Banker Broker Barred Over Rebate of Overdraft Fees

August 8, 2016

Submitted for your consideration is the case of a lowly bank and brokerage firm employee who doesn't quite like the fact that his personal banking account was charged overdraft fees. Unlike the rest of us, this unhappy employee had a tool to right the wrongs. He used that tool. The thing is, he should not have. In the end, it just doesn't end well for this misguided righter of wrongs. So why, then, do we secretly give him a wink and a thumb's up?

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, [REDACTED} submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of [Ed: Note, Respondent's name REDACTED at the sole ]discretion of Blog}, Respondent (AWC 2015047364601, July 28, 2016).

[REDACTED] first became registered with FINRA in 2009 and in May 2015 he was hired as an employee of Citizens Bank, N.A.,  (the "Bank"), which employed him as a relationship manager at two branches. The Bank required [REDACTED] to maintain a FINRA registration, which he did through the affiliate Citizens Securities, Inc. The AWC asserts that [REDACTED] had no prior disciplinary history with the SEC, FINRA, any other self regulatory organization or any state securities regulator.

Overdraft Fees

While employed by the Bank and also associated with Citizens Securities, [REDACTED] had both a Bank savings and checking account. The AWC alleges that on six occasions between July 2015 and August 2015, [REDACTED] was charged $210 for overdrawing on his checking account.

Fee Rebate Tool

As asserted in the AWC, as a Bank employee, [REDACTED] had access to what is characterized as a "fee rebate tool." I'm sure that, at times, you would liked access to just such a tool when your monthly statement appeared with all sorts of dubious and annoying bank fees. [REDACTED] was happy to have access to the rebate tool because between August 2015 and October 2015, without the knowledge or authorization of the Bank, he rebated to himself the $210 in overdraft charges.

Unfortunately, [REDACTED]'s righting of perceived wrongs didn't end with balancing out the books over a total of $210 in his overdraft fees. The AWC asserts that between August 2015 and October 2015, [REDACTED] processed 19 fee rebates to his own accounts, resulting in a total of $1,035. That's an additional $825 above and beyond the $210 in overdraft fees. As the AWC admonishes, he obtained $1.035 in rebates "to which he was not entitled, into his accounts."  As the AWC further notes:

The Bank had a policy prohibiting employees from processing any banking transaction on his or her own behalf. The policy also specifically prohibited any employee from processing a rebate in his or her own account.


Following the Bank's September 2015 awareness of [REDACTED]'s rebates, the Bank and Citizens's Securities purportedly terminated him in October 2015.

Deeming his conduct in violation of FINRA Rule 2010 and in accordance with the terms of the AWC, FINRA imposed upon [REDACTED] a Bar from associating with any FINRA member in any capacity.

Bill Singer's Comment

You know, it's somewhat hard to pretend that our first response to this revelation about [REDACTED]'s self-help doesn't result in a barely suppressed laugh and smile, followed by a head shake and barely-disapproving grimace.  Okay, sure, no question about it, [REDACTED]did wrong. Reduced to basics, he stole over $1,000 from his employer. My warped view of right and wrong, however, doesn't alter my acceptance, grudging as it may be, that FINRA was right to bar this guy.

I don't want to launch into another long-winded attack on Wall Street and its regulators (well, okay, I do but it's August and it's already too hot and I don't have the energy).  Let me, instead, turn to the words of others to make the point that I desire.

If you visit the "About" page of the website, you will learn that:

President Obama established the Financial Fraud Enforcement Task Force in November 2009 to wage aggressive and coordinated investigations and prosecutions of financial frauds and maximize the ability both to recover the proceeds of these frauds and obtain just and effective punishment of those who commit them. . .

Mortgage frauds are among the many financial frauds investigated and prosecuted byt eh Financial Fraud Enforcement Task Force. Visit the "Mortgage Frauds" page. If you read through the many press release on the "Mortgage Frauds" page, you will likely note a number of high-profile banks, many of which have FINRA member firm affiliates or subsidiaries. I don't have the time or inclination to exhaustively list all such relevant press releases but let's pick one to illustrate the issue:

"Service Members to Receive Over $123 Million for Unlawful Foreclosures Under the Servicemembers Civil Relief Act" (Press Release 15-157, United States Department of Justice, February 9, 2015):

The Justice Department announced today that under its settlements with five of the nation's largest mortgage servicers, 952 service members and their co-borrowers are eligible to receive over $123 million for non-judicial foreclosures that violated the Servicemembers Civil Relief Act (SCRA).  The five mortgage servicers are JP Morgan Chase Bank N.A. (JP Morgan Chase); Wells Fargo Bank N.A. and Wells Fargo & Co. (Wells Fargo); Citi Residential Lending Inc., Citibank, NA and CitiMortgage Inc. (Citi); GMAC Mortgage, LLC, Ally Financial Inc. and Residential Capital LLC (GMAC Mortgage); and BAC Home Loans Servicing LP formerly known as Countrywide Home Loans Servicing LP (Bank of America).

In the first round of payments under the SCRA portion of the 2012 settlement known as the National Mortgage Settlement (NMS), 666 service members and their co-borrowers will receive over $88 million from JP Morgan Chase, Wells Fargo, Citi and GMAC Mortgage. The other 286 service members and their co-borrowers are receiving over $35 million from Bank of America through an earlier settlement.  The non-judicial foreclosures at issue took place between Jan. 1, 2006, and Apr. 4, 2012.

"These unlawful judicial foreclosures forced hundreds of service members and their families out of their homes," said Acting Associate Attorney General Stuart F. Delery. "While this compensation will provide a measure of relief, the fact is that service members should never have to worry about losing their home to an illegal foreclosure while they are serving our country.  The department will continue to actively protect our service members and their families from such unjust actions." . . .

Briefly, ever so briefly, let me highlight some points from the above press release.
  • Five of the nation's largest mortgage servicers;
  • 952 service members;
  • $123 million for non-judicial foreclosures that violated SCRA;
  • unlawful judicial foreclosures;
  • forced hundreds of service members and their families out of their homes;
  • JP Morgan Chase;
  • Wells Fargo;
  • Citibank; and
  • Bank of America.
And there Justice stands. Blindfolded. Holding the scales before her. On the right scale, which is noticeably lower than the left, we have the barred Mr. [REDACTED} and his $1,035 in rebates; on the left scale, we have five too-big-to-fail banks and $123 million in unlawful foreclosures of service members' homes. [REDACTED} gets fired and barred from Wall Street. The big banks pay a settlement whose funds largely come out of the pockets of public shareholders.

Has FINRA barred any executive who was employed at a FINRA member firm affiliate bank and whose firm was involved in improperly originating mortgages or securitizing them, or in unlawfully foreclosing on homes?  Should we also explore the whole robo-signing disgrace? FINRA has no problem ferreting out an affilated bank employee's improper use of a rebate tool and barring that registered person. Why the lack of similar diligence among the ranks of the big fish who run the affiliated banks and brokerages?

And Wall Street's cops wonder why public investors and the industry don't quite take them seriously?