An irreverent Wall Street Blog
FINRA Fines and Suspends Rep Over False Attestations Involving an Elderly Widow's Beneficiary Designation
September 1, 2021
When entering into a settlement of allegations of regulatory conduct with FINRA, respondents agree to the imposition of sanctions subject to the reservation "without admitting or denying" the allegations in the Complaint. That's a big concession by a regulator. Unfortunately, FINRA isn't policing the enforcement of its settlements because some respondents seem to be denying their misconduct or raising questions about it. See a recent FINRA regulatory settlement for one such scenario.
Case in Point
In response to the filing of a Complaint on February 26, 2021, by the Financial Industry Regulatory Authority's ("FINRA's") Department of Enforcement, Respondent Clyde Anthony Jensen submitted an Offer of Settlement dated August 24, 2021, which the regulator accepted. Under the terms of the Offer of Settlement, without admitting or denying the allegations in the Complaint, Jensen consented to the entry of findings and violations and to the imposition of the sanctions.
FINRA Department of Enforcement, Complainant, v. Clyde Anthony Jensen, Respondent (FINRA Office of Hearing Officers Order Accepting Offer of Settlement, Disciplinary Proceeding No. 2018059733101 / August 27, 2021)
https://www.finra.org/sites/default/files/fda_documents/2018059733101
%20Clyde%20A.%20Jensen%20CRD%205658476%20Order%20Accepting%20Offer%20rjr.pdf
%20Clyde%20A.%20Jensen%20CRD%205658476%20Order%20Accepting%20Offer%20rjr.pdf
Securities Industry Background
As set forth in pertinent part under the "Background" portion of the OHO Order:
Jensen entered the securities industry in April 2009 and was last associated with a FINRA member firm in June 2021. From April 2009 to August 2018, October 2018 to December 2019, and March 2020 to June 2021, Jensen was registered with FINRA as a general securities representative through associations with five member firms, including, from December 2016 to August 2018, Ameriprise. . . .
at Page 2 of the OHO Order
The Elderly Widow Client
As asserted in the "Summary" of the OHO Order:
Respondent Jensen was the broker of record for several accounts held by Customer J, a widow who, during the relevant period, was in her 90s. In March 2017, Jensen told his firm that Customer J wanted to name Jensen the beneficiary of nine securities in one of her firm accounts, which, at the time, were worth approximately $600,000. Jensen's supervisor denied the request and told Jensen that firm policy prohibited either him or his family members from being a named a beneficiary of J's accounts. Nevertheless, just a few weeks later, Jensen, Customer J, and Customer J's then successor trustee and primary beneficiary of Customer J's existing trust ("Trustee S") met with an attorney who amended Customer J's trust to name Jensen the primary beneficiary and his children as contingent beneficiaries of the nine securities. Jensen failed to disclose to his supervising registered principal at the firm that he had been named beneficiary of Customer J's trust. The firm also did not know that Jensen's children had become contingent beneficiaries and, at no time after Customer J's death did Jensen notify his supervisor that his children had become contingent beneficiaries of Customer J's trust as required under the firm's Policy. Jensen continued to manage Customer J's accounts until her death on July 10, 2018. In August 2018, Jensen attempted to have the securities transferred to an account he controlled, but his firm rejected the transfer. Jensen then resigned from the firm.Jensen circumvented his firm's policies and his supervisor's directives in agreeing to be designated as a beneficiary of Customer J's trust, and by failing to notify his supervising registered principal that his children were designated contingent beneficiaries of Customer J's trust in the time period between when Customer J died and when Jensen resigned from the firm. He accordingly violated FINRA Rule 2010.In addition, in February 2018, Jensen submitted an Annual Attestation to his firm on which he affirmed that he would abide by firm procedures and direction from his supervisor, could not inherit from a customer (other than immediate family), and would "immediately contact" his supervisor if he became aware of a prohibited beneficiary relationship. This Annual Attestation was false because, at the time he submitted it to his firm, Jensen knew he had been designated a beneficiary of Customer J's trust since May 25, 2017, in circumvention of firm policy and against his supervisor's express direction. By submitting the false Annual Attestation to his firm, Jensen violated FINRA Rule 2010.
at Pages 2 - 3 of the OHO Order
FINRA Sanctions
In accordance with the terms of the settlement, FINRA imposed upon Respondent Jensen a $10,000 fine and a six-months suspension with any FINRA member in any capacity.
Bill Singer's Comment
Six months suspension?
Six months?
Not years of suspension?
Not a Bar?
Six months?
On FINRA's online BrokerCheck database under the heading "Customer Dispute - Closed-No Action/Withdrawn/Dismissed/Denied," Ameriprise Financial Services, Inc. stated that it had received a customer complaint on September 19, 2018, seeking $85,883.52 in damages, which was deemed "Closed/No Action." As set forth by Ameriprise under "Allegations":
Attorney for the current trustee alleged the advisor breached his fiduciary duty by convincing the former trustee/client, prior to her death, to name him as a beneficiary of the trust.
Okay -- that disclosure by Jensen's employer is pretty consistent with the fact pattern set forth in the OHO Order. On the other hand, Jensen purportedly submitted this "Broker Statement":
The complaint by the current trustee is baseless and inaccurate. The current trustee was aware that the prior trustee fully authorized me being named a beneficiary to the Trust. My prior firm's registered principal was fully aware that my client wanted to include me as a beneficiary in her estate. I was told by my registered principal what the client needed to do to accomplish this and I followed his instructions exactly.
Clearly, Jensen's position in 2018, when his statement was posted, was that the allegations by the "current" trustee were "baseless and inaccurate." Moreover, Jensen asserted that his firm's principal was "fully aware" of the beneficiary issue, told him what he needed to do to comply with the client's desire, and "I followed his instruction exactly." Okay, sure, some of what Jensen alleged was technically correct; however, let's consider these findings by FINRA as set forth in its OHO Order:
- In March 2017, Jensen told his firm that Customer J wanted to name Jensen the beneficiary of nine securities in one of her firm accounts, which, at the time, were worth approximately $600,000. Jensen's supervisor denied the request and told Jensen that firm policy prohibited either him or his family members from being a named a beneficiary of J's accounts.
- Jensen failed to disclose to his supervising registered principal at the firm that he had been named beneficiary of Customer J's trust. The firm also did not know that Jensen's children had become contingent beneficiaries and, at no time after Customer J's death did Jensen notify his supervisor that his children had become contingent beneficiaries of Customer J's trust as required under the firm's Policy.
- In August 2018, Jensen attempted to have the securities transferred to an account he controlled, but his firm rejected the transfer. Jensen then resigned from the firm.
- Jensen circumvented his firm's policies and his supervisor's directives in agreeing to be designated as a beneficiary of Customer J's trust, and by failing to notify his supervising registered principal that his children were designated contingent beneficiaries of Customer J's trust in the time period between when Customer J died and when Jensen resigned from the firm. He accordingly violated FINRA Rule 2010.
- In addition, in February 2018, Jensen submitted an Annual Attestation to his firm on which he affirmed that he would abide by firm procedures and direction from his supervisor, could not inherit from a customer (other than immediate family), and would "immediately contact" his supervisor if he became aware of a prohibited beneficiary relationship. This Annual Attestation was false because, at the time he submitted it to his firm, Jensen knew he had been designated a beneficiary of Customer J's trust since May 25, 2017, in circumvention of firm policy and against his supervisor's express direction. By submitting the false Annual Attestation to his firm, Jensen violated FINRA Rule 2010.
When we consider Jensen's September 2018 BrokerCheck "Broker Statement" and reference it to the August 2021 OHO Order, Jensen's 2018 statement seems in conflict with many aspects of the 2021 OHO Order; and, more to the point, I would argue that Jensen's BrokerCheck statement (even if only in hindsight from today's perspective) is a denial of numerous allegations in the FINRA Complaint, and, as such, would seem to run afoul of this specific language in the OHO Order:
Under the terms of the Offer, Respondent has consented, without admitting or denying the allegations of the Complaint, as amended by the Offer, and solely for the purposes of this proceeding and any other proceeding brought by or on behalf of FINRA, or to which FINRA is a party, to the entry of findings and violations consistent with the allegations of the Complaint as amended by the Offer, and to the imposition of the sanctions set forth below, and fully understands that this Order will become part of Respondent's permanent disciplinary record and may be considered in any future actions brought by FINRA.
at Page 1 of the OHO Order
Frankly, I don't understand how FINRA entered into an Offer of Settlement with Jensen without requiring that the posted BrokerCheck "Broker Statement" be deleted prior to or contemporaneously with the issuance of the OHO Order. Similarly, the OHO Order doesn't reference the published denial by Jensen, which makes you wonder if FINRA Staff was even aware of this counterfactual.