Is FINRA Actin' Kinda Shady In Naming (Or Not) Banks?

February 5, 2015

While still with Destiny's Child, Wall Street regulator Beyonce admonished:

Say my name, say my name
You actin' kinda shady

Rumor has it that the diva was upset with the Financial Industry Regulatory Authority's often inexplicable policy about naming or not naming an affiliated bank of one of its larger member firms. Unknown and unappreciated back-up singer Bill Singer (yes . . . Singer, the singer) launched a failed career as a solo act in which he too tried to sing a similar tune. In today's BrokeAndBroker.com Blog, we pay homage to the efforts of the famous and less famous singer and Singer to shine a light on the puzzling inconsistency with which FINRA says a bank's name.

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, Allen R. Maddox submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Allen R. Maddox, Respondent (AWC  #2014040342101, January 22, 2015).

The AWC asserts that Maddox was a personal banker at J.P. Morgan Chase Bank, N.A. ("JPM Chase Bank") as a personal banker and first became registered in 2010 with the bank's affiliate and FINRA member firm Chase Investment Services Corp. ("CISC"). In October 2012, as part of a mass registration transfer, Maddox became registered with J.P. Morgan Securities LLC ("JPM Securities"), where he remained until February 2014. The AWC asserts that Maddox had no prior relevant disciplinary history in the securities industry.

The Girlfriend

The AWC asserts that among Maddox's duties as a JPM Chase Bank personal banker was to assist customers with opening their retail bank accounts. In August 2013, a customer allegedly asked Maddox to assist him in adding the customer's girlfriend to his JPM Chase Bank Account.

The Blank Signature Card

On August 31, 2013, the girlfriend met Maddox at the bank branch, where he gave her a blank signature card.  On that blank card were spaces for the customer's and the girlfriend's signatures. Upon reviewing the blank card, the girlfriend purportedly informed Maddox that she did not know what her boyfriend's signature looked like - and in response to that disclosure, Maddox allegedly showed her the original signature card with the boyfriend's signature affixed - and the AWC further asserts that Maddox showed her the signature so that she could sign the boyfriend's name on the new card.

Apparently, the girlfriend signed both her and her boyfriend's names on the new card and the AWC asserts that Maddox did not instruct the girlfriend to note on the card that she had signed for her boyfriend, and Maddox did not indicate that circumstance on the signature card. Thereafter, Maddox purportedly submitted the card for processing.

Policy And Procedure

The AWC alleges that both JPM Chase Bank and JPM Securities had policies and procedures prohibiting the falsification of records; and that employees were reminded not to falsify any record that relates to the business of the company. Among the admonitions noted in the AWC, were that both companies prohibited employees from "doing anything to impair the authenticity of any documentation." According to the AWC, that proscription extended to "encouraging others to falsify information, and from signing for customers, or allowing someone other than the customer to sign for the customer."

Verbal Ain't Gonna Do It

Online FINRA BrokerCheck records as of February 4, 2015, disclose that on February 6, 2014, JPMORGAN Chase Bank "Discharged" Maddox based upon allegations that:

TERMINATED BY AFFILIATE BANK - NON SECURITIES RELATED. REGISTERED REP, IN THE CAPACITY OF AN AFFILIATE BANK EMPLOYEE, ADMITTED TO ADDING AN INDIVIDUAL TO AN EXISTING BANK CUSTOMERS ACCOUNT AFTER ALLOWING THE INDIVIDUAL TO VIEW THE CUSTOMERS ORIGINAL SIGNATURE CARD AND SIGN THE CUSTOMERS NAME TO THE NEW SIGNATURE CARD. REGISTERED REP STATES THE BANK CUSTOMER GAVE VERBAL PERMISSION TO ADD THE INDIVIDUAL TO THE ACOCUNT [sic] OVER THE PHONE.

FINRA deemed Maddox conduct to constitute assisting the customer's girlfriend in falsifying a bank signature care in violation of FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon Maddox a $5,000 fine and a one-month suspension from associating with any FINRA member in any capacity.

Bill Singer's Comment

Interesting fact pattern and an appropriate sanction. All around a compelling and credible bit of regulation.

In today's BrokeAndBroker.com Blog, FINRA named JPM Chase Bank as Maddox's banking employer and an affiliate of his FINRA member firm employer JPM Securities. As such, the regulator ain't actin' kinda shady in this settlement.

On the other hand, someone -- anyone -- do me a favor. PLEASE!  Read my recent commentary about FINRA's handling of a matter involving an individual employed in dual bank and brokerage capacities: Elderly Sugar Daddy, His Young Thing, And His Banker / Broker (BrokeAndBroker.com Blog, January 30, 2015). In that case, which also involved JPM Chase Bank, I thought FINRA came off as kinda shady because the "affiliate bank" was not named.  If you have any idea as to how this disparate treatment of disclosure involving the same bank and the same brokerage affiliate makes sense, enlighten me.

Compare the disclosure of JPM Chase Bank as the affiliated bank in Maddox with the non-disclosure in DeFilippis.

This column brought to you by Destiny's Child: