If it's Open-Mic Night at your local club and you want to try your hand at some celebrity impersonations, knock yourself out. On the other hand, if you are a stockbroker at work, I'm not so sure you want to be working on your material by pretending to be one of your customers. At the club, if you're lucky, you may bring the house down and get asked back for an encore. At work, well, you better be lucky because if you get caught, you may bring your career down and find yourself bum-rushed out the door by security. Consider this recent FINRA regulatory settlement involving customer impersonations.
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, Robert Joseph Luchini submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Robert Joseph Luchini, Respondent (AWC 2015045813601, December 29, 2016).
In 1991, Luchini became associated with Prudential Insurance Company of America and PRUCO Securities, LLC. The AWC asserts that Luchini had no prior relevant disciplinary history in the securities industry.
Who Are You?
The AWC asserts that on June 3, 2012, Luchini telephoned PRUCO Securities' telephone desk and pretended to be one his PRUCO customers, who is referred to in the AWC as "MB." Pursuant to his impersonation, Luchini sold 151 shares of stock from MB's brokerage
On June 30, 2013, Luchini again telephoned PRUCO's service desk pretending to be "CM," another one of his customers. During this impersonation, Luchini sold 349 shares of two stocks from the CM's brokerage account. On July 16, 2014, Luchini pursued the same ruse and sold 139 shares of stock and effectuated the withdrawal of $2,500 from CM's account.
Say His Name
On December 22, 2014, Luchini telephoned PRUCO's service desk and pretended to be BG, who had died on December 13, 2014. The AWC asserts that Luchini impersonated the customer "at the request of EG, BG's widow. During this telephone call, Luchini requested the redemption BG's IRA.
Yes . . . but
As set forth in the AWC:
Each of the transactions were authorized by EG, CM and MB. When questioned by the Firm regarding the transactions conducted on behalf of his Firm customers MB, CM and BG, Luchini admitted to impersonating MB, CM and BG during calls with the Firm's service desk in order to effect transactions on the customers behalf.
According to online FINRA BrokerCheck records as of January 14, 2017 under the heading "Employment Separation After Allegations," PRUCO "Discharged" Luchini on May 18, 2015, based upon allegations that:
REGISTERED REPRESENTATIVE IMPERSONATED TWO CLIENTS IN CALLS TO THE COMPANY'S SERVICE CENTER TO INITIATE BROKERAGE ACCOUNT TRADES. ALSO, IN A CALL TO THE SERVICE CENTER, HE IMPERSONATED A DECEASED CLIENT TO REQUEST A FULL SURRENDER OF A MUTUAL FUND ACCOUNT, WHICH WAS PRIOR TO THE FIRM'S RECEIPT OF NOTICE OF THE CLIENT'S DEATH.
FINRA deemed Luchini's impersonations to constitute violations of FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon Luchini a $5,000 fine and a 30-business-day-suspension from association with any FINRA member firm.
Bill Singer's Comment
In case you missed it, the AWC concedes that all of the cited impersonations by Luchini were authorized. We can debate all day long whether impersonating a customer with the customer's prior authorization is or should be a violation. For the record, I come down on the side that impersonating a customer is a terrible practice and should be a violation.. Notwithstanding my opinion on the ethics and appropriateness of such a practice, the industry's rulebooks (in-house and regulatory) disfavor the pretense regardless of whether the customer or surviving family authorizes the impersonation.
In terms of the Luchini AWC, even if you find some mitigation with the prior authorization by the two living customers, you're going to be in a pretty uncomfortable place if you try and justify liquidating the positions of a deceased client simply on the say-so of a surviving spouse. Generally, FINRA broker-dealers have written supervisory procedures requiring that upon notice of an individual account holder's death, all "OPEN" orders are cancelled and further trading in the account is blocked. Typically, the account is changed to that of a "DECEASED" and further activity suspended until the firm is in receipt of a death certificate or other legal notification. These steps are taken so as to ensure the preservation of assets for any estate and to limit the firm's exposure in any estate litigation. Thereafter,the name of the account is generally changed from that of the deceased into one reflecting the "ESTATE OF . . .," and such alteration may require the prior production of various court orders or letters testamentary, as the circumstances may dictate.
In the absence of legal documentation and authorization from your firm's legal/compliance department, registered persons should not merely follow the instructions of a surviving spouse, sibling or any other individual claiming the right to control the deceased's assets. As is often the case, the assets of a deceased may be subject to a will contest or, in the absence of a valid will, the estate may require judicial intervention pursuant to intestacy statutes.