RRBDLAW.com 917-520-2836 : 2010 FINRA Enforcement Actions

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.

June 2010

Donald Edwin Derieg
AWC/2007009070901/June 2010

Derieg served as an elderly customer’s attorney-in-fact pursuant to a power of attorney (POA) designation, and became a co-successor trustee and a beneficiary of the customer’s living trust. Derieg’s member firm generally prohibited representatives from accepting fiduciary appointments, except in connection with family. Derieg completed his firm’s associate annual attestations, in which he failed to disclose that he was named as a co-successor trustee of the elderly customer’s restated trust, that he was a beneficiary of her trust and life insurance policy, or that he was designated as an attorney-in-fact under the power of attorney should the customer become incapacitated.

Derieg improperly borrowed money from the customer when his firm’s written procedures prohibited registered representatives from borrowing money from customers, other than family members, and only then with management approval, and Dereig did not notify the firm of the loans or obtain its prior approval.

Derieg engaged in unauthorized transactions in the customer’s investment portfolio that were unsuitable in light of the customer’s deteriorating medical condition, her resulting financial situation and need for preservation of principal.

Donald Edwin Derieg: Barred

Tags: POA Beneficiary Living Trust Borrowing | In: Cases of Note : FINRA

Bill Singer's Comment

This case is troubling on many, many levels. First off, since the onset of the Great Recession, I have noticed an increase in the number of queries to me as a lawyer from registered persons concerning offers from their clients to become beneficiaries of various trusts, estates, and insurance policies. In virtually all such consultations, the broker's member firm has had clear written policies prohibiting "knowing" acceptance of such bequests, with limited exceptions for family members and other circumscribed individuals or circumstances.

In this case, not only do we have a broker serving as an Attorney-in-Fact to an elderly client in failing health, but that same broker is named as a trustee of that client's living trust, a beneficiary of that client's living trust; and the broker borrowed money from that same client. Worse, the acceptance of the fiduciary appointments were in conflict with the member firm's written policies, and it appears that Dereig affirmatively covered up his fiduciary roles by not disclosing them in an annual compliance certification. Moreover, in keeping with his apparently evasive conduct, Dereig did not disclose his borrowing of funds from that same client.

Add to all of the above the allegation of unsuitable trading and we don't have a particularly attractive picture. Fact is, things just don't get all that much more predatory on Wall Street.

Enforcement Actions

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