March 20, 2014
In today's BrokeAndBroker Blog about a Financial Industry Regulatory Authority ("FINRA") settlement, your first impression is anger at the stockbroker because of the cited misconduct. What's a bit puzzling is not so much what's in FINRA's published report about the respondent stockbroker and his misconduct but what the regulator left out. After you read about some of the background that I uncovered, you wonder who decides what goes in and what goes out of all the crap that gets published by Wall Street's regulators. Sure, much of the background is old stuff and includes a couple of dubious customer complaints. Still -- it all makes you wonder about the hiring and supervisory practices of the securities industry.
For the purpose of proposing a settlement of rule violations alleged by the FINRA, without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Jeffrey Scott Davis submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Jeffrey Scott Davis, Respondent (AWC 2013037743101, March 11, 2014).
Davis entered the securities industry in June 1998 and in 2000 became associated with FINRA member firm Ameriprise Financial Services. The AWC asserts that Davis had no prior FINRA disciplinary history.
The ACH Scam
During the relevant time from May 2012 through June 2013, Davis allegedly effected 71 unauthorized electronic Automated Clearing House (''ACH") payments totaling $116,976.69 from the brokerage accounts of five customers (amounts per customer ran from $7,880.70 up to $28,713.34) and directed those funds to three of his personal credit card accounts.
Ameriprise wasn't all that happy about those ACH payments because online FINRA records as of March 20, 2014, disclose that the firm filed a Uniform Termination Notice for Securities Industry Registration ("Form U5") in July 2013, indicating that the firm had "Discharged" Davis based upon allegations that:
REGISTERED REPRESENTATIVE WAS SUSPENDED ON JUNE 26, 2013 AND TERMINATED ON JULY 19, 2013 AFTER THE FIRM CONCLUDED CLIENT FUNDS WERE MISAPPROPRIATED VIA ACH TRANSFER TO PAY PERSONAL CREDIT CARDS HELD IN THE NAME OF THE ADVISOR
FINRA asserted that Davis' conduct constituted violations of FINRA Rules 2150 and 2010, and in accordance with the terms of the AWC, the regulator imposed a Bar from association with any FINRA-regulated firm.
Bill Singer's Comment
I mean, okay -- as far as these fairly routine FINRA AWC matters go, this is as garden variety as they get. What I find sort of troubling about this AWC isn't so much what it says as what it doesn't. In researching this blog, I did a little inquiry into Respondent Davis' background and found a whole lot of stuff that never quite made it into the AWC. You tell me -- are the following disclosures information that should have been fully set forth in the AWC?
The Robbery Mistake
In 2000, the Ohio Division of Securities issued a final order denying Davis application for a salesperson license on that basis that he was "not of good business repute." Davis' response to that action is noted in online FINRA records:
I WAS WORKING AS A STATION MANAGER FOR A LARGE SELF SERVE GAS STATION AT THE AGE OF NINETEEN. MY MISTAKE WAS THAT I DID NOT ACT ON KNOWLEDGE THAT A COWORKER HAD SPOKEN ABOUT STAGING A ROBBERY AND WANTED ME TO BE INVOLVED. I FALSELY CONFESSED TO BEING INVOLVED IN THE ROBBERY AFTER BEING QUESTIONED AGGRESSIVELY BY POLICE. DUE TO THIS INCIDENT BEING ON MY CRIMINAL RECORD, THE STATE OF OHIO DENIED MY APPLICATION FOR A SECURITIES LICENSE IN YEARS 2000.
So, lemme see if I got this. His "mistake" was that he didn't "act" on knowledge about a planned robbery in which he was invited to participate. How thoughtful an invitation that was -- do they have a Hallmark card for such an event? Then, of course, he "falsely confessed" to being involved in the robbery. I mean, you know, everyone falsely confesses to having been invited to a robbery. Maybe he should have sent a timely RSVP declining the invitation. Would love to join you and the guys for your bangin' party next week at the gas station but the little lady and I have plans to visit her folks out of town for their anniversary. We wish you all the best. Good luck on a speedy getaway.
D Felony and A Misdemeanor
Another online FINRA record discloses that on September 2, 1981, Davis had:
PLEAD GUILTY TO CLASS D FELONY OF THEFT. PAID RESTITUTION EQUALING $1301.00. SENTENCED TO TWO YEARS PROBATION WHICH WAS SUSPENDED JULY 25, 1983.
As of July 25, 1983, FINRA records disclose this updated disposition:
PLEAD GUILTY TO CLASS D FELONY NOVEMBER 30, 1981. SENTENCED TO PAY RESTITUTION AND SERVE TWO YEARS PROBATION JULY 25, 1983. FELONY WAS REDUCED TO CLASS A MISDEMEANOR AND PROBATION STOPPED. RESTITUTION WAS PAID IN FULL.
2008 Ameriprise Customer Complaint
Online FINRA records disclose that on July 28, 2008, Ameriprise received a customer complaint seeking $7,500 in damages based upon allegations that:
THE CLIENT ALLEGED HE WAS NOT PROPERLY DISCLOSED THE FEES ASSOCIATED WITH HIS INVESTMENTS.
On August 11, 2008, Ameriprise denied the claim and summarized its action as follows:
THE FIRM DETERMINED THE CLIENT RECEIVED PROPER DISCLOSURE REGARDING HIS INVESTMENTS THROUGH WRITTEN AND VERBAL DISCLOSURE
2009 Ameriprise Customer Complaint
Online FINRA records disclose that on December 29, 2009, Ameriprise received a customer complaint seeking $71,141 in damages based upon allegations that:
THE CLIENT'S ATTORNEY IN FACT ALLEGED EXCESSIVE TRADING, UNAUTHORIZED TRADING AND UNSUITABLE INVESTMENT PURCHASES IN HER PARENT'S INVESTMENT PORTFOLIO FROM 2006 TO 2009.
On May 19, 2010, Ameriprise denied the claim and summarized its action as follows:
OUR REVIEW FOUND ALL TRANSACTIONS WERE AUTHORIZED BY THE CLIENT. IT ALSO APPEARED THE CLIENT MADE PURCHASES IN HIGHER RISK INVESTMENTS AGAINST THEIR ADVISOR'S ADVICE.
2013 Ameriprise Customer Complaints
Finally, FINRA online records disclose that on August 28, 2013, Ameriprise received a customer complaint seeking $29,816.42 in damages based upon allegations that:
THE CLIENT'S ATTORNEY-IN-FACT ALLEGED FORGERY ON CHECKS DRAWN FROM THE CLIENT'S ACCOUNT BETWEEN JUNE 2012 AND JUNE 2013.
The FINRA records disclose that on October 21, 2013, Ameriprise settled that customer complaint for $39,197.13.
SIDE BAR: In fairness to Ameriprise, it had suspended Respondent Davis on June 26, 2013, prior to subsequently discharging him on July 19, 2003. As such, this August 2013 customer complaint was received about two months following Davis' suspension and about a month after his discharge.
Another FINRA online record discloses that on July 11, 2013, Ameriprise received another customer complaint seekinG $43,158.45 in damages based upon allegation that:
THE CLIENT ALLEGED FORGERY AND MISAPPROPRIATION FROM MAY 2012 TO JUNE 2013.
The FINRA records disclose that on October 2, 2013, Ameriprise settled this second customer complaint for $49,413.22