September 22, 2014
The dog ate my homework. My alarm clock didn't go off. I'm sick and can't get out of bed. Oh my, how many of you have resorted to one of those legendary excuses . . . or, perhaps, crafted an ingenious one of your own? In a recent Wall Street regulatory settlement, we have the situation of a public customer who may have been hovering at death's door. Seriously ill. On the way -- as we speak -- to the hospital. Unfortunately, we also have the problem of that customer's stockbroker and his response to an emergency request for the immediate wiring out of funds.
Case In Point
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, Michael Gerard Kirwan submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted.In the Matter of Michael Gerard Kirwan, Respondent (AWC 2013035449401, August 13, 2014).
In 1971, Kirwan entered the securities industry and was registered with First Allied Securities, Inc. from May 2008 through December 2012.
Doctor, Doctor Give Me The News
On the afternoon of November 26, 2012, Kirwan received an email from a customer advising that the individual was sick and headed for the hospital. The email advised that "[t]here's a financial transaction that requires urgent attention" and asking for information about effectuating the wiring out of funds to a third-party. In response to the urgent email, Kirwan replied that "as soon as we hear back from you we will be able to assist in expediting your wire transfer request."
Upon receipt of Kirwan's reply, a follow-up email from the customer explained that he needed to wire transfer $29,950 to a third-party in Nevada, and bank account and beneficiary information was provided. Kirwan asked his assistant to transmit via email an Annuity Withdrawal Request for Partial & Full Surrenders Form and an IRA Distribution Form for the customer's signature.
I've Got A Bad Case
Unfortunately, given the customer's dire health emergency, he replied that "it would be impossible for me to fill up any form in my present state, and there is no fax or scanner which i [sic] can even use to do this. Please take this e-mail as an authority."
Apparently relying upon his customer's email authorization, on November 27, 2012, Kirwan signed the customer's name to surrenders and IRA distribution forms. Going a step further, Kirwan prepared a cover letter (utilizing information supplied by the customer) and signed the customer's name to the cover letter. Kirwan forwarded the documentation and on November 27, 2012, the wire transfer went through.
No Pill's Gonna Cure The Ill I Got
On December 4, 2012, the customer contacted Kirwan and asked about the wire transfer - which, as it turns out, he had not authorized. As it further turned out, the customer's email account had been hacked and Kirwan duped by the hacker/imposter.
Kirwan contacted First Allied's compliance department, which arranged to reimburse the defrauded customer.
Shake My Fist
At the time of the events at issue, First Allied's written supervisory procedures ("WSPs") required a valid customer signature on the two forms and imposed a duty upon the registered representative to review account documents in order to validate the customer's signature. Explicitly("under no circumstances"), the WSP prohibited associated persons from signing a customer's name to any documents or forms with or without the client's consent.
According to online FINRA records, on December 13, 2012, First Allied Securities, Inc. "Discharged" Kirwan based upon allegations that:
THE REGISTERED REPRESENTATIVE VIOLATED FIRM POLICY BY SIGNING DOCUMENTS ON BEHALF OF A CUSTOMER AND PLACING TRADES IN A CUSTOMER ACCOUNT WITHOUT AUTHORIZATION.
Knock On Wood
In response to that notice of Discharge, Kirwan responded that:
MR. KIRWAN WAS THE VICTIM OF AN E-MAIL PHISHING SCAM IN WHICH AN IMPOSTER TOOK CONTROL OF HIS CLIENT'S EMAIL ACCOUNT REQUESTING TRANSACTIONS TO BE PROCESSED. MR. KIRWAN WAS UNDER THE BELIEF HE WAS ACTING UPON THE WILL OF HIS CLIENT AND ONLY DOING WHAT WAS IN HIS CLIENT'S BEST INTEREST. IT WAS NOT UNTIL AFTER THE TRANSACTION TOOK PLACE THAT HE, AND FIRST ALLIED, REALIZED THEY WERE THE SUBJECT OF A SCAM
I've Got It Bad And I've Got It Good
FINRA deemed Kirwan's conduct to constitute violations of FiNRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon Kirwan a fine of $5,000 and a suspension of two months with any FINRA member firm in all capacities.