An irreverent Wall Street Blog
Customer Twice Victimized By Broker's Impersonation and Online Disclosure
September 29, 2016
The conduct of the registered representative featured in
today's BrokeAndBroker.com Blog was improper; by way of spoiler alert, the rep impersonated one of her
customers. The employer discharged the
rep in 2014 but things sort of go off track afterwards, and we are confronted
with the apparent missteps of in-house compliance and industry regulation. For
one thing, the full name of the victimized customer was disclosed online -- for
all to see -- for about two years! And this from a self-regulatory organization
that goes to great pains to hide the disclosure of the name of a member's
affiliated bank or even the name of non-member third parties. On top of that,
it took two years for FINRA to settle the case even though the respondent had
admitted guilt and been fired in September 2014.
Case in
PointFor 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, Betty Lai Johnson
submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which
FINRA accepted. In the Matter of Betty Lai Johnson, Respondent
(AWC 2014042426401, September 7, 2016).
In 2003,Johnson was first registered and by 2012, she was
associated with Transamerica Financial Advisors, Inc.,("TFA") until
her September 23, 2014 termination. The AWC asserts that Johnson had no prior
relevant disciplinary history.
Liquidate and Buy
The AWC asserts that in early
June 2014, Johnson met with an individual described only as "Customer CW," and
during that meeting, Johnson purportedly recommended that CW liquidate her TRP
401(k) account and use the proceeds to purchase through Johnson a variable
annuity ("VA"). Note: the AWC does not disclose the identity of the firm housing the 401(k) account beyond the initials "TRP." The AWC asserts that CW completed certain paperwork
necessary to effectuate the 401(k) sale and VA purchase. The AWC then asserts
that:
After the meeting, CW changed her mind and decided she no longer wanted to purchase the VA or liquidate her TRP account, although she did not immediately inform Johnson that she had changed her mind. On or about June 9. 2014, after it received the paperwork that CW had completed during her meeting with Johnson, TRP contacted CW and informed her that, in addition to submitting paperwork, the transaction would require CW to verbally approve the liquidation of the TRP account in order to process the transaction. During the call, CW informed TRP that she no longer wished for the transaction to go forward and that she did not approve liquidating the TRP account.
Pretending
On June 13, 2014, Johnson
purportedly telephoned TRP and "impersonated" CW (which occurred without the
customer's prior authorization or knowledge). During the impersonation, Johnson
(pretending to be CW) gave verbal authorization to liquidate the TRP 401(k)
account and use the proceeds to purchase the VA, which instructions were, in
fact, followed by TRP.
Transaction Reversed
On June 18, 2014, CW received
notice of the 401(k) liquidation, which apparently prompted the customer to
contact TRP and demand an explanation. Following CW's contact, TRP reversed the
transaction.
Sanctions
FINRA deemed Johnson's cited conduct as constituting a violation of FINRA Rule 2010.
FINRA deemed Johnson's cited conduct as constituting a violation of FINRA Rule 2010.
In accordance with the terms of
the AWC, FINRA imposed upon Johnson a $5,000 fine and a six-month suspension
from association with any FINRA member firm in all capacities.
Bill Singer's
Comment
According to online
FINRA BrokerCheck records as recently as September 27, 2016,
TFA had "Discharged" Johnson on September 22, 2014, based
upon allegations
that:
ON JULY 29, 2014, TRANSAMERICA FINANCIAL ADVISORS, INC. ("TFA") BECAME AWARE OF A MATTER INVOLVING BETTY LAI JOHNSON'S CLIENT C**** W*. TFA WAS FORWARDED A SIGNED AFFIDAVIT DATED JULY 7, 2014 FROM MS. W* WHICH REFERENCED A TELEPHONE CALL ON JUNE 13, 2014 WHEREIN A ROLLOVER FROM HER 401(K) TO A VARIABLE ANNUITY WAS VERBALLY AUTHORIZED. IN HER AFFIDAVIT, MS. W* EXPLAINS THAT SHE DID NOT MAKE THIS PHONE CALL AND WAS INFORMED THAT THE CALLER IDENTIFIED THEMSELVES AS C**** W*. WHILE MS. JOHNSON WAS NOT NAMED IN THE MATTER, THE STATEMENTS MADE BY THE CLIENT PROMPTED TFA'S INTERNAL REVIEW. DURING A TELEPHONE INTERVIEW, MS. JOHNSON ACKNOWLEDGED IMPERSONATING MS. W* DURING A PHONE CALL ON JUNE 13, 2014 AND AUTHORIZING THE ROLLOVER FROM MS. W*S 401(K) TO A VARIABLE ANNUITY CONTRACT SHE SOLD MS. W* ON JUNE 2, 2014
The Street Has No Names
The above-referenced client's full name,
"C**** W*" , was disclosed in
the prior iteration of the BrokerCheck record used to
draft this article. The BrokeAndBroker.com Blog redacted the
client's disclosed name by substituting asterisks for the previously published
letters. Pursuant to a recent revision of the BrokerCheck record, the above-quoted section now refers to
the client as "[customer]". The BrokerAndBroker.com Blog references the older
version through boldface and yellow highlight emphasis that was not in the
original. Although the BrokeAndBroker.com Blog is aware of the client's full name as a result of its questionable publication on FINRA's BrokerCheck, we have not published that information in this article out of respect for the customer's confidentiality; however, we reference the full name in redacted form with asterisks in order to demonstrate that the prior iteration existed.
Sometime around September 28,
2016, it appears that TFA and/or FINRA discovered that the BrokerCheck
record had disclosed customer C**** W*'s full name for a period of about
two years from September 2014 to September 2016. If TFA filed its
disclosure with the client's full name, then that firm needs to review its
confidentiality protocols and make sure that this doesn't recur. Moreover, someone
at FINRA should have caught this glaring online breach of customer
confidentiality long before the expiration of two years. After all, on the Street we have no names, right?
Two Years
Finally, Johnson's misconduct
was purportedly detected and admitted to by July 2014. Just what the hell took
until September 2016 (a date more than two years later) to get this matter
settled? What exactly was FINRA required
to investigate, ascertain, confirm, and charge during the span of some 25
months? I mean, c'mon, the BrokerCheck filing by TFA unequivocally states that "during a telephone
interview, Ms. Johnson acknowledged impersonating Ms. W*. . ." Since TFA had fired Johnson on September 22,
2014, after having obtained an admission of misconduct from the employee, just
what did FINRA's staff need to ferret out during the ensuing two
years?
READ:
"Wells Fargo Employee Withdraws Money From Customers ATM Accounts" (BrokeAndBroker.com Blog, May 13, 2016)
"Is FINRA Actin' Kinda Shady In Naming (Or Not) Banks?" (BrokeAndBroker.com Blog, February 5, 2015)