Another day. Another wire transfer compliance and regulatory problem. What's a registered rep to do? How hard should you press for confirmation from the sender of an email seeking to move money out of his or her account? Your firm has rules about confirming with the customer but it can be a delicate issue. "You must not ask for so much," was the admonition in the song Bird On The Wire, but in that same song, the question is asked: "Hey, why not ask for more?" Of course, to cite the lyrics of another song: "Everybody's talkin' at me, can't hear a word they're saying, only the echoes of my mind." Ummm, lemme give ya a hint, those so-called echoes of your mind ain't gonna stand up under any regulatory scrutiny.
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, James Bertero submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of James Bertero, Respondent(AWC 2013039312001, November 3 2015).
In 1998, Bertero first became registered and by June 2009, he was registered with FINRA member firm Morgan Stanley Smith Barney LLC. The AWC asserts that he had no prior relevant disciplinary history with the Securities and Exchange Commission, any state Securities agency, FINRA or any other self-regulatory organization.
Like A Bird On A Wire
The AWC asserts that on September 18, 2012, Bertero received an email from what appeared to be a customer requesting that $22,000 be wired from his account to a third-party bank account in Oklahoma, which was represented as belonging to the customer's relative. He customer indicated that he was unavailable for any telephone conversation. Because this customer had previously requested wire transfers, Bertero did not find anything unusual about the wire transfer request.
In order to facilitate the wire transfer, Bertero sent an email to the customer stating:
[g]lad we had a chance to talk I will get the wire out as soon as I get the instructions.
In fact, the AWC alleges that Bertero had not spoken to the customer notwithstanding the assertion to the contrary in the above email. Compounding the situation, Bertero then forwarded the wire request to his assistant for processing and, moreover, he told his assistant that he had verbally confirmed the wire request with the customer.
In furtherance of Bertero's instruction, the assistant completed wire transfer forms and submitted the request for processing. On a same-day basis, the firm effected the transfer, which was completed on September 18th.
Everybody's Talkin' At Me
On September 19, 2012, Bertero received a second email request from the customer, this time requesting that $8,500 be transferred to California (the AWC does not indicate the target institution to which the transfer was sought). Although the AWC concedes that this time Bertero tried to ascertain a mutually agreeable time to contact the customer by telephone, the customer was uncooperative and the desired conversation never materialized. Notwithstanding, Bertero again directed his assistant to process the email wire transfer request and, yet again, he falsely asserted that he had spoken with the customer. The assistant processed the request, which was again completed on a same-day basis for September 20th.
At some point after processing the wires, Morgan Stanley apparently learned that the sender of the email wire transfer requests was not the customer but an individual who had hacked into the customer's email account. The AWC asserts that Morgan Stanley recoverd the $30,460 in wired funds and fully reimbursed the customer for the transfers.
FINRA deemed that Bertero had falsely stated on Morgan Stanley documents and in statements to the firm's personnel that he had received verbal confirmation from the customer in violation of FINRA Rule 2010. Further, FINRA deemed that Bertero's misrepresentations to his assistant resulted in the falsification of the firm's records in violation of FINRA Rule 4511.
In accordance with the terms of the AWC, FINRA inposed upon Bertero a $7,500 fine and a 30 calendar day suspension from association with any FINRA regulated firm in all capacities.