Anticipating Stockbroker Fined For Taking Client Files Home

August 15, 2014

Ah yes, that sweet anticipation with which you ponder leaving the scorched earth of the branch office of your current brokerage firm for the greener pastures of the firm that just agreed to hire you. Although you're not physically leaving until next week, fact is, you've mentally checked out already. Of course, there's still all that pesky crap about transferring customers that you have to deal with -- and while your anticipating the big career move, you're also trying to figure out what best to do with your customers' files. As famed securities regulator Carly Simon admonished: 

We can never know about the days to come
But we think about them anyway

Wise, wise words of advice for all stockbrokers, who should carefully think about what may happen to you after you've left your firm because that legacy can bite you in the ass. As Ms. Simon so sagely observed, when anticipating your departure, take your time, consider what you're doing, it may make you late, it may make you wait . . . but those inconveniences may pale in comparison to what your former employer and FINRA could have in store for you if you don't play by the rules. 

Case In Point

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, Edward Thomas Hill submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Edward Thomas Hill, Respondent (AWC 2013036393901, August 7, 2014).

In 1992, Hill first became registered and, subsequently, from 1996 to June 1, 2009, he was registered with FINRA member firm Citigroup Global Markets lnc. ("CGMI"), and, thereafter, as part of a mass transfer of CGMI's personnel, he was registered with Morgan Stanley. On March 5, 2013, he was registered with Wells Fargo Advisors Financial Network, LLC. ("Wells Fargo").The AWC asserts that Hills had no prior relevant formal disciplinary history with the Securities and Exchange Commission, any self-regulatory organization or any state securities regulator.


The AWC alleges that in March 2013, Hill was preparing to depart Morgan Stanley for Wells Fargo, and, while still registered with Morgan Stanley, he removed from that firm's offices documents regarding approximately 46 customers. FINRA asserted that the documents contained nonpublic personal information, and were transported by Hill for storage at his home and, thereafter, placed in a locked personal storage facility.  

On March 19,2013, Morgan Stanley filed a Uniform Termination Notice for Securities Industry Registration ("Form U5") stating that Hill's termination was "Voluntary." His last date of employment was indicated as March 5, 2013. Morgan Stanley purportedly recovered the documents at issue around March 20, 2013.

The AWC deemed Hill's conduct as constituting violations of SEC Regulation S-P, Morgan Stanley's written supervisory procedures, and FINRA Rule 2010. 

In accordance with the terms of the AWC, FINRA imposed upon Hill a Censure and a $5,000 fine. 

Bill Singer's Comment

Considering how many of these customer document removal cases are settled by FINRA, this one turned out relatively well for the respondent because there was no suspension imposed. As such, there were likely mitigating factors that the self-regulatory organization took into account. 

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