BrokeAndBroker Blog's Bill Singer made a mistake. Not my first. Not my last. By way of full disclosure, I misread the FINRA regulatory settlement about which today's blog is based. The fault was all mine and the self-regulatory organization is totally blameless. Oddly, I was prepared to publish virtually the same commentary premised upon my mistaken understanding that there was a $5,000 unauthorized trade. Imagine my surprise when I discovered that the sum was $5 million !
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 Parker
Scullin submitted a Letter of Acceptance, Waiver and Consent ("AWC"),
which FINRA accepted. In the Matter of James Parker Scullin, Respondent
(AWC 2014043554601, May 24,
In 1986, Scullin first became
registered with a FINRA member firm and, thereafter, left the industry in 1988
and re-entered in 2010. The AWC asserts that by June 2011, Sculling was registered with FINRA member firm UBS
Financial Services, Inc. The AWC asserts that he had no prior relevant
As to the circumstances of Scullin's separation from UBS, the AWC asserts that he remained with
that firm until November 21, 2014, when UBS filed a Uniform
Termination Notice for Securities Industry Registration (""Form
U5") terminating his association.
A Matter of
Around the time when Scullin
joined UBS in mid-2011, he became the registered representative for the account
of an entity only referred to in the AWC as "MS." There were purportedly two
individuals with trading authority for the MS account. Despite not having any
discretionary authority for the MS account, the AWC alleges that sometime around
September 12, 2014, Scullin entered a trade for over $5,000,000 without
informing or seeking the authorization of either of the two individuals with
As set forth in the
In late September 2014, MM, one
of the individuals with authority over the MS account, questioned Scullin about
the trading activity in the account, but Scullin concealed the unauthorized
trade. In early October 2014, UBS questioned Scullin about the trade. Scullin
initially concealed the fact that it was unauthorized, but later admitted to
the Firm that the trade was not authorized by MM or anyone at MS. In October
2014, UBS reversed the trade.
In accordance with
the terms of the AWC, FINRA imposed upon Scullin a $15,000 fine and a
9-month-suspension from association with any FINRA member firm in all
Online FINRA BrokerCheck
records as of June 1, 2016, indicate that UBS Financial Service, Inc.
"Discharged" Scullin on October 29, 2014, based upon allegations
SCULLIN'S EMPLOYMENT WAS TERMINATED WHEN THE FIRM LEARNED THAT HE (1) ACTIVELY
TRADED IN AN UNDISCLOSED COMMODITIES ACCOUNT OUTSIDE UBS; (2) EXERCISED
DISCRETION WITHOUT WRITTEN AUTHORIZATION IN VIOLATION OF FIRM POLICY; AND (3)
ENTERED AN UNAUTHORIZED
An odd aspect of this AWC is that I misread the fact pattern and, as I initially had drafted today's article, I noted that the September 12, 2014, unauthorized trade was for a mere $5,000. Notwithstanding that somewhat paltry figure, I still found the case of interest. Imagine my surprise when I reviewed the AWC one last time before releasing the article for publication and -- oops! -- there were three more zeros involved. Five thousand mushroomed to five million.
After revising this blog and increasing the cited unauthorized trade from $5,000 to $5,000,000 a few things took on a different shade. For starters, UBS's October 2014 trade reversal took on far more import as the firm was booking ten times the trade amount as I had first misread. In industry parlance, that's quite the "hickey."
By way of double checking after the revelation that I had misread the dollar amount of the unauthorized trade, I reviewed Scullin's online FINRA BrokerCheck records and took note of this interesting
tidbit under the
category of "Customer Dispute - Pending," which asserts that on December 1,
2014, Scullin was named in a FINRA arbitration 14-03513 seeking $7 million
in damages based upon allegations that:
ALLEGE UNAUTHORIZED TRADING AND EXCESSIVE COMMISSIONS. TIME FRAME:
Frankly, my added research leaves me puzzled. Assuming that UBS reversed the $5,000,000 unauthorized trade in October 2014, how come "Claimants" filed a FINRA Arbitration in December 2014 seeking $7 million in damages? Were there $2 million in "excessive commission?"