March 20, 2014
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, David Eckess submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of David Eckess, Respondent (AWC 2012031084801, March 12, 2014).
Eckess first became registered with a FINRA member firm in 1985 and during the times relevant to this matter, he was registered through Morgan Stanley, Inc.
Friends With Beneficiary
The AWC asserts that in November 2011, Eckess agreed to being named the replacement (and sole) beneficiary on two Allstate Life Insurance Company variable annuities worth about $94,000 and held by a 92-year-old customer, who is described in the AWC as being infirm and bed-ridden.
If you don't mind, let me stop here and repeat a few salient facts. Two variable annuities worth just a tad under $100,000. An infirm, bed-ridden, 92-year-old customer. Okay, just keep those points in mind.
The AWC alleges that Eckess obtained the requisite Allstate change-of-beneficiary forms, and, thereafter, the stockbroker provided those documents to the elderly customer. Going a step further, Eckess assisted the customer in the completion of the forms.
Not So Fast
About a week after she received confirmation from Allstate of the beneficiary change naming Eckess, the elderly customer immediately objected and requested that the beneficiary be changed to her son.
The AWC asserts that on May 10, 2012, Eckess entered into a Consent Order with the Arkansas Securities Department, which found that he had engaged in unethical practices in the securities business based upon his having been "named the beneficiary of annuities owned by one of his clients," and "failing to inform his employing broker-dealer and investment adviser of the matter." The State fined him $10,000 and he consented to a requirement that any Arkansas-based brokerage firm that hired him would place him under heightened supervision for one year. READ the Consent Order In the Matter Of David S. Eckess (Arkansas Securities Commissioner,Consent Order, Case No. S-12-0021, Order No. S-12-0021-12-Oro2, May 12, 2010).
The AWC alleges that Eckess' unethical actions also violated Morgan Stanley procedures, which prohibited registered representatives from engaging in conduct that conflicts with a client's interests.
According to online FINRA records as of March 20, 2014, on December 15,2011, Morgan Stanley filed a Uniform Termination Notice for Securities Industry Registration ("Form U5") indicating that Eckess had been "Discharged," based upon:
ALLEGATIONS MADE CONCERNING FA'S HANDLING OF ANNUITY MODIFICATIONS."
In accordance with the terms of the AWC, FINRA imposed upon Eckess a $10,000 fine and a 1-year suspension from association with any FINRA member in any and all capacities for one year.
Bill Singer's Comment
Maybe it's me? Maybe the State and FINRA have waaaaaaaaay overstated the facts in this case and what appears to be a fairly horrific situation is far more nuanced and replete with explanations that are not included in the Order and the AWC. The State of Arkansas Order asserts that Eckess had been the elderly customer's agent for approximately 20 years and that the annuities were purchased about six years prior to the beneficiary changes at issue. Perhaps those facts mitigated the sanctions. If so, I wish that the State and FINRA had offered us some commentary on whatever they deemed mitigating factors.
On the other hand, are you kidding me? $10,000 fine. A one-year suspension. How the hell did both FINRA and the State of Arkansas square that with the victim being a 92-year-old, infirm, bed-ridden public customer? I mean, seriously, what am I not quite getting here?