Few things in life are more dangerous than so-called false assurances. You embark upon a course of conduct based upon a belief that what you're going to do is okay. You think you got it all covered with prior permission and the like. Unfortunately, it doesn't work out the way you thought it would. You offer explanations. They say they're nothing but excuses. Consider the recent regulatory settlement in which a stockbroker thought he had the go-ahead to impersonate his customers during telephone calls.
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, Nabil Bouab submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Nabil Bouab, Respondent (AWC # 2013037548401, June 3, 2015).
Bouab was first registered in 2001 and during the relevant time of June 2007 through June 2013, he was with FINRA member firm Royal Alliance Associates, Inc. ("Royal"). The AWC asserts that Bouab had no prior relevant formal disciplinary history with the Securities and Exchange Commission, any self-regulatory organization or any state securities regulator.
The Rebalancing Act
The AWC alleges that between October 2011 and May 2013, Bouab impersonated a client on about four occasions during telephone calls with the client's outside brokerage firm in order to place rebalancing trades in the client's account. Also during those calls, it is further alleged that Bouab caused a sales assistant to impersonate the client's wife in order to effect trades in the wife's account at the same brokerage firm.
Okay, now . . . before you jump to conclusions . . . both the client and his wife had asked Bouab to make the above calls on their behalf and had authorized the underlying transactions.
Royal Alliance Hangs Up
Online FINRA BrokerCheck records as of June 11, 2015, disclose that on June 5, 2013, Bouab was "Permitted to Resign" from Royal Alliance Associates pursuant to allegations that:
FINRA Sends Its Own Message
THE REPRESENTATIVE IMPERSONATED A CLIENT WITH THEIR PERMISSION, IN VIOLATION OF COMPANY POLICY
FINRA deemed Bouab's conduct to constitute violations of FINRA Rule 2010.
In accordance with the terms of the AWC, FINRA imposed upon Bouab a $5,000 fine and a 20-business-day suspension from association with any FINRA member on any capacity.
Bill Singer's Comment
This settlement involves what I call a "Yes But" situation.
Yes . . . registered reps should NOT impersonate their clients and should not instruct subordinates to do the same.
But . . . in this case, geez, the clients authorized the calls, so, what's the big deal? For starters, the loss of a job, a fine, and a suspension.
Frankly, this is an easy one for me to reconcile: Don't impersonate a client. Period. Ever. No. No. And No. You're too old to be playing pretend!
Many aspects of in-house compliance policies and regulatory rules strike industry participants as silly. In Bouab's case, one can easily imagine that the stockbroker thought that he was performing acts of superb customer service, and, on top of that, he did so with the confidence that the customers knew what he was going to do and gave him their prior authorization. To the extent those factors are mitigating, FINRA's sanctions likely took the circumstances into account.