The representative
exploited the firm’s check handling
procedures by taking control of customer checks totaling
approximately $850,000
and depositing the customer funds into his own bank accounts,
without the checks
being logged in the firm’s tracking system.
By and
through Coleman, its CCO, the Firm
failed to establish and maintain
adequate WSPs addressing the
circumstances under which it would contact and communicate with a
customer following
receipt of a complaint.
The firm’s lack of adequate WSPs
describing circumstances
under which complaining customers would be contacted contributed
to its failure to
discover the representative’s scheme after a
customer sent a
written complaint to a
variable annuity company, which was subsequently forwarded to the
firm, asserting
that recent distributions from variable annuity policies were
unauthorized and seeking
reinstatement of the funds. The complaint also
alleged that the customer
had sent the firm money and was unable to ascertain what assets
were purchased with
the money. Although the firm interviewed the
representative, the
customer was never contacted and the representative’s illegal
activities continued for
approximately another 10 months. After the representative’s death,
the firm undertook a
forensic audit of the representative’s transactions, which led to
identification of numerous
customers whose funds had been embezzled; the results were shared
with FINRA and were
instrumental in exposing how the funds were embezzled and the
extent of the customer
harm. In addition, the firm voluntarily
provided more than $2
million in restitution to customers.
Hantz Financial Services, Inc: Censured; Fined $10,000 jt/sev with Coleman; Fined Additional $50,000
Bruce Frederick Coleman: Censured; Fined $10,000 jt/sev with Hantz Financial