An irreverent Wall Street Blog
by Bill Singer
by Bill Singer
The Transactions Were Authorized But Not The Customer Signatures
November 22, 2013
What's the big deal? So what if a broker signs or pastes a customer's signature onto a form, particularly when the customer has approved, in advance, the transaction. After all, isn't there such a thing as customer service? Do I really have to send every damn piece of paper to the customer for a manual signature?
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, Nicholas T. Drew submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Nicholas T. Drew, Respondent (AWC 2012031830601, November 18, 2013).
Drew was first registered in 1997 and during times relevant to this matter was registered with Ameriprise Financial Services, Inc., until March 9, 2012.
The AWC alleges that between June 2010 and December 2010, Drew executed a number of transactions with the approval of four customers; however, he falsified their signatures on cash distribution forms that authorized the withdrawal of funds from two joint brokerage accounts. As such, we are presented with a bit of a frustrating regulatory/compliance scenario. Notwithstanding that the transactions at issue were expressly authorized by the customers, they did not authorize Drew to affix their signatures to the forms -- further, Ameriprise's procedures prohibited such conduct.
In accordance with the terms of the AWC, FINRA imposed upon Drew a $7,500 fine and a 30-day suspension from association with any FINRA member in any capacity.
Bill Singer's Comment
You're right: not a particularly fascinating fact pattern and not an especially outrageous violation. In fact, even the fine and suspension come off as reasonable. Why then did I report about this case?
The answer to that question is despite the fairly obvious ramifications of engaging in the old customer-signature-shortcut, far too many registered person persist in this expediency with the consequence of incurring a regulatory blot on their records. And while I concede that signing off under a customer's name on an "authorized" transaction doesn't exactly seem like a glaring, blatant bit of misconduct, the reality of these cases is that they do not exist in a vacuum.
Consider what might happen, in the future, if a customer has a complaint -- perhaps about a funds transfer, a stock recommendation, or a loss in the account. And just to make a point, let's agree that the complaint is somewhat bogus. Let's see how prior regulatory settlements involving your signing off on a customer document can permeate the case and compromise your ability to mount an effective defense.
Enter a high-powered claimant's lawyer working on a contingency fee and this legal eagle starts looking for something, anything, to use as leverage against you and your brokerage firm. Lo and behold, the lawyer uncovers your FINRA AWC involving your unauthorized affixation of a customer's signature on a document. It doesn't matter whether that signature short-cut was taken on an approved transaction or even if it was in connection with the specific allegations raised in the customer's complaint. The fact is that the customer's lawyer now has something to use to force a settlement or raise reasonable questions about your honesty before a hearing panel. Before you can even make your points about the transactions at issue, you're back pedaling on the question of why you signed a customer's name without his or her prior approval.
Consider the following online information about Drew. Note how the issue of "signatures" permeates his record and rears its ugly head. According to online FINRA documents as of November 22, 2013, the following allegations were made by one of Drew's clients on March 2, 2012:
THE CLIENT ALLEGED THE SIGNATURES TO EFFECT TRANSACTIONS ON MARCH 2010 WITH HIS RIVERSOURCE RAVA 4 AND RIVERSOURCE VUL IV WERE DONE WITH RECYCLED SIGNATURES.
The online document notes, however, that:
THE CLIENT STATED HE HAD APPROVED THE TRANSACTIONS.
On April 18, 2012, Ameriprise apparently denied the client's claim, although it is unclear what, if any, damages were sought or what, if any, remedies had been requested.
Another online FINRA disclosure indicates that on June 5, 2012, Ameriprise settled a customer complaint for $6,359.25 pursuant to the filing of a February 22, 2012, customer complaint seeking $22,030 in damages. That dispute is characterized as:
THE CLIENTS STATED THAT ALTHOUGH THE SIGNATURES WERE THEIRS, THEY DID NOT SIGN THE CASH DISTRIBUTION FORMS SIGNED IN OCTOBER 2009, MARCH 2010, JUNE 2010, JULY 2010, AND NOVEMBER 2010.
Finally, On September 29, 2012, Ameriprise paid a $19,137.54 settlement versus alleged damages of $9,331.64 (so stated in the online disclosures), as a result of a June 27, 2012, customer complaint alleging:
THE CLIENTS STATED THEY RECEIVED POOR ADVICE TO SURRENDER TWO RIVERSOURCE RETIREMENT ADVISOR 4 ADVANTAGE VARIABLE ANNUITIES ON JANUARY 2011 AND MAY 2011
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