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COMPLY-Impersonating clients can endanger brokers' careers
March 13 |
March 13 (Reuters) - Brokers who impersonate clients while in a rush to boost commissions or land accounts can pay a steep price.
The practice is common among many brokers, who are often in a hurry to gather information from hard-to-reach clients or complete transactions, say lawyers. But it is also against the rules. Brokers who say it is a minor infraction may be surprised by a much tougher view among regulators: they recently stiffened penalties against one professional involved in a customer impersonation scheme instead of lessening the punishment, as he had asked.
It is a harsh lesson for Timothy Golonka, a former insurance wholesaler for Hartford Equity Sales Company Inc, a unit of the Hartford Financial Services Group Inc. His alleged misconduct: taking part in a plan to impersonate customers during calls to their insurance companies.
Golonka, who worked in King of Prussia, Pennsylvania, recently challenged sanctions imposed last year by the Financial Industry Regulatory Authority, Wall Street's industry-funded watchdog. But a FINRA appeals panel, in an unusual move, increased them.
FINRA's appellate body, the National Adjudicatory Council (NAC), has increased sanctions in roughly one-quarter of its decisions since 2008, according to a FINRA spokeswoman. The NAC hears about 15 to 20 cases each year, including some it reviews on its own. While stiffer penalties are not aimed at punishing people simply for contesting their sanctions, they can send a powerful message about conduct, say lawyers.
The boost in sanctions against Golonka is a strong reminder to securities industry professionals about taking the most basic rules seriously and avoiding shortcuts, said Richard Roth, a New York-based securities lawyer who represents brokers. Shortcuts, which can also include pasting copies of customers' signatures on forms, may save time, he said, but they also reflect on a broker's honesty.
Impersonating customers is fairly common, said Roth. A sense on Wall Street that "everyone does it" fuels the behavior, he said.
Few brokers are caught. FINRA's database of disciplinary cases reveals final orders in six such cases since 2009.
A spokeswoman for The Hartford said the company investigated Golonka's actions and then terminated him. Golonka's lawyer declined to immediately comment and did not return additional calls. Efforts to reach Golonka, who left the securities industry in 2011, were unsuccessful. It is unclear whether he will appeal the case further to the U.S. Securities and Exchange Commission.
Golonka was a 25-year industry veteran who generated more than $1 million in new business in 2008, according to disciplinary opinions. Nonetheless, he is dealing with five years of fallout from an impersonation scheme. A junior adviser involved in the scheme, Jordan Arnold, last year was barred from the securities industry, according to FINRA documents.
Golonka's problems began when a group of financial advisers at a former Smith Barney branch hired him to review their customers' life insurance policies and determine if they needed new coverage, according to the FINRA appeals decision.
During the project, Golonka worked alongside two junior financial advisers from the group who collected client information, such as ages, policy numbers and death benefits. But Golonka needed more details to conduct his analysis.
He could not get those details for customers who did not buy policies from The Hartford. The junior advisers could not reach those customers to gather information.
Golonka and the junior advisers then carried out a plan to impersonate the customers in calls to the non-Hartford companies. The junior advisers would later testify that Golonka told them that brokers engaged in client impersonations "all the time," according to the FINRA opinion.
They overlooked one glitch: their calls were recorded, a standard practice at many financial services companies. Golonka and Arnold, one of the junior associates, continued speaking to each other after the insurance representative said goodbye but was still on the line, according to the FINRA opinion. "You sound exactly like an older woman," Golonka said to Arnold. "You sounded like you were 82," he said in another call.
Golonka, in his public disclosure record, wrote that he was on the call, but that he did not impersonate anyone.
Efforts to locate Arnold were unsuccessful. Her lawyer did not return a call requesting comment. A spokeswoman for Citigroup, which owned Smith Barney at the time, had no comment.
One call, nonetheless, caught the attention of an insurance company's privacy officer, which notified The Hartford.
Pennsylvania insurance regulators fined Golonka $5,000 in 2009. Golonka argued to FINRA that the punishment was enough and that he did not harm anyone.
FINRA's enforcement unit pushed to bar Golonka and appealed to increase the sanctions by the hearing panel. Golonka also appealed to lower the sanctions, but that move backfired.
He now faces a $20,000 fine, instead of $7,500, and an 18-month suspension instead of nine months, according to a March 11 decision.
The price is simply not worth putting a career on the line, said Dev Modi, a securities lawyer in Florham Park, New Jersey who represents investors and brokers. "You need to be thorough and take your time," Modi said. "These are the things that will come back to you if there's an action by a regulator," Modi said.
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