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Take What You Have Gathered From Coincidence In Oral Advisory Fee Agreement
June 22, 2016
Wall Street is for gamblers, Baby Blue, and you better use your sense. Take what you have gathered from coincidence. You must leave now, take what you need, you think will last, but whatever you wish to keep, you better grab it fast. Sadly, it's all over now, Baby Blue.
What the hell is BrokeAndBroker.com Blog publisher Bill Singer talking about? What does any of this have to do with stockbrokers, customers, and outside business activities? Read today's article and enjoy the three music videos.
Case In Point
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Robert Myers submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Robert Myers, Respondent (AWC 2015045384601, June 14, 2016.
In 1987, Myers entered the securities industry and was registered with FINRA member firm MML Investors Service, LLC from November to December 2008 and, after a stint with another member firm, returned to MML from July 2009 to May 2015. The AWC asserts that Myers had no prior disciplinary history.
Advisory Fees
The AWC asserts that in 2011, Myers had entered into an:
oral agreement with customer EC to provide quarterly reviews of her accounts and receive advisory fees. Pursuant to that agreement, from 2011 to 2014, EC paid Respondent approximately $57,575 for advice that she received from 2011 to 2014.
OBA Protocol
During the relevant times of Myers's agreement with EC, MML purportedly required prior written disclosure of proposed outside business activities ("OBA") and prohibited any OBA absent its prior approval. FINRA deemed the oral agreement between EC and Myers to be an OBA for which Myers failed to provide MML with prior notice and failed to obtain his firm's prior approval, in violation of FINRA Rule 3270 and Rule 2010.
FINRA Sanctions
In accordance with the terms of the AWC, FINRA imposed upon Myers a $20,000 fine and a one-year suspension from associating with any FINRA member firm.
Bill Singer's Comment
Online FINRA BrokerCheck records as of June 22, 2016 assert that MML received a customer complaint on March 10, 2015, presenting allegations that:
IT IS ALLEGED THAT SINCE 2011, THE REP CHARGED INAPPROPRIATE FEES TO THE CUSTOMER IN RELATION TO HER VARIABLE ANNUITY.
The BrokerCheck report discloses the "Alleged Damages" at $57,575 and indicates that on April 9, 2015, the matter settled for $25,903.73, which was contributed by Myers.
The BrokerCheck records further disclose that on May 21, 2015, MML "Discharged" Myers based upon allegations:
Gotta tell ya, I'm somewhat at a loss to explain the variation between the AWC's presentation of the the "oral agreement" and BrokerCheck's presentation of an "inappropriate fees" customer complaint. There is no mention of any customer complaint in the AWC.TERMINATED IN RELATION TO THE CUSTOMER COMPLAINT
If we strictly follow the presentation of facts in the AWC (which was posted in June 2016), we have Myers entering into a seemingly benign oral agreement with customer EC (who is identified as a female per reference to "her accounts.") Pursuant to the AWC's explanation of the agreement, for a three-year period from 2011 to 2014, Myers provided quarterly reviews of the customer's accounts for which he was paid about $57,575 (which would work out to something like $19,192 per year or $4,798 per quarter).
If we strictly follow the presentation of facts in Myers's BrokerCheck report (which seems to have been updated around May 2015 to reflect his termination), we have a customer (not named or identified beyond being a female per "her" variable annuity) accusing Myers of charging "inappropriate fees . . . in relation to her variable annuity." The alleged damages in the customer's complaint was $57,575.
Now, I don't want to jump to any conclusions or engage in any unwarranted inferences but, geez, it's sort of hard not to note that the AWC references an "oral agreement" under which $57,575 in fees were charged by Myers and BrokerCheck references a customer complaint alleging that Myers charged $57,575 in inappropriate fees related to the customer's annuity. What are we to make of these two fact patterns: mere coincidences involving $57,575?
Maybe it's me -- and it often is because I'm a quirky fellow -- but the AWC seems to be alleging a fairly benign bit of misconduct in the sense that Myers's entered into an oral agreement with a customer to provide good-faith quarterly reviews of her accounts (note the plural: accounts). The AWC comes off as a regulatory settlement largely concerned with Myers's OBA non-compliance.
In contradistinction to the formulaic OBA non-compliance concerns in the AWC, BrokerCheck presents us with a customer complaint alleging $57,575 in inappropriate fees related to a variable annuity. As far as the AWC is concerned, if Myers had simply followed the OBA protocol there would not have been a regulatory case; whereas, BrokerCheck suggests that there was an larger issue with the appropriateness of the fee itself.
Because I cannot unequivocally confirm that the oral agreement in the AWC was entered into with the same customer and involved the same set of facts as the customer complaint noted in BrokerCheck, I have to confine my commentary here to simply raising questions and noting discrepancies. To go beyond that, I would need to know the identity of the complaining customer cited in BrokerCheck and confirm that she is the same as the EC referenced in the AWC. Although the same $57,575 fee is cited in both the AWC and BrokerCheck, said similarity could be a coincidence as a result of Myers charging various clients a $4,798 quarterly review fee that would naturally amount to $57,575 after three years. And so, having run out of further clues, our hunt stops here. Take what you have gathered from coincidence . . .