FINRA publishes this quarterly review to provide firms with a sampling of recent disciplinary actions involving misconduct by registered representatives. This sample includes settled matters and decisions in litigated cases (National Adjudicatory Council (NAC) decisions and SEC decisions in FINRA cases). These summaries call attention to, and remind registered representatives and member firms of, specific conduct that violates FINRA rules and may result in disciplinary action.

The following was published on FINRA’s website, October, 2012

“Fraudulently Misappropriating Customer Funds”

FINRA settled a matter involving a registered representative who misled two
customers to convince them to transfer approximately $100,000, which the registered representative subsequently misappropriated. The registered representative fraudulently misrepresented to one customer that he would use the customer’s money to purchase corporate bonds.

In response, the customer transferred $47,000 from his brokerage account to the registered representative. This registered representative deposited the
funds into his personal bank account, used the money for personal expenses and never purchased the corporate bonds.

The registered representative indicated to a second customer that he would use the customer’s funds to purchase a certificate of deposit (CD). The customer transferred approximately $53,000 to the registered representative
for the purchase. The registered representative deposited the funds into his personal bank account and used the money to cover personal expenses. He did not purchase the CD.

FINRA found that the representative’s conduct violated Section 10(b) of the Exchange Act (fraud); Exchange Act Rule 10b-5 (fraud); NASD Rules 2120** (fraud), 2330(a)† (customers’ securities or funds) and 2110‡ (ethical standards), and FINRA Rules 2150(a) (improper use of customer funds) and 2010 (ethical standards).

Because of the registered representative’s violations, FINRA barred him from associating with any firm in any capacity.
(This ends the FINRA article.)

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