An irreverent Wall Street Blog
by Bill Singer
by Bill Singer
FINRA Bars Female Sales Asst Instructed To Impersonate Customers
October 10, 2014
In Wall Street's branch offices, they always seem to manage to find the "girl," and instruct her (or really, really strongly suggest) to impersonate a customer. It's usually some guy who's higher up in the feeding chain pushing the female, who's low down on that chain, to do something that the guy knows probably shouldn't be done . . . he sure as hell doesn't want to do whatever it is that he's pressing her to do. Funny, isn't it, that the expression is "fall guy" when it's so often "fall girl."
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, Angela M. Borchardt submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Angela M. Borchardt, Respondent (AWC #2013037650602, October 2, 2014).
Borchardt entered the securities industry in 2000 and first became registered in 2011. In May 2013, she was employed by FINRA member firm Commonwealth Financial Network as a registered assistant. The AWC asserts that she had no prior disciplinary history.
SIDE BAR: Although not disclosed in the AWC, online FINRA records as of October 10, 2014, disclose the Borchardt was registered with FINRA member firm LPL Financial LLC from May 2011 to May 2013.
A Lot In Common(wealth)
The AWC asserts that Borchardt and a number of registered representatives moved from the same prior firm to Commonwealth in May 2013, thus necessitating the transfer of securities for the customers that transferred their accounts to the new firm. The AWC alleges that, in specific, six transferring customers had proprietary securities that could not be transferred between the old and new firms.
Liquidating The Prop Funds
The AWC alleges that "as instructed by a registered representative at Commonwealth," Borchardt impersonated the six customers during telephone calls to the former firm and instructed that firm to liquidate the proprietary holdings and transfer the proceeds to Commonwealth.
SIDE BAR: Take this however you want, but it bears repeating that the AWC conceded that Borchardt was "instructed" to engage in the cited impersonations. Not asked. Not suggested. Not requested. Instructed. Also, Borchardt was a relatively lowly sales assistant, as in a subordinate to the instructing registered representative.
Customers In The Dark
During those communications, Borchardt allegedly provided customer information such as social security numbers, account numbers, address, and telephone numbers. In response to Borchardt's impersonation, the positions were liquidated and funds forwarded. The AWC asserts that the customers had not been informed about the non-transferrability of the subject securities and had not authorized the liquidations and subsequent transfers.
The Cover-Up
At some point, Borchardt's Commonwealth supervisors purportedly learned of the impersonations and interviewed her about her conduct. The AWC asserts that she "falsely stated to her supervisors that the customers were on the phone with her during the calls." In furtherance of this apparent cover-up, Borchardt apparently asked one of the customers to confirm to the supervisors that the client had participated in the call seeking the liquidation of the position.
The Consequences
According to online FINRA records as of October 8, 2014, Commonwealth "Discharged" Borchardt on July 16, 2013, based upon allegations that she had:
ADMITTED TO IMPERSONATING CLIENTS ON RECORDED CALLS TO FORMER BROKER-DEALER. ASKED CLIENT TO PARTICIPATE IN WITHHOLDING ACCURATE INFORMATION FROM CURRENT BROKER-DEALER
Borchardt subsequently declined to appear for on-the-record testimony at FINRA, in violation of FINRA Rules 8210 and 2010. Also, FINRA deemed her impersonation conduct to be in violation of FINRA Rule 2010.
In accordance with the terms of the AWC, FINRA imposed upon Borchardt a Bar from associating with any FINRA member in any capacity.
Bill Singer's Comment
Before I launch into a rant, let me concede a few important points. One, Borchardt settled this case. Two, she was apparently satisfied with being barred from the industry. Three, she likely could have obtained a lesser sanction if she had testified on the record before FINRA, but for whatever reasons, she declined, and, as such, put in motion the forces that ended her career. And, absolutely, she should not have impersonated the customers.
On the other hand, how wonderful it is for FINRA to self-regulate Wall Street from the warm confines of a hermetically-sealed bubble. My, how nice it is for this self-regulatory organization to avoid having to dig its hands into the muck of sexism, racism, and ageism that are far too prevalent among its member firms -- and, at times, even at FINRA itself.
FINRA should be somewhat familiar with the charged nature of sexual politics because it has been sued by former employees asserting sex, age, and racial discrimination. In fact, FINRA is currently defending against allegations a of unlawful disability, sex, and age discrimination and/or retaliation, brought under the Americans with Disabilities Act of 1990 ("ADA"); Title VII of the Civil Rights Act of 1964 ("Title VII"); the Age Discrimination in Employment Act ("ADEA"), and the Florida Civil Rights Act ("FCRA"). Jill Wile v. Financial Industry Regulatory Authority, Inc. (SDFL, First Amended Complaint, 14-80218-CV, June 20, 2014). Plaintiff Jill Wile, 52 years old, is characterized in her First Amended Complaint as:
As set forth in her First Amended Complaint:3. Wile was employed by FINRA (or its predecessor the National Association of Securities Dealers) for nearly 25 years, from August 1, 1988, until her employment was terminated on March 1, 2013, most recently as a Deputy Regional Director and Case Administrator Manager in FINRA's Southeast Regional Dispute Resolution office in Boca Raton, Florida.
18. One week later, on May 7, 2012, Wile sent a written complaint of disability, sex, and age discrimination to Chris Snyder ("Snyder"), FINRA's Associate Director of Human Resources. Wile's complaint indicated that she felt her only option for continued employment at FINRA in her current position was through acceptance of the PIP plan, though Ray had threatened that she would not succeed under the plan. Wile noted that in her 24 years with FINRA, she had received only Exceptional or High Contributor performance ratings, and that she was well-respected by the users of the arbitration forum, the arbitrators, and staff. She noted that when she turned 50, Ray began treating her as a problem employee and treating her less favorably than the male manager in the office, Kevin Rosen ("Rosen"). Wile also pointed out in her complaint that Ray had criticized her for dressing too youthfully on casual Fridays by wearing jeans and a short-sleeved shirt - because "she was 50." When men and younger women wore this type of clothing on casual Fridays, Ray did not criticize them for dressing inappropriately at any time.. . .
26. Wile also disclosed that Ray had been treating her differently, and more negatively, than Rosen, the male manager in the office, in part by being supportive of Rosen's efforts to work close to normal business hours in order to be with his family. Like Wile, Rosen managed the office staff responsible for case administration, addressed case-related issues and personnel issues, responded to arbitrator and party inquiries, reported directly to Ray, and assisted Ray in the overall administration of the Southeast Regional office. When Wile complained to Ray in March 2012 that she had been working 12-hour days for almost two years, plus time on weekends, Ray responded with the threat of termination set forth in paragraph 16 above. Ray also asked Wile to perform secretarial functions, such as generating and printing letters for his signature, which he did not ask Rosen to do.27. Wile also provided several examples of younger female employees whose dress on casual Fridays violated Ray's office dress policy, but whose choice of attire was not criticized by Ray.28. This supplemental complaint again reported to FINRA that Ray targeted older employees to fire upon his arrival at the Boca Raton office, and also that older employees who were not fired were demoted with no opportunity for improvement. "I believe I am now being targeted because I objected to age discrimination in the workplace."
Using some of Wile's allegations against FINRA, did that same organization consider what would likely have happened to Borchardt if she had said "no" to her higher-up's instruction? Imagine how nurturing the branch office would have been for this veteran female if she refused to make the phone calls at issue. I'm sure that she would have received a lovely year-end bonus. I'm sure that she would have received a promotion. I'm sure that her relationship with other registered male superiors would have developed favorably. And while we're all enjoying that fantasy of the realities of Wall Street's workplace, let's ask ourselves whether Borchardt's refusal to testify may have, in some small part, been the result of her belief that her cooperation with FINRA would be the death knell for her career -- in essence, she figured that no matter what she did, her days in the biz were numbered.
You know, when you think about it that way, FINRA sort of takes on the role of an enforcer of the code of omerta in the securities industry rather than the champion of compliance and the enforcer of regulation. I mean, look at it this way, you either do the wrong thing or, if you don't, should FINRA investigate and you're called to testify, you better clam up because if you sing like a stool pigeon, no one here will work with you again and, trust me, the word quickly spreads about folks like you.
Borchardt seems to have been offered a Hobson's Choice, but FINRA is regulating the stables and should be aware of this "take it or leave it" choice. While it is preferable that folks not engage in wrongdoing, when the "it" in "take it or leave it" is one's job and career, you truly can't expect most employees will opt for the moral high ground. Ultimately, that is the challenge for all credible regulators. There is a chasm between our aspirations and reality. Effective regulation focuses on the latter.
If Borchardt's impersonation were an isolated regulatory matter, if women in lower-paid, subordinate roles in Wall Street's branch offices were not repeatedly forced into a Hobson's Choice, if FINRA would simply open its eyes to the sexual politics of its industry, then I would not have much disagreement over barring Borchardt for impersonating customers. Fact is, the act of impersonating a customer should result in a Bar, or, at best, a meaningful suspension.
The problem is that FINRA knows the recurrent pattern here because it has brought these charges against other similarly situated industry females with some frequency (see, for example, some of the articles posted immediately below). Maybe the self-regulatory organization could make some effort to preemptively regulate by attacking the root causes for these cases?
Finally, what, if anything happened to the male, registered representative who instructed Borchardt to impersonate the customer? You'd sort of like to know that, right? Me too. The thing is, FINRA doesn't present anything about that aspect of this case in Borchardt's AWC. It's apparently a state secret. Hush hush. And you thought my use of the term "omerta" was over the top?
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