An irreverent Wall Street Blog
Confusing Customer Conversion Case Confounds FINRA
December 19, 2016
Gimme a "C" for Confusing. Gimme a "C" for Customer. Gimme a "C" for Conversion. Gimme a "C" for Case. Gimme a "C" for Confounds. Gimme a "C" for FINRA . . . umm, oops, gimme an "F" for FINRA. Put it all together you got CCCCCF -- okay, I gotta work on that. In any event, today's BrokeAndBroker.com Blog presents an interesting FINRA AWC in which the regulator boots from the biz a wayward registered rep who seems to have had a penchant for writing unauthorized checks against a customer account. Unfortunately, FINRA seems a bit confused about who is and who isn't the customer.
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, Marc Donald Bushey submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Marc Donald Bushey, Respondent (AWC 2016051803901, December 13, 2016).
Bushey was first registered in 1993 and by March 2005, he was registered with FINRA member firm NYLife Securities LLC. The AWC asserts that Bushey had no prior relevant disciplinary history in the securities industry.
AWC: In Its Own Words
In my opinion, there are a number of deficient aspects of this AWC. As such, I want to be meticulous in not paraphrasing the "OVERVIEW" and the "FACTS AND VIOLATIVE CONDUCT" sections of the published regulatory settlement. Accordingly, here is the full-text of those sections:
OVERVIEWFrom at least November 2015 through September 2016, Bushey violated FINRA Rules 2150(a) and 2010 by converting approximately $10,900 in funds from the account of a Firm customer. Bushey converted the funds by writing checks to "cash," depositing those checks into his personal bank account, and subsequently using those funds for his personal use.FACTS AND VIOLATIVE CONDUCTFINRA Rule 2150(a) provides that "[n]o member or person associated with a member shall make improper use of a customer's securities or funds." FINRA Rule 2010 requires associated persons to "observe high standards of commercial honor and just and equitable principles of trade." Conversion is an intentional and unauthorized taking of and/or exercise of ownership over property by one who neither owns the property nor is entitled to possession it, and violates FINRA Rule 2010.In 2007, Bushey assisted MB and her now-deceased father with creating a trust for the benefit of MB's two minor children (the ''Trust"). MB and a third-party with whom Bushey had a business-relationship were appointed as co-trustees. Bushey then assisted the Trust with opening an account at NYLife, for which he served as the registered representative of record.From November 2015 through September 2016, Bushey wrote at least seven checks from the trust's account, made out to "cash," for a total of $10,900. Bushey then deposited those checks into his personal bank account and used the funds for his personal use. Neither trustee authorized Bushey's actions. Through these actions, Bushey converted and improperly used the Trust's funds, which he neither owned nor was entitled to possess.By converting and improperly using the Trust's funds for his personal use, Bushey violated FINRA Rules 2150(a) and 2010.
The AWC further asserts that:
[O]n October 25, 2016, NYLife filed a Uniform Termination Notice of Securities Industry Regulation ("Form U5") on Bushey's behalf disclosing that Bushey voluntarily terminated his employment on September 30, 2016, and that he was the subject of a customer complaint received by NYLife on October 11, 2016.
FINRA SanctionsOn September 30, 2016, Bushey registered as a GSR with another FINRA regulated broker-dealer, which on November 2, 2016, filed a Form U5 on Bushey's behalf disclosing that Bushey's employment with the firm had been terminated because Bushey withheld information regarding a customer complaint from his previous firm.
In accordance with the terms of the AWC, FINRA imposed upon Bushey a Bar from association with any FINRA regulated broker-dealer in any capacity.
Bill Singer's Comment
Name That Customer
The AWC "Overview" asserts that from about November 2015 through September 2016, Bushey converted $10,900 "from the account of a Firm customer."
Given the predicate, let's see if we can figure out just who is that referenced customer.
The AWC "Facts and Violative Conduct" section asserts that:
In 2007, Bushey assisted MB and her now-deceased father with creating a trust for the benefit of MB's two minor children (the ''Trust"). MB and a third-party with whom Bushey had a business-relationship were appointed as co-trustees. Bushey then assisted the Trust with opening an account at NYLife, for which he served as the registered representative of record.
Sometimes my curiosity gets the better of me but just who the hell is MB?
The only answer we can glean from the AWC's "Facts and Violative Conduct" section is that MB was a female, that she her father was deceased at the time of the publication of the AWC, that she had at least two minor children for whom a trust was created for their benefit.
If you read the AWC carefully, what you don't learn is whether MB or her father were prior customers of Bushey's. Similarly missing from the AWC is any indication as to just what, if any, relationship existed between her and Bushey.
Who then was the "Firm customer" from whom Bushey allegedly converted $10,900? My first inference was that it was MB but upon further consideration, that doesn't appear to be what the AWC is asserting. Let's consider what we may think the AWC informs us about and then examine whether our understanding is correct or even justified.
In the second paragraph of the "Facts and Violative Conduct" section, we are informed that in 2007, Bushey assisted MB and her father with creating the Trust and, thereafter, Bushey "assisted the Trust with opening an account at NYLife, for which he served as the registered representative of record." As such, the "Firm customer" referenced in the AWC is the Trust.
As to whether the Trust was funded by MB, her father, the two of them, or some other party(s) is not actually explained in the AWC. All that we know is that Bushey "assisted" MB and her father in creating the Trust.
In addition to our inability to clearly understand who was Bushey's customer, we have the added burden of trying to decipher that awkwardly worded sentence in which we can't quite figure out if Bushey "had a business relationship" with just MB or just with "a third party" or if the business relationship was with both MB and some unnamed third party.
SIDE BAR: Why does the AWC characterize the female/mother/daughter referenced in the document as "MB" but only refers to another individual with whom Bushey had a business relationship as a mere "third party?" If for no other reason than consistency, why doesn't the AWC refer to "MB" and, let's say that the third party was "John Doe" and also refer to him as "JD" ?In the alternative, why not simply refer to MB as the "mother of the two minor children beneficiaries of the Trust" and the unnamed third party as "the third party"?
Ultimately, after we try to draw the necessary inferences and rely upon what we think are the obvious implications, we seem to conclude that the AWC has alleged that:
- Bushey wrote seven checks for a total of $10,900 against the customer account of the Trust; and
- neither of the trustees (MB and the third party) authorized Bushey's check-writing.
$18,000 Customer Complaint
You may think that I'm making more of this MB issue than is warranted. Recall that the AWC asserted that when Bushey resigned from NYLife on September 20, 2016, that "he was the subject of a customer complaint received by NYLife on October 11, 2016."
According to online FINRA BrokerCheck records as of December 19, 2016, under the heading of "Customer Disputes - Pending," NYLife Securities LLC disclosed its receipt on October 11, 2016, of a customer complaint involving the "Product Type: Money Market Fund," and "Alleged Damages: $18,000." NYLife characterized the customer's allegations as:
Customer alleges between January 2016 and September 2016 checks in the total amount of between $15,000 and $18,000 were written out of her brokerage account without her permission by RR Marc Bushey.
That BrokerCheck disclosure prompts me to ask the following:
- Was MB the same complaining customer referenced in NYLife's disclosure?
- Was the "her brokerage account" noted in the BrokerCheck allegations the same as the "Trust account" noted in the AWC ?
- Was the BrokerCheck allegation in addition to or the same as the conversion case set forth in the Bushey AWC? And if it is the same, what is the explanation for the $10,900 set forth in the AWC versus the $18,000 in BrokerCheck?
- If, in fact, the customer allegations on BrokerCheck involve allegations different from those set forth in the AWC, then why is there no reference to the BrokerCheck allegations in the AWC and, similarly, why is the Trust account's allegations in the AWC not set forth in BrokerCheck?
I'm not prepared to crawl all the way out on this limb but it sure seems to me that there is one and only one October 11, 2016, customer complaint that was lodged against Bushey during his tenure with NYLife. Inexplicably, FINRA's AWC and FINRA's BrokerCheck database don't mesh to the extent that they should. We never quite figure out if the AWC and the BrokerCheck customer are the same, and, even if that seems to be the case, we can't precisely nail down whether the "same" customer was MB or the Trust. Then there's the issue as to whether Bushey converted about $11,000 or $18,000 -- the conversion seems a given but the dollars converted seem up in the air.