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The TD Ameritrade Stockbroker and The Customer Were Friends Until Options Trading Came Between Them
June 8, 2021
In a recent FINRA regulatory settlement, we got two friends, one of whom is a stock broker. The stockbroker may well have thought that he was doing his friend a favor by trading options. In fact, the friend may also have appreciated the gesture. That is until the friend/customer didn't quite appreciate the stockbroker's trading; and we're talking about lots of trading.
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, Elvis Beslagic submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Elvis Beslagic, Respondent (AWC 2019063798401)
https://www.finra.org/sites/default/files/fda_documents/2019063798401
%20Elvis%20Beslagic%20CRD%205565302%20AWC%20va.pdf
%20Elvis%20Beslagic%20CRD%205565302%20AWC%20va.pdf
The AWC asserts in part that:
Beslagic was associated with three different FINRA member firms from 2010 to November 2018. Between July 2017 and November 2018, Beslagic was registered with FINRA as a General Securities Representative through his association with TD Ameritrade, Inc. (BD No. 7870), a FINRA member firm. In an Amended Uniform Termination Notice for Securities Industry Registration (Form U5) dated August 29, 2019, TD Ameritrade disclosed its receipt of a customer complaint alleging that Beslagic "mishandled his account through options trades."
The AWC asserts that Beslagic "does not have any relevant disciplinary history."
You've Got a Friend
The AWC alleges that Beslagic agreed to help a friend. Oh my -- few things end more disastrously than those which began with the good intention of helping a friend. And given that we are discussing Beslagic's FINRA regulatory settlement, we might easily infer that he trod the road to Hell upon a pavement of good intentions. As the AWC paints the picture in part:
In September 2018, Beslagic agreed to help his friend and firm customer generate a quick return by executing an options trading strategy in the customer's self-directed firm account. Because Beslagic was prohibited from accessing or placing trades in customer accounts, the customer provided Beslagic with his account login credentials. Beslagic used his personal cell phone and the customer's login credentials to access the account and execute trades.
What makes matters worse for Beslagic is that the friend/customer has a "self-directed" account, as in the customer is placing his own orders. As in without a stockbroker -- except Beslagic walks blindly into that regulatory/compliance trap and despite being "prohibited from accessing or placing trades in customer accounts," Beslagic short-circuits all the prohibitions and restrictions. But, you know, he's doing this to help out a friend. So, like, hey what could possibly go wrong, right?
With A Little Help From My Friend
On the surface, this "move over and let me handle the trading" always seems like a quick fix and somewhat harmless. After all, when you ask the client to move over, the client is aware that the stockbroker is entering orders with the impression (to the outside world) that the orders are coming from the client's own self-directed self. Moreover, let's not get overly sympathetic to the customer because even the AWC admits that the "customer provided Beslagic with his account login credentials."
As things set up, for right or wrong, it's tough to imagine how the hell would Beslagic get caught merely trying to give a little help to his friend? Then again, as previously noted, we're reviewing an AWC here, so, duh, Beslagic did get caught doing something. As the AWC alleges:
Between September 2018 and November 2018, with the customer's knowledge and authorization, Beslagic executed over 1,000 trades in the account with a principal value over $5 million. In November 2018, Beslagic and the customer ended their trading arrangement.
1,000 helpful trades over two months.
$5 million in principal traded.
Somewhat overshadowed by all that helpin' out is the ominous disclosure that the friend/customer ended this lovely arrangement after only two months.
The Digital Footprints
So --- what got Beslagic fired by Ameritrade? According to the AWC, FINRA asserts in part that:
Beslagic concealed his trading from the firm by posing as the customer and coordinating the trades by text messages from his personal cell phone. Between September 2018 and November 2018, Beslagic exchanged over 1,000 text messages with the customer regarding trade recommendations and specific trades in the customer's account. Beslagic did not inform TD Ameritrade or provide the firm copies of the text messages, causing the firm to maintain incomplete records of business-related communications. Beslagic also falsely certified in his annual compliance questionnaire that he had not placed trades in any unauthorized accounts and that he had complied with the firm's text message policy.
Sanctions
In accordance with the terms of the AWC, FINRA found that Beslagic violated FINRA Rule 4511 and 2010, and the regulator imposed upon him a $5,000 fine and a 12-month suspension from associating with any FINRA member in all capacities.
Bill Singer's Comment
Online FINRA BrokerCheck disclosures as of June 8, 2021, disclose that Beslagic was first registered in 2010 with Chase Investment Services Corp, then from October 2012 to May 2017 with J.P. Morgan Securities LLC, and with TD Ameritrade, Inc. from July 2017 to November 2018. BrokerCheck discloses under "Customer Dispute -- Pending" that a complaint was received on July 30, 2019, alleging that a "client alleges the representative mishandled his account through options trades," and the client sought $110,000 in alleged damages.