FINRA tells manager that he should have looked more carefully at the paperwork
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, Charles Edward Krsek submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Charles Edward Krsek, Respondent (AWC 2010021224803, May 31, 2012).
In 1987, Krsek entered the securities industry and starting in July 2000 began work at MetLife Securities Inc. as a financial sales representative, where in 2001 he began to work as a manager responsible for training insurance representatives. In 2004, Krsek became an agency sales director and was responsible for supervising the day-to-day insurance operations of the Lady Lake, Florida office. For several months in 2008 and again in 2009, he served as an Interim Managing Director at Central Florida office. The AWC asserts that Krsek has no prior disciplinary history.
In 2004, a Met Life registered representative, who did not have a Series 7 license and was not permitted to handle securities accounts other than variable annuities accounts, asked Krsek to open a trust brokerage account for a client in his eighties. Krsek submitted the account application for approval and became the assigned registered representative, but never monitored the activity in the account.
In March 2005, the MetLife registered representative asked Krsek to open another account for the same elderly client, who was now 82 years old with no known relative or family. Krsek agreed to do so and this account application included the other registered person as a joint account holder.
Krsek did not prepare the joint account application and does not recall if he reviewed the joint account application or any documentation prior to opening the account. At the time that the joint account was opened, Krsek mistakenly believed that the customer and the registered rep were related - notwithstanding a "NO" was marked on the section of the application asking whether any of the customer's relatives worked for MetLife.
The elderly customer died on September 9, 2009.
The AWC alleges that the opening of the account and permitting it to remain open through December 2009, caused a violation of MetLife policies and procedures as well as NASD Rule 2330(f) and FINRA Rule 2150(c) because of the prohibition against a registered person sharing directly or indirectly in profits or losses in a customer's account. Further, the AWC asserts that between at least March 2005 and January 2009, MetLife ‘s written policies and procedures specifically prohibited registered representatives or principals from "sharing directly or indirectly in profits or losses in an individual's account." In January 2009, Metlife amended its policies and procedures (the joint account remained open through December 2009) to explicitly state that
registered representatives may not be the owner or beneficiary of an individual's contract, policy or account, including but not limited to an insurance policy, investment account, annuity contract or bank account, except for family members and other insurable interest such as business partners, regardless of whether the individual is a client or where the contract is held. This prohibition included any co-ownership, beneficiary or joint ownership beneficiary capacity.
Also, the AWC asserts that Krsek failed to properly review the joint brokerage account application before opening the account and also failed to conduct mandated periodic reviews of the activity in the joint brokerage account in violation of NASD Rule 2110 and FINRA Rule 2010.
In accordance with the terms of the AWC, FINRA imposed upon Krsek a $7,500 fine and a 10-business-day suspension from association with any FINRA member firm in all capacities. He also provided a voluntary Statement of Corrective Action, which does not constitute factual or legal findings by FINRA, nor does it reflect the views of FINRA, or its staff:
Statement of Correction Action as Submitted by Respondent Charles Krsek Matter No. 20100212248
Mr. Krsek has reviewed his employer firm policies and procedures and has ensured that the one brokerage account which he currently services, in addition to his own personal brokerage account, fully complies with the firm's policies and procedures. Additionally, Mr. Krsek will regularly review firm policies to determine whether any updates have been issued. Further, Mr. Krsek will, at a minimum, review all of the brokerage accounts he services on a monthly basis for all account activity and he will regularly communicate with his clients to confirm that the activity in his clients' accounts was effected with their knowledge and consent.