February 28, 2017
If I had to sum up my sense of why Wall Street compliance departments and regulators often fail, I would offer four key points:
- If you're not looking for something, you often can't find it.
- If you're convinced that where you're looking is the only right place, you fail to find what's located elsewhere.
- If you're wasting your time looking for nonsense, you tend to find the useless but not what's important.
- If you're going through only the motions of looking, then everything is a silly game and nothing worth looking for gets found.
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, Matthew C. Maczko submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Matthew C. Maczko, Respondent (AWC 2016050430201, February 9, 2017).
The AWC asserts that Maczko was first registered in 1988 and by 2008 was registered with FINRA member firm Wells Fargo Advisors, LLC. The AWC asserts that Maczko had no prior relevant disciplinary history.
The AWC alleges that during the relevant time between January 2009 and April 2016, Maczko effected over 2,800 transactions in four brokerage accounts (with an aggregate value of $3 million ) of a customer who is identified only as "JZ."Customer JZ was characterized in the AWC as currently being 93 years of old and Maczko was deemed to have controlled her accounts. The cited transactions allegedly generated about:
- $581,650 in commissions,
- $84,270 in other fees, and
- $397,000 in trading losses.
FINRA alleged that Mackzko's conduct violated NASD Rule 2310 and FINRA Rules 21 11 and 2010.
As of February 28, 2017, online FINRA BrokerCheck records under the heading "Employment Separation After Allegations" disclose that Wells Fargo Advisors "Discharged" Maczko on September 2, 2016, based upon allegations that:
Mr. Maczko is under internal review for adherence to industry standards of conduct based on concerns about the level of trading in a customer account.
While testifying to FINRA investigative staff on September 28, 2016, Maczko allegedly stated that after his discharge from Wells Fargo earlier that same month, he had not spoken to two other elderly customers, who are identified only as "KL" and "CL."). As if often the case, there was a bit of a disconnect between Maczko's recollection and his telephone records because the latter disclosed that he had spoken to KL and CL several times after his termination. FINRA deemed Maczko's inaccurate and misleading testimony to constitute violations of FINRA Rules 8210 and 2010.
In accordance with the terms of the AWC, FINRA imposed upon Maczko a Bar from associating with any FINRA member in any capacity.
Maczko's BrokerCheck record was updated by Wells Fargo Advisors to include this "Firm Statement":
FINRA permanently barred registered representative in connection with his conduct on February 9, 2017. The firm thereafter closed its investigation, noting that the individual consented to a permanent bar from the industry.
Bill Singer's Comment
Somewhat lost in the details of this case is a very troubling and alarming fact; namely, that Maczko's alleged excessive trading in JZ's account went unnoticed by Wells Fargo's compliance staff and by any industry regulator for over seven years from 2009 through 2016. Which means that over a seven year span, an elderly customer was allegedly victimized from her late eighties to her early nineties through nearly $600,000 in commissions and $400,000 in losses as against about $3 million in assets but nary an alarm was sounded or a flare fired. One must only wonder whether Wells Fargo's flurry of bogus account openings sidetracked its oversight of Maczko's and others.
Also take into consideration these further disclosures on Maczko's FINRA BrokerCheck files:
No . . . Maczko is not FINRA or Wells Fargo's finest moment.
- Wells Fargo Advisors disclosed that a client "verbally alleged unauthorized trades and excessive commission rates" for the period of October 23, 2015, to January 19, 2016. The firm settled that complaint on February 9, 2017 for $20,0000.
- Wells Fargo Advisors disclosed that a client "verbally alleged unauthorized trades and was unaware of the amount of commissions that she had incurred" for the period of January 1, 2012 to January 1, 2016. The firm settled that complaint on November 14, 2016, for $1,000,000.
- Wells Fargo Advisors disclosed that a client "Claimants allege that from 2008 through 2016, FA recommended unsuitable investments, and misrepresented information in September 2016. The firm settled that complaint, which had progressed to a FINRA Arbitration Statement of Claim, on February 6, 2017 for $375,000.
- Painewebber Incorporated disclosed that "Claimants allege unsuitable and unauthorized transactions as well as misrepresentations regarding their investments in equities, including MacDonald's options and AT&T Scores and allege compensatory damages in the amount of $48,741.00 and punitive damages. The transactions took place during the time period 1989 through 1990." The firm settled that complaint on November 1, 1995, for $35,000. According to BrokerCheck, Maczko's statement concerning the matter was that it had been "settled by Painewebber paying claimants $35,000. Claimants executed & full release. I deny in each matter, all allegations mentioned above. The allegations are unfounded and untrue.
- UBS Financial Services Inc. disclosed that a "client claims that he is 'looking into the possibilities of turning you into the SEC for misrepresentation and fraud.' Time Frame: 2006." The client allegedly sought $39,378, which was denied by the firm on July 6, 2006.
- UBS Financial Services Inc. disclosed that a "client alleges that broker recommended unsuitable investments. Estimated losses exceed $5,000." The claim was denied by the firm on July 18, 2003.