In Regulatory Wrap for the week to August 1, Jay Hampshire reviews a FINRA fine against a firm rep for concealing misconduct using off-channel communications.
In this week’s Regulatory Wrap, we discuss how a former Charles Schwab representative was suspended and fined $80k by the Financial Industry Regulatory Authority (FINRA) for using unauthorized communications channels to conceal profit-sharing.
1. From October 2020 to January 2022, the representative took part in a secret profit-sharing agreement with a customer involving over 14,000 trades and over 6,000 options trades
2. The representative did this by using the customer’s account and log-in credentials, which was a violation of Charles Schwab’s policies
3. To conceal this misconduct, the representatives transfer payments via non-Schwab accounts and non-compliantly communicated about these undisclosed profits, performance, and trades over his personal device
4. This misconduct was a violation of FINRA Rule 2150, which prohibits unauthorized access of a customer’s account, and Rule 2010, which outlines requirements around high standards of commercial honor – as well as various recordkeeping rules
5. The representative has been ordered to pay back the $80,000 in profit sharing payments and was also charged a $15,000 fine
This episode is brought to you by our Senior Content Writer, Jay Hampshire.
FINRA’s enforcement action against personal misconduct sends a clear message on the consequences of financial crime while also emphasizing to firms the importance of a comprehensive surveillance solution to spot signs of risk early on.
