Dec 14 The year is closing on a bad note for
some securities brokers who are learning the hard way that easy
money often comes with a steep price.
A review of recent disciplinary sanctions by the Financial
Industry Regulatory Authority, Wall Street's watchdog, shows
that even the possibility of strict sanctions cannot keep some
brokers in line with the most basic industry rules.
Among securities industry taboos breached in 2012: A broker
withdrew a customer's money, illegally, to buy into a gold
scheme. Others traded clients' accounts without their permission
or borrowed money from customers.
The resulting penalties and other sanctions stand to put a
dent in their holiday celebrations and, even worse, their
careers. But no matter how many times brokers get caught
crossing the line, each year brings a fresh crop of egregious
behavior, lawyers say.
That is because certain qualities that help many brokers
succeed in securities industry, such as the aggressive drive to
gain an edge, also lead some brokers astray, said Michael
Sullivan, a lawyer at Coughlin Duffy LLP in Morristown, New
The will to succeed is another quality that many brokers
share. For some, however, "it also lends itself to a significant
minority stepping over the line," said Sullivan, who represents
Some recent cases and their consequences serve offer a
cautionary tale (or stinging rebuke) to brokers:
* Gold heist gone badly: FINRA barred Carlos Suarez from the
securities industry this month following a gold coin scheme.
Suarez, who was licensed through Wells Fargo Advisors LLC, a
unit of Wells Fargo Corp, is also serving three years
probation after pleading guilty to federal mail fraud charges in
He withdrew $50,000 from a client's then Wachovia Bank
account, without permission, to buy gold coins, according to
court documents. Suarez worked then at Mount Pocono,
Pennsylvania-based Wachovia as a "financial specialist," which
later became part of Wells Fargo.
Suarez' lawyer described him as "a bit desperate," at the
time. As the criminal case revealed, Suarez had financial
difficulties and planned to sell the coins to turn a profit.
To hide the fact he was buying the coins with a customer's
money, Suarez wore a fake beard and wig to a UPS Store, where he
impersonated the customer and rented a mailbox in his name. He
then bought the coins through a company in Texas which shipped
them to the box. His appearance was so suspicious, that store
employees notified the police.
"He made a terrible mistake in a misguided scheme," said Joe
D'Andrea, Suarez' lawyer in Dunmore, Pennsylvania. Suarez had no
previous brushes with the law, D'Andrea said. A Wells Fargo
spokeswoman declined to comment. While Suarez pleaded guilty in
the criminal cases, he neither admitted nor denied the findings
in his regulatory settlement with FINRA.
* Steep borrowing costs: Some of broker Richard Seligson's
customers were friends and family, but those ties did not shield
him from industry restrictions on borrowing money from
customers. Seligson, a former broker for Morgan Stanley
in Boca Raton, Florida, borrowed $45,000 from six friends and
two relatives - all Morgan Stanley customers - between 2009 and
2011, according to regulatory documents.
Seligson did not have the firm's permission for the loans,
as industry rules require. Then Seligson made the problem even
worse: he lied on annual compliance questionnaires for brokers,
which asked if he entered into loans with customers.
Now Seligson, whom Morgan Stanley dismissed in 2011, has
agreed to a year-long suspension from the securities industry
and a $10,000 fine, according to a FINRA settlement dated Dec.
5. Seligson, who has paid back $3,900 of the loans so far, must
pay everyone in full with interest before applying to return to
A phone number for Seligson was not working on Thursday. A
Morgan Stanley spokeswoman said the firm dismissed Seligson
after "discovering policy violations he had concealed."
* No discretion: Brokers are not allowed to unilaterally
make trades in their clients' accounts, known as 'exercising
discretion,' unless they have the client's written permission.
Even then, the brokerage firm must allow the practice. But those
restrictions do not stop brokers from doing it anyway.
Former Ameriprise Financial Services Inc broker
Christopher Bones recently agreed to a $5,000 fine and a 15-day
suspension from the industry after making numerous trades in
four customer accounts without their authorization, according to
a FINRA settlement dated Wednesday.
While Oregon-based Bones "followed an agreed-upon investment
strategy," he did not always notify customers when he placed
trades, according to the settlement. The trades also violated an
Ameriprise prohibition on discretionary accounts.
Bones voluntarily resigned from Ameriprise in 2010 and now
works for another brokerage. He neither admitted nor denied
FINRA's findings and did not return a call requesting comment.
An Ameriprise spokesman declined to comment.