April 21, 2014
I fully appreciate that FINRA has a legitimate concern about industry personnel impersonating customers. I also understand why it is appropriate in this and similar cases to impose a suspension and fine for customer impersonation. On the other hand, FINRA does seem to have a penchant for going after the industry's unregistered, female administrators and office assistants. Frankly, many of these cases have the appearance of piling on after the whistle has been blown. In today's BrokeAndBroker Blog, for example, we drill down a bit and consider a regulatory settlement involving five purportedly distinct violations involving the impersonation of a customer.
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, Paula Denise Downing submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Paula Denise Downing, Respondent (AWC 2013035418401, April 14, 2014).
In 2002, Downing entered the securities industry as an unregistered Branch Office Administrator with FINRA member firm Edward D. Jones & Co., LP., where she remained until December 18, 2012. According to the AWC, Downing was:
responsible for assisting the Firm's registered representatives and clients. Respondent's duties included preparing appointments, providing market information or quotes to customers, responding to customer inquiries on administrative questions and ensuring customer accounts were processed accurately.
The AWC asserts that Downing had no prior disciplinary history.
Do Me A Favor
On five occasions between November 16, 2012 and November 28, 2012, Downing allegedly
contacted an annuity vendor and improperly represented herself as the client of record in order to facilitate a $15,000 distribution from the client's annuity contract and transfer the withdrawal to the client's securities account at the Firm. Respondent made the calls pursuant to a request from a financial advisor in her branch office to confirm certain information about the client's annuity at the vendor. Respondent had oral authorization from the client to obtain the information from the annuity vendor, but did not have authorization to impersonate the client.
FINRA deemed each of the five contacts as separate and distinct violations of FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon Downing a $5,000 fine and a 30-day suspension.
Bill Singer's Comment
Downing's five telephone calls occurred from November 16 through November 28. At first blush, that comes off as 13 days (if you include the start and last days); however, the 17, 18, 24, and 25th were weekends, and the 22nd was Thanksgiving Day. So, to put the 13 days in context, Downing made five calls on what was likely an 8-business-day period, which also included the day before and the day after Thanksgiving. It's not as if this was a protracted course of misconduct over many weeks and months. It all seems part of a single, concerted effort to spur the transfer of the customer's IRA distribution during the Thanksgiving Holiday. It does not come off as five distinct violations -- at least not in this case and not based upon the facts as presented, except, you know, it does make FINRA look all the more tougher and diligent, I suppose.
Then there's the whole subtext of this regulatory case that the AWC ever so lightly touches upon but fails to properly highlight and underscore. As noted in the AWC, Downing "made the calls pursuant to a request from a financial advisor in her branch office" and she "had oral authorization from the client" to facilitate the transfer. All of which means that the unregistered respondent was asked to make the calls by her registered superior and did so with the understanding that the client had orally okayed the subject IRA distribution transfer. Does any of the excuse the customer impersonation? No. Does any of that offer context that should permit some mitigation? I think so.
The thing that FINRA and this AWC just don't come to grips with is that almost all of Wall Street's so-called unregistered branch office administrators are women. As in lower paid. As in subordinate. As in the often nameless and faceless minions of the big boys. Unfortunately, in the end, it often comes down to a simple, time-honored expediency: Get the girl to do it. See if she can work her charms on someone at the other end.