FINRA Bars former Securities America Rep For Conversion

April 21, 2023

In a recent FINRA regulatory settlement, it is alleged that the pro se Respondent engaged in conversion when he made payments of a customer's personal expenses "without consent." Except the AWC settlement also states that the payments were made at the "request" of the customer. It makes no sense that the cited payments were made "without consent" of the very customer who had requested the payments. All of which raises questions about FINRA's sloppy work and whether a lawyer might have prompted a different outcome for the Respondent. 

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, Michael Patrick Raineri submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. 
In the Matter of Michael Patrick Raineri, Respondent (FINRA AWC 2023078057401)

Paying Customer's Personal Expenses

The AWC asserts that Michael Patrick Raineri entered the industry in 2004, and by November 2020, he was registered with Securities America, Inc. As alleged in part in the AWC:

As early as August 2018, at the request of one of his customers, Raineri began paying some personal expenses for the customer. Over time, Ranieri caused the customer to pay him at least $135,000, ostensibly to reimburse Raineri for the payments he had made. The payments to Raineri, however, far exceeded the customer’s expenses Raineri had paid, and Raineri was not entitled to the extra funds. By virtue of the foregoing, Raineri  converted customer funds, violating FINRA Rules 2150(a) and 2010. 

FINRA Sanction

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

Bill Singer's Comment

As of April 21, 2023, FINRA still doesn't seem to know when Raineri's alleged conversion began. As best the AWC alleges, it was "as early as August 2018." August 2018 -- as in almost five years ago. You'd sort of think that as part of FINRA's investigation and ensuing AWC settlement that the "when" Raineri began his alleged conversion would have been nailed down by now. Didn't FINRA speak to the customer and get the likely start date from that purported victim? Don't bank statements or checks set out the start and end dates of the misconduct?

As to the alleged conversion by Raineri, to some degree, it sounds as if FINRA is trying to make things look far worse than they were; and if that's not the case, then FINRA just rushed out the AWC and fudged whatever remained unresolved. As to FINRA's working definition of "conversion," according to the Sanctions Guidelines, it is stated on Page 32 for "Conversion; or Improper Use of Funds or Securities / FINRA Rules 2150(a) and 2010" that:

Footnote 2. Conversion generally is an intentional and unauthorized taking of and/or exercise of ownership over property by one who neither owns the property nor is entitled to possess it. 

Note that according to FINRA's definition, "conversion" involves an intentional and unauthorized taking. At first blush, its seems that the AWC has alleged that Raineri engineered some unauthorized fraud upon the customer; however, the AWC concedes that "at the request of one of his customers, Raineri began paying some personal expenses for the customer." Note that the AWC states that the customer had requested Raineri pay some personal expenses. So . . . how can Raineri's alleged "taking" be unauthorized if the customer had requested the payments?

The AWC gets a bit too cute for me when it alleges that "[o]ver time, Raneri caused the customer to pay him at least $135,000, ostensibly to reimburse Raineri for the payments he had made." Moreover, the AWC asserts that the $135,000 in reimbursements "far exceeded the customer's expenses Raineri had paid. . ." Far exceeded? How much was that excess? Hundreds of dollars? Thousands of dollars? Tens of thousands of dollars? Inexplicably (and I would argue "inexcusably), the AWC fails to do that important calculation. FINRA's case against Raineri is that he converted the "extra funds" that he was "not entitled to;" however, the AWC never alleges the value of the purported "extra funds." 

Being the curious fellow that I am, I went to FINRA's online BrokerCheck and as of April 21, 2023, Securities America, Inc. reported that on January 31, 2023, it received a customer complaint alleging that:

Customer alleges financial professional transferred approximately $135,000 from customer's bank account to himself without customer's consent.

Customer's bank account? I thought the AWC had alleged that Raineri paid the customer's expenses out of his own pocket and then obtained improper reimbursement. Where the hell did this customer bank account come from and why isn't it noted in the AWC? 

The AWC fails to explain the mechanics of Raineri's payments of the customer's expenses; and, I would argue, that undermines the allegation of "conversion."

If, Raineri paid the customer's expenses from the customer's bank account, then why would Raineri even need to be reimbursed? Given that scenario, Raineri would not have been out of pocket for any payments. That doesn't even add up to conversion.

On the other hand, if Raineri paid the customer's expenses out of his own pocket and then reimbursed himself by transferring funds from the customer's bank account, that could be conversion if the reimbursements exceeded the actual expenses paid. By the time the ink is dried on an AWC, we should be way past any "could be" this or "could be" that.

The AWC's allegation that Raineri's payments of the customer's expenses were "without consent" is not consistent with the AWC's allegation that as "early as August 2018, at the request of one of his customers, Raineri began paying some personal expenses for the customer." It makes no sense that Raineri made payments at the "request" of his customer but that the same requested payments were made "without consent" of the very customer who had requested the payments.

All in all, a sloppy bit of regulation by FINRA. What concerns me is that the AWC does not disclose that Raineri was represented by an attorney, and, as such, he seems to have navigated through the settlement process in a pro se capacity. Which makes me wonder whether a lawyer might have obtained a different outcome. 

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