Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE
2011
NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.
November 2011
Jason Pedigo
AWC/2010025512501/November 2011

Pedigo submitted a fixed annuity contract for his customer with an insurance company. The insurance company issued the annuity contract and sent it to Pedigo in accordance with its selling agreement. The insurance company never received the customerís executed annuity contract confirmation (ACC); and, as a result, mailed letters to Pedigo numerous times requesting that he have the customer sign and return the ACC. 

Pedigo informed the insurance company that the customer was deceased and requested paperwork to submit a death claim.  According to the insurance company, it never received the death claim paperwork. After receiving a surrender request form that same day, the insurance company contacted Pedigo to inform him that a full surrender could not be processed because the customer was deceased. Amazingly, about a year after the customer had passed, Pedigo falsely informed the insurance company that the customer was still alive. Pedigo faxed the insurance company an ACC which the customer purportedly signed and dated almost 20 days after the customer had died.

Jason Pedigo: Barred
Tags:  Deceased    Insurance     |    In: Cases of Note : FINRA
Bill Singer's Comment
One of my favorite cases!  READ:  Zombie Client Signed Annuity Document 20 Days After His Death (BrokeAndBroker.com)
September 2011
John Thomas Pappas
AWC/2010021962101/September 2011

Pappas converted funds totaling $157,563.75 from customer accounts, without the customersí knowledge or authorization, and attempted to convert an additional $14,260 from another customer account.

Pappas misappropriated the funds by activating the online bill payment feature in the clientsí accounts and then directed payments to his personal credit cards. Pappas placed an unauthorized trade totaling $6,893.43 in a deceased firm customerís account.

Pappas refused to respond to FINRA requests for information and testimony.

John Thomas Pappas: Barred
Tags:  Deceased    Credit Cards     |    In: Cases of Note : FINRA
Bill Singer's Comment
You see -- and you thought Wall Street fraud required a lot of devious planning.  Not at all.  You just activate an online bill payment program and trade on behalf of a dead customer.  So simple. So easy,. So scary.
February 2011
Benjamin Harry Cohen
AWC/2009017087301/February 2011

Cohen violated FINRAís suitability rule by failing to understand or convey to customers the cost of a rider to a variable annuity, pursuant to transactions he recommended to customers. Cohen incorrectly communicated the imposed fee. Cohen did not understand the risks and rewards inherent in the variable annuity, with the rider feature, which he recommended to the customers.

Cohen conducted a trade in a deceased customerís account with a purchase of $4,662 of an entity Class A mutual fund share. Cohen had discussed with this customer purchasing the entityís Class A shares prior to the customerís passing, and he had prepared certain paperwork for the transaction prior to the customerís death, but the purchase had not been made at the time of the customerís death. At the time of the transaction, Cohen did not consult with any representative of the deceased customerís estate and also did not notify the firm that the customer had passed away.

In addition, Cohen failed to appear for a FINRA on-the-record interview.

Benjamin Harry Cohen: Barred
Tags:  Variable Annuity    Deceased     |    In: Cases of Note : FINRA
Bill Singer's Comment
A frequent issue for many brokers is how to best handle the portfolio of a deceased client. Should you enter the orders that the deceased gave you prior to his/her death? Should you sell the stock just hit with bad news? Should you close out the profitable option position as expiration date nears?  All legitimate concerns and, frankly, all could require different answers depending upon whether the deceased left an estate, whether there is an executor or administrator involved, whether there is a JTWROS, etc.  The best advice? First, talk to your firm's compliance/legal department. Second, if appropriate, get in touch with the individual legally empowered to handle the deceased's account.
January 2011
George Abbott Berry
AWC/2009017596901/January 2011

Berry serviced a brokerage account a relative held but did not have power of attorney or discretionary authorization over the account. Berry failed to report his relativeís death to his member firm, and after leaving the firm, he removed funds from the account totaling $70,000 by requesting checks be drawn on the account, sent to her listed address, which was the same as Berryís home CRD address, and deposited the checks in a joint checking account he shared with his relative. When Berry submitted a written withdrawal request to the firm for $10,000, the firm discovered that the signature did not match the signature on file for the customer and froze the brokerage account after Berry acknowledged his relativeís death with the firmís customer relations staff.

The Firm amended Berryís Form U5 to reflect an internal review of his withdrawals and his failure to advise the firm of his relativeís death.

George Abbott Berry: Barred
Tags:  Checks    Deceased    Power Of Attorney    Signature     |    In: Cases of Note : FINRA
Bill Singer's Comment
The somewhat puzzling aspect of this case is whether there was a joint account at the brokerage firm -- since we are told that the bank account was joint.  If there was a Joint-Tenants-With-Right-of-Survivorship brokerage account, then you have to wonder why Berry went through all of the subterfuge; which sort of suggests that there wasn't a JTWROS in place for the brokerage account.
Enforcement Actions
Tags
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+