The Old Client Phone Number and Email Address Switcheroo Backfires on UBS Broker

March 7, 2012

Changing customer phone numbers to facilitate your resignation may not be such a great idea

In response to the filing of a Complaint on February 18, 2011, by the Department of Enforcement of the Financial Industry Regulatory Authority ("FINRA"), Respondent Leonard Eric Burd submitted an Offer of Settlement dated February 13, 2012, which the regulator accepted.  Under the terms of the Offer of Settlement, without admitting or denying the allegations in the Complaint,Respondent Burd consented to the entry of findings and violations and to the imposition of the sanctions. FINRA Department of Enforcement, Complainant, vs Leonard Eric Burd, Respondent(Offer of Settlement, 2009017279201, March 1, 2012).

U and Us - UBS

From October 21, 1997 to February 11, 2009, Respondent Burd was registered with  UBS Financial Services Inc., where he worked as a Private Wealth Advisor at the firm's Wellesley, MA office, and, thereafter, he was registered with another FINRA member firm.

From at least October 2008 through January 2009, the AWC alleges that Respondent Burd began exploring employment opportunities and in January 2009 decided to leave UBS and join another firm.

Hey, God bless America! Nothing like trying to better yourself with a new job and a higher salary. And let's not forget that January 2009 was in the very bowels of the Great Recession with a stock market spiraling down towards a March 2009 bottom.  It wasn't exactly a warm and fuzzy time on Wall Street and UBS was laying off thousands of employees.

On or about February 2 and 3, 2009, Burd allegedly accessed UBS's computer system and made alterations to the telephone and e-mail contact records for about 51 of his customers.  Apparently, Burd deleted customer telephone numbers, entered inaccurate and non-working telephone numbers, and deleted customer email addresses. As the servicing registered representative for the 51 affected customers, Respondent Burd allegedly had made up his mind to leave UBS and was paving the way to transfer his book to his new firm.

SIDE BAR: Given that it would have been reasonable to expect UBS to take steps to retain Burd's customers and given that the likely response by any former brokerage employer would be to divide the book of a former broker among the remaining brokers in the office, Burd likely thought that his alterations would impede the attempt to convince his clients not to transfer their accounts from UBS.  After all, if your former colleague starts to telephone your clients or sends them emails and, oh my, wattaya know, the numbers and addresses are wrong . . . hey, all's fair in love and war and on Wall Street, or so some think.

U and Us Got A problem

On February 3, 2009, Respondent Burd's alterations were popped up on UBS's exception report system.  Subsequently, around February 4th and 6th, Burd was questioned by UBS personnel and he indicated that the changes were inadvertent.  Burd also denied that he planned to resign.  Notwithstanding his protestations and while still under investigation, Burd resigned on February 11, 2009.

Subsequent to his resignation, Burd retained a UBS document containing customer contact for those clients that he personally had serviced, including the 51 customers at issue. That UBS document, however, reflected the customer contact information in its original, unaltered form.

U and FINRA Got A Problem

Following an investigation by FINRA, the regulator alleged that by improperly altering his employer's customer contact records, Respondent Burd violated NASD Conduct Rule 3110 and FINRA Rule 2010.  In accordance with the terms of the Offer of Settlement, FINRA imposed the sanctions of:

  • a 30-business day suspension from association with any FINRA member firm in any capacity, and
  • a $5,000 fine

Bill Singer's Comment

Yeah, I know, you have this really, really clever idea.  It's like throwing some thumbtacks on the road in the path of a pursuing car - you'll slow ‘em down and get away.  And if those hot on trail are your former bosses and colleagues at Merrill Lynch, Smith Barney, Morgan Stanley, UBS, JP Morgan, or Wells Fargo, so what, it's a free country and I have every right to take what's mine.

First off, it's not that clever. The whole ruse about transposing your clients' phone numbers or changing the "" to "" on their emails - someone else tried that, quite a while ago, in fact, and, guess what, it didn't end well for them.

At first, as word got around about the old switcheroo, hey, okay, cute!  By the time former employers figured it out, you were long gone and had transferred the bulk of your book to your new firm.  So sue me, you said.  Some of your former employers did and you got a surprise about how the regulators and arbitration panels didn't find your self-help measures legal.  On the other hand, maybe some of you took the risk and it paid off - your firm said good riddance and the regulators were clueless.  With a lot of firms going under the past few years, it was a more forgiving time but not anymore.  You pull this crap of altering customer data these days and you're more apt to wind up in hot water with both your former firm and the regulatory community.

In 2012, many employers and a whole crop of regulators are onto this scheme. Nowadays, bulk changes to your clients' account information is likely to set off a software detection program on your firm's database. Further, with all the digital data back-ups, it's not all that difficult to reconstitute the data from a prior, saved iteration.  Worse, if your former employer seeks a temporary restraining order in court against you, this type of shenanigan is exactly the nonsense that often disposes a judge to slap all sorts of restraints upon you and it doesn't play all that well with arbitration panels.

Before you decide to play the old switcheroo, ask yourself this: "Do you feel lucky?" You sure you wanna go here??  If you got 30-days to waste on the sidelines and a few thousand bucks to blow, be my guest.

By the way, if your former employer sues or FINRA comes calling and you need a high-priced lawyer, you got my number, right? Please don't scramble it when you leave.