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, Timothy Edward Daly submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted.In the Matter of Timothy Edward Daly, Respondent (AWC 2009018310201, June 4, 2012).
In 1984, Daly became a General Securities Representative, and during the relevant time of 2006 through May 29, 2009 was registered in that capacity through Citigroup Global Markets Inc. The AWC asserts that he does not have any FINRA disciplinary history.
From April 2007 through May 2009, Daly allegedly caused 24 customers to be overcharged commissions and fees in connection with certain securities transactions. The AWC alleges that, at times, Daly purchased securities in a customer's commission-based retail account and then journaled the positions into the customer's fee-based account. Conversely, sometimes Daly allegedly journaled securities positions out of the fee-based account and, thereafter, sold those securities from the customer's commission-based retail account.
Consequently, FINRA alleged that certain of Daly's customers got hit with a double-dip: They paid a commission on transactions effected in their retail account and also paid fees on the same securities in their fee-based account. The AWC alleges that the excess charges attendant to this double-dip totaled some $212,120.37, in violation of NASD Conduct Rule 2110 and FINRA Rule 2010.
According to the terms of the AWC, FINRA imposed a $97,500 fine (including disgorgement of ill-gotten gains) and a 3-month suspension from association with any FINRA member in any capacity.
Citigroup, Goldman Sachs, JP Morgan, Morgan Stanley, Merrill Lynch, Wells Fargo are all big firms, household names, some say they're too-big-to-fail. Unfortunately, with such size comes problems of scale. There are only so many compliance personnel and so many more brokers and, well, what can I tell ya? Sometimes stockbrokers make inadvertent mistakes. Sometimes they screw around and try to game the system. Then you got your hardcore crooks. Trouble is, it's often too late before an in-house supervisor or compliance officer figures out which one is handling your account.
If you were to answer my telephone for a few days, you'd hear lots and lots of complaints from public customers seeking to sue their broker or brokerage firm. Very often, when I ask how come it took the customer six months to discover unauthorized trades or missing funds, there's a deafening silence on the other end. Eventually, in response to my prodding and pulling, it comes out.
I didn't open those trade confirmations that came to the house.
I didn't really understand the monthly account statements.
I got some kind of quarterly report but gave it to my daughter and she said it all looked okay, as far as she could tell.
My son and my accountant were asking me about some losses on my annual statement but I told them that my broker said he would get some kind of credit next year.
I called my stockbroker about the apparent loss in my account and he explained that it was a back-office mistake and would be corrected.
A few lessons from a 30-year Wall Street veteran who has worked in-house at brokerage firms, as a regulator, as an industry defense lawyer, and as a public customer's lawyer. Yeah, it's sort of tough to pull the wool over my eyes - I've sat at all sides of the table.
First, open every damn piece of mail you get from your brokerage firm.
Second, if you don't understand your trade reports/statements, ask questions and educate yourself - or shut down the account until such time as you have learned how to keep track of your cash and securities. It's not that you're stupid; sometimes those statements are incomprehensible. See, "Arbitrators Award Damages For Misleading and Incomprehensible Trade Confirmation" (" Street Sweeper" April 5, 2012).
Third, if something doesn't look right in your account, call an accountant or lawyer and get to the bottom of it, but never, ever merely rely upon the assurances of your broker or brokerage firm.
There are many good, decent, honorable men and women who are stockbrokers and investment advisers. Find one. Just because you called to open an account on Tuesday and were assigned to Murray or Jane as the broker-of-the-day doesn't mean that you have to stay with that person. Just because Joe or Nancy handled your parents' accounts, doesn't mean that you too have to use those same folks.
Find a financial professional with whom you are comfortable and who makes times to answer your questions. On the other hand, sometimes touchy-feely is the artifice of a con artist - I'd rather have delicate brain surgery performed on me by a grouch than some sweetheart with a long history of malpractice. Ultimately, your goal is to preserve your capital and make money, not to make friends with your broker or money manager. Instead of worrying about whether your broker will give the toast at your daughter's wedding (as some of those television commercials depict), find someone who will help you accumulate the money to pay for that wedding.