The regulatory sword of the financial industry came down on a former securities employee for violations involving wire transfers out of a client’s account. The Financial Industry Regulatory Authority (FINRA) provides oversight of the financial industry. According to their website, in 2017, they brought 1,369 disciplinary actions against registered individuals and firms, levied fines totaling $64.9 million and ordered restitution of $66.8 million to harmed investors.
We’ve discussed phishing scams where the imposter sends an email and makes it look like the wire transfer instructions have changed. Unfortunately, both the company employee and the client are scammed as a result. In this case, the former employee of the broker took the imposter’s instructions, acted on them, and then deceived his employer –all to the detriment of the client. FINRA brought an action against the former securities employee.
Why? The difference in this case is that it appears that the former employee failed to follow his employer’s own policies and procedures regarding wire transfers. The former employee processed eight wire transfers from the customer’s account without obtaining verbal verification of the instructions from the actual customer. In total, the former employee processed wire transfers totaling $794,860 in response to the imposter’s requests. The former employee was also alleged to have made false statements to his former employer regarding the transactions, violating FINRA Rule 2010, and causing his employer to file inaccurate financial statements.
The former employee consented to a $5,000 fine and is no longer associated with a FINRA member. The employer was not fined or sanctioned in this matter.