox a $10,000 fine and an eight-month suspension from association with any FINRA member firm in all capacities.

Bill Singer's Comment

Seriously?  All that Cox got was an 8-month suspension? Am I getting too cranky in my old age or or has FINRA overstated its case? This may well be one of those "Yes, but . . ." cases; however, FINRA has alleged multiple forgeries involving elderly individuals who resided in assistant living facilities. What exactly is the "but" that warranted the relative slap on the wrist here?

Now, don't misunderstand. I have carefully read and re-read the AWC. At best, it appears that Cox forged signatures on about $7,000 worth of distributions -- which admittedly seem to have been made payable to the customers and, moreover, sent to their respective addresses. So what we may well have here is a misguided attempt to expedite the distributions by signing family members' names to the IRA distributions. If my inferences are correct, then why the hell doesn't FINRA just say as much -- and if I have read far too much into these alleged forgeries, then why hasn't FINRA spelled out the misconduct with some more detail?

Then there's that whole $100,000 guarantee thing that involved a LOA, a phoney-baloney witness attestation, and the troubling question of what might have happened with the LOA had the anticipated sale fallen through. Perhaps in and of itself, you could give Cox some credit as he tap danced around all these machinations attendant to selling his property but when coupled with other examples of forgeries involving his elderly family members, I am left with a very uneasy feeling and a concern for the safety of other public investors handled by this same stockbroker.

Just what the hell does it take for FINRA to throw someone out of the industry these days? Either FINRA has presented a jacked-up fact pattern that made Cox's conduct seem far worse than it was; or, FINRA has, in fact, presented us with an accurate fact pattern that does not seem to have resulted in an appropriate sanction. You tell me: elderly victims in assisted living, forgeries, fabricated documents -- what else did Cox need to do to warrant a Bar?

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