Morgan Stanley Smith Barney Female Employee Suspended and Fined for Unauthorized Signatures

September 23, 2011

In an effort to settle allegations by the Financial Industry Regulatory Authority ("FINRA") of rule violations but without admitting or denying the findings, Carmela L. Knieriem ("Knieriem"), submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which the self-regulatory organization accepted. In the Matter of Carmela L. Knieriem, Respondent (AWC/20100247249, July 12, 2011).

Background

Knieriem entered the securities industry in 1979 and during the relevant period of November 2009 through October 14, 2010, she was associated with Morgan Stanley Smith Barney ("MSSB") as a registered customer service associate in MSSB's Rancho Bernardo Branch.

At the Rancho Bernardo Branch, Knieriem was assigned to assist branch financial advisors, branch managers, and other employees with administrative duties. As part of those duties, the branch manager and other financial advisors often asked Knieriem to prepare certain internal administrative forms in documenting and processing requests that the branch manager or financial advisor received verbally from a customer (the "Verbal Forms").

The AWC alleged that Knieriem prepared a number of Verbal Forms for approval and signed the names of the relevant MSSB employee who had received the verbal instruction - the problem here for FINRA, however, was that Knieriem allegedly did the signing without the necessary prior approvals or authorizations. MSSB internally investigated whether Knieriem had signed the names of a financial advisor and branch manager on internal documents without authorization. Knieriem had no prior disciplinary history. She voluntarily resigned from MSSB.

The Litany of Allegations

The AWC alleged that in violation of FINRA Rule 2010, on ten occasions between March and September 2010, Knieriem signed, without authorization, the names of her branch manager and other financial advisors to Verbal Forms:

On six occasions, at the request of financial advisor EP, Knieriem was asked to prepare an instruction form documenting a customer's verbal request for the:
- release of account statements to a third party;
- transfer $3,505.00 from the customer's account;
- transfer $75,000.00 from the customer's account
- journal funds between the customer's accounts (twice); and
- issuance of a check for $75,397.22 from the customer's account.
On one occasion, at the request of financial advisor GT, Knieriem was asked to prepare an instruction form documenting a customer's verbal request to stop payment on a check from his account.
On one occasion, at the request of financial advisor CL, Knieriem was asked to prepare an instruction form documenting a customer's verbal request to issue a check for $95.62 from the customer's account
On two occasions, at the request of branch manager RL, Knieriem was asked to prepare an instruction form documenting a customer's verbal request to journal funds between the customer's accounts.

Sanctions

Accordingly, FINRA charged Knieriem with violating FINRA Rule 2010. Pursuant to the terms of the AWC, FINRA imposed upon Knieriem a 60-day suspension in all capacities from the securities industry, and a $5,000 fine (which is due and payable either immediately upon reassociation with a member firm following the 60-day suspension noted above, or prior to any application or request for relief from any statutory disqualification resulting from this or any other event or proceeding, whichever is earlier).

Bill Singer's Comment

Sorry, but I'm not buying this one, not at all. Perhaps if the AWC presented more or different facts, I might change my mind, but, for me, this case stinks.

Lemme see if I got this.

Knieriem has been in the industry since 1979 - that's now some 32 years. And during that time, she had no prior disciplinary history. Moreover, for what it's worth, Wall Street hasn't exactly been a worker's paradise for many of its women.

As I and many other industry commentators have long noted, slightly more than 50% of the U.S. population is female but when it comes to the profitable jobs on Wall Street - traders, brokers, and management - the numbers of women in such jobs are not proportionate. Of course, when it comes to receptionists, secretaries, sales assistants, back-office, and Human Resources, well, you know, there always seem to be lots of women, often far more than men. Although that's not solely Wall Street's shame because that disproportionate participation carries over to many industries and professions, it is still a sad commentary on how much further we still need to go in terms of equality. READ: "Bill Singer Replies to SEC Commissioner Aguialar's Call For Diversity ("Street Sweeper", May 4, 2011).

In this FINRA disciplinary case, Knieriem, a 32-year veteran, was charged with engaging in misconduct during a six-month period in 2010. At the request of four registered persons, she allegedly prepared ten Verbal Forms, and then she signed the names of four registered persons without their authorization or that of MSSB. The four registered persons asked Knieriem to prepare the Verbal Forms - she's not charged with fabricating those forms on her own initiative; it's solely the act of the purportedly unauthorized signing.

And not one of those four registered persons had an inkling that Knieriem was signing their names? How the hell did those folks think that the customers' verbal requests got processed if they didn't sign the forms? And MSSB was shocked, shocked, I say, to learn that, omigod!, branch assistants are filling out forms and signing the names of brokers to those forms when the company's rules specifically prohibit such a practice? As if such a practice doesn't occur everyday at virtually every branch office at virtually every brokerage firm? Hey, honey, do me a favor, take care of this - I gotta get this processed ASAP.

As if such a practice doesn't occur, in some fashion, at FINRA itself?

I have long expressed my approval, even if sometimes grudgingly, for FINRA's enforcement of its rules and policies against forgeries. I reiterate that support without any ifs or buts. However - ah, there is still that - in this case, I think some mitigation was warranted before FINRA slammed Knieriem into the mud. I mean, seriously, a $5,000 fine and a 60-day suspension on top of Knieriem losing her job?

Next time, maybe someone at FINRA might sit down, scribble some words in the dirt, and tell Knieriem to get on with her life and not to sign anyone's name to any documents again? There are lots of stones scattered on Wall Street. This one did not need to be thrown.

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