April 10, 2018

A word to the wise: It's tax season! A word to the wary: It's tax season! As folks are scrambling around to come up with the funds for this year's tax bite, it's inevitable that many will come up short. Some will beg. Some will borrow. Some will steal. It's easy enough to urge you to keep a close eye on transfers out of your bank and brokerage accounts, but what about your elderly grandparents, parents, and other family-members and friends? Similarly, what about those in failing health that compromises their abilities to monitor their finances? Today's Blog sets off a bright, red warning flare in the form of a Financial Industry Regulatory Authority settlement involving a wayward stockbroker who apparently engaged in a bit of self-help when it came to paying her taxes.

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, Laura Ortega Shean submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Laura Ortega Shean, Respondent (AWC 2017056236901, April 3, 2018).

The AWC asserts that Shean was first registered in 1996, and by 1999 she was registered with FINRA member firm LPL Financial LLC. 


The AWC alleges that Shean made about $124,000 in tax payments to the Internal Revenue Service ("IRS") for her own benefit by improperly directing the IRS to debit funds from a customer's brokerage account on six occasions between March 2017 and October 2017

Tax Penalties

The AWC asserts that after the misconduct was discovered, the customer was fully reimbursed by a combination of transfer reversals and reimbursements from Shean. 

SIDE BAR: Online FINRA BrokerCheck records as of April 10, 2018, disclose under the heading of "Employment Separation After Allegations" that LPL "discharged" Shean on November 2, 2017, based upon allegations that:

Registered representative terminated after admitting to accessing one client's funds for personal use.

FINRA deemed Shean's conduct to constitute the conversion of her customer's funds in violation of FINRA Rules 2150(a) and 2010. 

SIDE BAR: FINRA Rule 2150: Improper Use of Customers' Securities or Funds; Prohibition Against Guarantees and Sharing in Accounts

(a) Improper Use

No member or person associated with a member shall make improper use of a customer's securities or funds. . .

In accordance with the terms of the AWC, FINRA imposed upon Shean a Bar in all capacities from associating with any FINRA member. 

Bill Singer's Comment

No . . . today's Blog is not presenting an earth-shattering analysis of a multi-million dollar consumer fraud. In some sense, today's coverage is more important. It's about small ball. It's about the mundane kind of crap that tends to fly under the radar and can cause far more significant harm to vulnerable broker-dealer clients than an insider trading case that makes headlines.

Reduced to its boring details, this case is about a registered representative with over two decades of industry experience who stole about $124,000 over a seven-month span from one client.  The troubling aspect of this case is that it highlights how easy it is to commit fraud on Wall Street. The other troubling aspect is the confirmation that someone could steal roughly six figures from a client and that victim apparently was clueless for at least seven months. Why? A failure of due diligence by the client? An issue of dementia or advancing age and/or illness? A somewhat indecipherable monthly statement? Active fraud by the stockbroker in terms of misstatements to the client? Frankly, I wish that the AWC had answered some of those questions as a public service.