SEC Finding Spotlight: February 2020
We trust our brokers to carry out our plans and instructions regarding the management of our investment accounts. This can include long-term planning about the types of investments we want to make, as well as honoring our wishes regarding who is allowed to make changes to our accounts or initiate withdrawals. In some situations this can become complicated, especially when a broker communicates with a number of parties who have some type of interest in an investment account. The rules governing securities trading and broker behavior make it clear however that brokers may not allow withdrawals by unauthorized parties or make decisions that fall outside the scope of the accountholder’s permission. As a dedicated Los Angeles securities lawyer, Steve A. Buchwalter is prepared to help you seek to hold a careless or reckless broker or brokerage firm responsible for your financial losses.FINRA Prohibits Withdrawals by Nonauthorized Parties
A recent enforcement action by the Financial Industry Regulation Authority (FINRA) highlights the rules that apply to transaction requests from nonauthorized parties. According to the enforcement action documents, Eugene Nathan Gordon, a general securities representative with Morgan Stanley in Palo Alto, California, was terminated in February 2018. The basis of his termination was related to recordkeeping concerns involving one of his customer’s claims that Gordon allowed the customer’s wife to make withdrawals from the husband’s retirement account without his written permission. The wife was also a customer of Morgan Stanley.
Some of the transactions that Gordon allowed the wife to make in her husband’s account included mutual fund trades and distributions to a bank account that the couple held jointly. Overall, Gordon made 32 distributions from the retirement account to the joint bank account totaling over $317,000 in value. The investigation also revealed that Gordon made false notes in Morgan Stanley’s system regarding the distributions stating that he spoke with the customer when he actually spoke with the wife.
According to FINRA, this conduct violated Rule 2010 and resulted in Gordon paying a $5,000 fine and undergoing a 90-day suspension from engaging in securities-related activities. This rule requires that all members of the securities profession adhere to high standards of candor and honor when engaging in financial transactions or decisions, and that they act in an honest and equitable manner. A securities lawyer serving Los Angeles can assess the facts of your case to determine whether these standards may have been violated.Seeking Compensation From a Careless or Reckless Broker
In addition to being subject to a FINRA investigation and fines, a broker who engages in this kind of unlawful conduct can also be held liable for any damages that he or she causes to the investor’s account. The investor can bring a civil claim against the broker and possibly his or her brokerage firm to recover this compensation. In the claim, the investor must prove that the broker failed to act in accordance with the fiduciary duty that a prudent broker would have adhered to when handling the accounts. If the investor is successful in showing this, he or she is entitled to the difference between the current value of his or her account and the estimated value that the account would have contained had the broker acted appropriately. A skilled Los Angeles securities attorney can estimate the amount of damages you may be entitled to in light of your circumstances.
You may also be able to assert a claim against the brokerage firm that employs the broker who mishandled your accounts. California recognizes a doctrine called vicarious liability, which can be used to hold an employer liable for the tortious acts that his or her employees commits during the course and scope of employment. FINRA also imposes a series of responsibilities on brokerage firms when it comes to ensuring that their brokers are operating in accordance with the law and applicable fiduciary duties.Dedicated Los Angeles Lawyer for Securities Claims
Attorney Buchwalter has seen how financially and emotionally devastating a case of broker negligence or fraud can be for an investor. He offers a free consultation to help you learn more about whether you may have a civil claim against the broker and/or brokerage firm that wronged you, and the best way to go about pursuing legal action. He handles cases on behalf of clients throughout Southern California, including in areas such as Santa Barbara, Irvine, Beverly Hills, and Newport Beach. To schedule your free consultation, call him at 818-501-8987 or contact him online to get started.