A Wells Fargo broker who traded a client’s account after he died was fired and sanctioned by FINRA.
According to FINRA, the broker was terminated from Wells Fargo “after internal review revealed that advisor entered stop loss orders in account of deceased customer, per prior discussion, not knowing client was deceased.”
FINRA Rule 2010
FINRA found that doing so violates FINRA Rule 2010, requires associated persons, in the conduct of business, to “observe high standards of commercial honor and just and equitable principles of trade.”
Of course, unauthorized trading is a serious violation, and one which merits investigation and when proven, significant sanctions. However, in this case, according to the consent order, the broker was placing stop loss orders, in a managed account.
Unauthorized Stop Loss Orders
A stop-loss is designed to limit an investor’s loss on a security position that makes an unfavorable move. Once the stock’s price hits the set price, the order converts to a market order. Stop loss orders are accepted and widely used orders.
Falsifing Firm Records
FINRA Rule 4511
No Gain, Lots of Pain
While there was no financial gain for the broker in entering the unauthorized trades, the fact that he entered false information into the firm’s customer note system, and then altered that false information later, should be a serious violation. Plus, entering trades in a client’s account without speaking to him is simply foolish.
The broker was suspended for three months. No fine was imposed, since he had filed for bankruptcy.
Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.