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, Thomas Martin Rosen submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Thomas Martin Rosen, Respondent (AWC 20110305780-01, May 15, 2012).
Between the relevant time of approximately May 2007 and February 2011, Rosen served as a registered representative of a FINRA member firm and "relationship manager" for accounts of the member firm's non-FINRA member bank affiliate. Although not identified by name in the AWC, online FINRA records as of May 17, 2012, indicate that the member firm was Franklin Templeton Financial Services Corp. ("FTFSC") and its bank affiliate was Fiduciary Trust Co. International.
The AWC alleged that during the relevant time, without a customer's knowledge, Rosen effectuated unauthorized wire transfers from, and checks drawn off, the customer's bank account to a business entity Rosen initially had formed to manufacture fire safety masks. Rosen used some $789,000 in misappropriated funds from the victimized customer to pay his business and other personal expenses.
On April 12,2011, FTFSC terminated Rosen's employment, and on April 18, 2011, filed a Form U5 terminating his registration based on "unsatisfactory performance" that was not "security related." Some eight months after Rosen's termination, FTFSC amended Rosen's Form U5 on December 12, 2011, to disclose that he was the subject of an internal review by an affiliated non-FINRA member bank as a result of the misconduct that was purportedly identified by the bank following his termination.
FINRA alleged that by converting and making improper use of money transferred to his business from the banking customer, Rosen failed to observe high standards of commercial honor and just and equitable principles of trade in violation of NASD Rule 2110 (for his misconduct prior to December 15, 2008) and FINRA Rule 2010 (for his misconduct occurring on or after December 15,2008). According to the AWC, FINRA imposed upon Rosen a bar in all capacities from associating with any FINRA member.
Not a particularly complicated or profound case - more of a garden variety bit of nastiness to the tune of nearly $800,000. The scary part is how relatively simple it was to pull off this theft and how long it took for anyone to uncover it. Just what the hell were they looking at for some eight months after Rosen was fired?
It is comforting for many customers to think that banks are banks and stock brokerage firms are stock brokerage firms and the money of one is kept apart from the funds of the other and there are rigorous anti-fraud protocols in place. Although such a belief may be technically correct, in reality, the barriers among financial services affiliates are often blurred and sometimes it's not all that difficult for employees wearing multiple hats with roles at multiple affiliates to engage misconduct at more than one entity.
On modern day Wall Street, there's lots of what they call cross-selling: the guy at the bank is trying to sell you insurance and stocks; the gal at the brokerage firm is trying to get you to buy annuities and open a bank account at their affiliate. Then there's the whole thing with all those confusing job titles. I mean, after all, just what exactly do they mean when they tell us that someone is a "relationship manager?"
So - be careful out there. When you walk by Citigroup, JP Morgan, Wells Fargo, Bank of America, Morgan Stanley Smith Barney, what you see may not always be what you get. There are lots of strings and entanglements. For starters, that relationship manager you deal with may be dipping into your bank accounts and no one seems to have a clue. As evidenced in Rosen, it could take a bank or brokerage firm eight months to figure out who did what to whom and for how much - assuming that they even track down all the problems.