Before you read today's analysis of a recent FINRA regulatory settlement, place a large pillow on the floor directly under your chin because it may cushion the impact when your jaw hits the hardwood not once or twice but possibly three or more times. By way of a brief observation from someone who's been on Wall Street for four decades: When we are confronted by the stupid stuff that folks do, often our first inclination is to assume that the stupid stuff was a mistake; however, notwithstanding our inclination to assume that there may well have been a sensible reason for doing the stupid stuff, it turns out that folks just do stupid stuff. Or, as that great Wall Street regulator Forest Gump so aptly observed "Stupid is as stupid does."
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, Annemarie Thomas submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Annemarie Thomas, Respondent (AWC 2017053017501, December 17, 2018).
The AWC asserts that Thomas was first registered in 1998 and by 2010, she was registered with FINRA member firm Wells Fargo Clearing Services, LLC.
The Parking Lot
The AWC asserts that in early October 2016, Respondent Thomas and another registered representative worked together as a team at Wells Fargo; and during that time:
[O]ne of their customers contacted Thomas about wiring $100,000, on behalf of the customer's grandson in connection with a real estate closing, which would occur later in the month when the customer was out of the country. On October 18, 2016, when the customer was away, Thomas wrote an email to her team member saying, "[the customer] requested meet [sic] in parking lot for signature as she is running to an appointment." Thomas knew that her email statement was not accurate because the customer was out of the country on that day and unavailable to sign the LOA. That same day, the other registered representative on the team submitted a signed LOA for the $100,000 wire.
What the hell?
I fully appreciate that an AWC is not an exercise in creative writing but does anyone in FINRA management bother to read any of the crapola that the regulator posts online? A customer contacted Thomas about wiring $100,000. That much I got. But what does it mean to wire those funds "on behalf of the customer's grandson in connection with a real estate closing"? Was the customer asking Respondent Thomas to wire funds out of the customer's grandson's account; or, to wire funds into the grandson's account for some real estate closing; or, to wire funds to some place as part of a real estate closing for the grandson's benefit; or . . . what is FINRA alleging? What gets lost in this jumble of words and meaning is that the customer contacted Thomas and sought to initiate some $100,000 "later in the month" transfer when the customer would be out of the country. Pointedly, Thomas did not take it upon herself to transfer $100,000 but had done so at the express behest of the customer. Unfortunately, "behest" has its limits on Wall Street and FINRA's rulebook certainly doesn't countenance the manner in which Thomas attempted to execute her customer's request "later in the month."
When the customer is actually out of the country, the AWC alleges that there was something going on about Thomas meeting the customer in the parking lot to get her signature. Now, we know that the customer can't be physically in the parking lot because we know the customer is out of the country -- so we're sort of left to infer that this was a ruse. Perhaps this was Thomas' misguided way of filling her file with CYA-paperwork to demonstrate that on October 18, 2016, she went and met with the customer in the parking lot to get a Letter of Authorization signed. As to why Thomas didn't obtain said LOA from the customer before that individual left the country isn't explained. Indeed, stupid is as stupid does. Also not particularly clear is whether, on October 18th, the other rep knew that the whole "parking lot" thing was a ruse and went along with it. Having muddied the waters, the FINRA AWC offers this explanation:
After a supervisor at the Firm questioned the authenticity of the LOA, Thomas and her team member submitted a letter, purportedly signed by the customer, to persuade the supervisor to process the wire request. She also participated on a call with the supervisor where someone purporting to be the customer confirmed the wire request. Based on the call, the supervisor approved the wire for processing. Wells Fargo followed-up with the customer several weeks later and learned that although the customer did in fact want the transfer, she was out of the country on October 18, 2016, did not sign the LOA or subsequent letter, and did not participate on a phone call with the supervisor. Because the customer had previously informed Thomas that she would be out of the country and unavailable during the period from October 11, 2016 to October 21, 2016, Thomas knew or should have known that the LOA, subsequent letter, and oral conversation were not genuine because all of these actions were taken on October 18, 2016 while the customer was out of the country. In addition, Thomas did not accept responsibility for her actions during the Firm's investigation or, at least initially, during FINRA's inquiry.
On a Day That That
FINRA allegedly began its investigation after Wells Fargo filed a Form U5 reporting that Thomas was discharged for "[p]articipating in the submission of a wire request purportedly signed by the client near the office on a day that that [sic] the client indicated she was out of the country."
In accordance with the terms of the AWC, FINRA imposed upon Thomas a $5,000 fine and six-month suspension from association with any FINRA member firm in all capacities. A footnote in the AWC asserts that the team member was "'barred pursuant to FINRA Rule 9552 for failing to cooperate in a separate FINRA investigation."
Bill Singer's Comment
I am NOT excusing ANY of Thomas' conduct and I take NO issue whatsoever with FINRA's fine and suspension. If that's not clear enough for you, please re-read the preceding sentence. Having noted my concurrence with FINRA's settlement and sanction, lemme see if I at least got the gist of this regulatory case:
The customer knows that she is going out of town and asks Thomas to wire $100,000 from her account on a date(s) when that customer will, in fact, be out of town. So . . . there's no question that the customer had authorized the wire and there is no allegation in the AWC to the contrary.
The sensible thing would have been for Thomas to have gotten an executed POA from the customer BEFORE the customer left town. Duh.
What this case appears to address is Thomas' fairly inane ruse to pretend that the customer had signed the LOA in the Wells Fargo parking lot, and had done so in front of Thomas. Also, there's that whole idiocy about the customer signing the letter confirming the LOA, and, let's not forget, the apparent imposter participating in the role of the customer during the cited phone call.
Thomas likely had a brain fart and awoke on or around October 18th with the realization that she had forgotten to get the client's signature on something -- anything -- that would allow the routing of the previously authorized $100,000 wire. Which prompted her to realize that she needed to get an LOA signed. Which gave her the idea about pretending that she would meet the client in the parking lot. Which got the team-member enrolled in this nonsense by vouching for the LOA. Which prompted the bogus letter from the customer when Wells Fargo started asking questions. Which prompted the impersonation of the customer on the phone call. Which prompted the team-member's failure to cooperate and the imposition of a Bar. Which prompted Thomas' fine and suspension. Which prompted you and me to invest far more time into this case than it was worth.