August 1, 2013 / 11:02 AM / 5 years ago

COMPLY-When a sales assistant becomes a liability

Aug. 1 (Reuters) - A sales assistant can be one of a broker’s greatest assets or biggest headaches.

Great sales assistants often help boost brokers’ income by being the central contact point for clients and handling tasks like processing orders and juggling paperwork. That leaves brokers more time to develop relationships and bring in new accounts.

But there can be a downside: Sales assistants who break industry rules or make costly mistakes may expose brokers to problems with their employers and regulators, say lawyers. Even if the firm and the broker aren’t held liable, the behavior can alienate clients.

A spate of recent disciplinary cases against sales assistants by the Financial Industry Regulatory Authority (FINRA) - six since May - highlights what can go wrong. A recurring theme: not calling customers to verify whether they instructed the firm to wire funds from their accounts. Firms recently faced a rash of incidents in which scam artists posing as customers made wire transfer requests. Other cases in 2013 have involved assistants who forged client signatures on forms and embezzled money.

FINRA, Wall Street’s industry-funded watchdog, fined and suspended the assistants and even barred some from the securities industry. But brokers can be on the hook for reimbursing the firm for their assistants’ errors, according to Tom Lewis, a lawyer for Stark & Stark in Lawrenceville, New Jersey. Lewis routinely represents brokers whose firms want to hold them financially responsible for trading errors their assistants made, such as not selling a security when instructed to do so.

Disciplinary actions against sales assistants are not widespread, and many teams that bring in a lot of business view their sales assistants as a force behind their success.

“There’s a multitude of ways a sales assistant can create liability or exposure for the team,” said Lewis. “That is why professional, competent sales assistants can be worth their weight in gold.”


Brokers at the largest U.S. firms, known as wirehouses, typically share sales assistants as a group. The most successful brokers - generally those who generate more than $500,000 to $700,000 in sales - often have their own.

Licensed assistants typically earn a modest base salary from the firm - often around $25,000 - and also can receive a percentage of sales made by the broker or team they support. Assistants in busy practices could earn $100,000, Lewis said.

Their responsibilities can extend far beyond clerical work, especially for licensed sales assistants. Justine Richards, a licensed assistant for Romano Brothers & Co, a wealth management firm in Evanston, Illinois, does everything from doublechecking bond bids and putting through orders to opening accounts, she said.

Some assistants buckle under the demands, especially when being barked at by brokers, said Joe Romano, the firm’s president. That could lead to their taking shortcuts with required procedures, he said.

Supervising sales assistants is typically the responsibility of a brokerage’s branch managers or operations manager - a person who oversees the firm’s administrative work. Nonetheless, firms can still blame the broker for an assistant’s mistakes or misdeeds, such as sending clients the wrong form or improperly completing certain paperwork, said Marc Dobin, a securities lawyer in Jupiter, Florida, who represents brokers. “At the end of the day, the buck stops with the broker for something created by the sales assistant,” Dobin said.

Brokers can get fired if the sales assistant’s offense is serious. Brian Buckstein, an employment lawyer in Wellington, Florida, recently received calls from two such brokers, he said.

In one instance the assistant cut and pasted copies of client signatures onto forms, Buckstein said. While the practice was once common in the securities industry, it’s forgery, and no longer tolerated by regulators and most firms.

Brokers whose assistants hand them paperwork that does not comply with industry rules could put themselves on the line, Buckstein said.


It’s unclear from recent disciplinary cases whether brokers suffered consequences because of their assistants’ misconduct. Some situations would at least require restoring confidence among clients, say lawyers.

Consider a June decision involving a former Wells Fargo Advisors sales assistant who was duped into wiring a total of $85,000 in client funds to an imposter who was posing as the client. The assistant for the Wells Fargo & Co unit then falsely documented that she verbally confirmed the wire transfer requests with the client, according to the decision. She agreed to a one-month suspension and $7,500 fine but did not admit or deny FINRA’s findings.

A Wells Fargo spokesman pointed to a part of the FINRA order that notes the firm discovered the policy violations and took appropriate steps to fix them. That included notifying FINRA and reversing the transfer after the assistant became wise to the scam.

While no money ultimately changed hands, such an incident would doubtless be embarrassing for a broker to discuss with the client. Putting the money back in the client’s account is a critical first step to restoring trust, said Benette Zivley, a lawyer for Munsch Hardt Kopf & Harr PC in Austin, Texas, who advises brokerages. Then, he said, it is time to acknowledge how the firm dropped the ball.

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