January 11, 2016
As if Mexico isn't in the news enough these days, we now find a regulatory settlement involving the somewhat unusual scenario of a Mexican resident having security concerns about receiving her brokerage statements via snail mail. No . . . the solution here is not to have Donald Trump build a postal system for Mexico and have that country pay for it. On the other hand, the stockbroker who serviced this account came up with another approach which also doesn't seem like a particularly sound solution.
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, Jose A. Zapata submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Jose A. Zapata, Respondent (AWC 2014039998801, December 30, 2015).
Zapata first became associated with a FINRA member firm in 1996 and was first registered in 1998. By January 2009, Zapata was associated with Argentus Securities, LLC and, thereafter, he was associated with an other firm from December 2013 until his May 29, 2015, termination.
A Matter of Security
The AWC alleges that since 2007, Zapata serviced a customer who was a resident of Mexico. As a result of what the AWC ascribes as "security concerns" voiced by the Mexican resident, she did not want account statements mailed to her home address and would often obtain her account balances through telephone conversations with Zapata.
The AWC asserts that by September 2012, the customer had begun verbally expressing concerns to Zapata about the performance of her account, which had sustained losses. In response to one such conversation during which Zapata purportedly became concerned that the customer might file a complaint, the stockbroker misrepresented that the account was worth about $170,000 at a time when the actual value was $108,225. The AWC asserts that this pattern of deception by Zapata persisted for several months during which he overstated the account's worth from $15,000 to $60,000. These recurrent misstatements of the account's value proved material because Zapata was made aware by the customer that she was relying upon her account's value when deciding to make purchases of, in part, a car and a condominium.
SIDE BAR: Online FINRA BrokerCheck records as of January 11, 2015, disclose that on October 28, 2013, Argentus Securities received a customer complaint alleging $115,000 in "mutual fund" damages. Argentus characterized the allegations as:
CUSTOMER'S ULTIMATE ALLEGATIONS INVOLVE THE REPRESENTATIVE LYING TO THE CUSTOMER BY STATING AN INFLATED ACCOUNT VALUE AND ACCOUNT MISMANAGEMENT. THE ALLEGED ACTIVITY OCCURRED FROM APPROXIMATELY AUGUST 2010 TO SEPTEMBER 2013.
FINRA deemed Zapata's account value misrepresentations to constitute violations of FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon Zapata a Bar from from associating with any FINRA member in any capacity.
Bill Singer's Comment
The Mail Issue
By way of offering an alternative approach, if you as a customer are truly concerned that someone might open your mail and obtain the confidential information about your brokerage account, you should pursue a far safer course of action than the Mexic0-based customer. Assuming that instructing the brokerage firm not to send you account statements by mail is sensible, then you should certainly make sure that you know how to log on to the firm's website and access your statements online. If accessing your account via a computer is not an option, consider that many brokerage firms now offer apps by which you can access your account through a smartphone or tablet. It just does not make sense to solely rely upon the servicing stockbroker for such critical information as your equity and cash balances. If your brokerage firm does not offer digital access and you are concerned about receiving your account statements by mail, then you might consider moving your business to a firm that offers digital access.
What's In A Name?
The AWC references the Respondent as:
When you look up "Jose A. Zapata" with Central Registration Depository ("CRD") number 2892463 on FINRA's online BrokerCheck database, you come upon the records of:
Jose A. Zapata, Respondent
General Securities Representative
CRD No. 2892463
I am assuming that the two "Zapatas" are, in fact, the same individual given the common CRD number. Notwithstanding, it's puzzling that FINRA has not conformed its regulatory and BrokerCheck databases so that the same registered representative is consistently referenced throughout the self-regulatory organization's digital records. In my opinion, both Respondent's middle name "ANGEL" and the suffix "JR." should have been used in the AWC.