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The Trust, The Beneficiary, The Annuity, The Elderly Customer, and The Stockbroker
April 21, 2021
Regulators and prosecutors like to exaggerate the nature and extent of their allegations; but let's not pretend that defense lawyers don't participate in similar subterfuge through their own fanciful pleadings. Such is the stuff of our adversary system of justice. When regulators/prosecutors have a settlement to work with, however, things really get blown out of proportion -- such unbridled excess produces settlements in which the sanctions imposed don't appear to fit what is presented to us as another crime of the century. In a recent FINRA AWC, we are left somewhat breathless by a series of seemingly outrageous allegations by the regulator only to be asked to accept what comes off as tepid sanctions.
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, Jimmie Darrel Summers submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Jimmie Darrel Summers, Respondent (FINRA AWC 2020065609101)
https://www.finra.org/sites/default/files/fda_documents/2020065609101
%20Jimmie%20Darrel%20Summers%20CRD%201467286%20AWC%20jlg.pdf
%20Jimmie%20Darrel%20Summers%20CRD%201467286%20AWC%20jlg.pdf
The AWC alleges that Jimmie Darrel Summers was first registered in 1986, and from December 2017 to January 2020, he was associated with Cetera Investment Services LLC. The AWC asserts that Summers "does not have any relevant disciplinary history."
The Trust
In part, the AWC alleges that in March 2019, Summers was named the successor trustee of an 82-year-old Cetera customer's living trust, and, Summers was to receive 90% of the trust's assets upon the customer's death. Notably, Summers was not related to the elderly customer.
The Estate
Also in March 2019, Summers was named the personal representative of the elderly customer's estate in
the customer's will. Although Summers had never acted as power of attorney or medical
power of attorney for the customer, the stockbroker was appointed power of attorney and medical power of attorney for the customer.
The Annuity
In June 2019, Summers was named the sole beneficiary of an annuity held by the elderly customer.
Cetera's Prohibitions
As asserted in the AWC:
In 2019, Cetera's procedures prohibited the firm's registered representatives from being named as a trustee, co-trustee, successor trustee, or executor for a firm customer, or from having power of attorney for a firm customer, except when the customer was a member of the representative's immediate family. Cetera's procedures also forbade its registered representatives from being named a beneficiary of a customer's account, estate, or insurance policy, unless, again, the customer was a member of the representative's immediate family.
Notwithstanding Cetera's procedures, Summers did not disclose to Cetera his elderly customer's designations or appointments. The AWC asserts that "Summers no longer holds any of these appointments or designations for the customer."
Sanctions
In accordance with the terms of the AWC, FINRA found that Summers had violated FINRA Rule 2010 and imposed upon him a $5,000 fine and a 45-calendar-day suspension from associating with any FINRA member in all capacities.
Bill Singer's Comment
According to online FINRA BrokerCheck records as of April 21, 2021, during Summers' 32 years in the industry, he has been registered with 10 firms. In addition to the AWC disclosure, there are only two other disclosures involving customer disputes (filed in 2008 and 2009) that were either closed without action, withdrawn, dismissed, or denied. Consequently, Summers has a relatively spotless industry record, which may well account for the relatively mild sanctions imposed upon him.
As presented to us in Summers, FINRA's fact pattern is pregnant with implications and we are similarly prompted to make many inferences. Pointedly, we got three -- count 'em -- three, examples of misconduct to consider: The Trust, The Estate, and The Annuity. And for each of those roles, Summers allegedly failed to disclose his conduct to his employer Cetera. Add into that mix the customer's age and, well, geez, you sort of expected that FINRA was going to impose a Bar.
All of which makes me wonder, makes me ask: What the hell was going on here?
Go back and read and then re-read the AWC; and you tell me why Summers accepted the various roles/designations and why it wasn't viewed by Cetera and/or FINRA as a predatory act involving an elderly customer.
Pointedly, and let's be very, very clear about this, I am NOT asserting or implying that Summers did anything predatory; and, frankly, going by the sanctions and the language of the AWC, he did not -- as such, there may well be a fairly harmless, benign explanation that FINRA determined to be true and took into account when calculating its sanctions. It may well be, for example, that when the elderly customer "named" Summers, the customer did so on his own volition and without any prompting by the stockbroker. As previously noted, this may be one of those times when FINRA went over the top and piled on.
The problem and, as such, the failing of this AWC is that it does a disservice to Summers, to the investing public, and to the industry precisely because the document fails to explain to us what the hell was going on. In the end, it just feels like FINRA got Summers down on the mat, got in a few kidney punches before the ref caught on, and then stuck a thumb in the guy's eye for the fun of it. I doubt that's how FINRA intended for readers to view this settlement but the disconnect between the AWC's fact pattern and the sanctions (and the absence of any meaningful explanation) compel that conclusion.
Also read: "FINRA Regulatory Settlement About Vulnerable Individual Raises Troubling Questions" (BrokeAndBroker.com Blog / February 26, 2019)http://www.brokeandbroker.com/4449/finra-awc-vulnerable-individual/SEE the BrokeAndBroker.com Blog "Trustee" archive http://www.brokeandbroker.com/index.php?a=topic&topic=trusteehttp://www.brokeandbroker.com/index.php?a=topic&topic=beneficiary