A former Edward Jones administrator has been permanently barred from the financial industry after misappropriating a total of $63,000 from 21 customers.
According to a default decision issued by the Financial Industry Regulatory Authority (FINRA) on Feb. 15, Carolyn Avia Harmon misappropriated $63,000 in customer funds between November 2006 and September 2009. She also failed to respond to requests for information from FINRA’s Department of Enforcement.
At the time of her fraud, Harmon was an unregistered branch office administrator at the Lenoir, N.C., office of investment firm Edward Jones. Harmon began her association with Edward Jones, a FINRA member, in 2000. She was not previously registered with any FINRA member.
Edward Jones Dismisses Carolyn Avia Harmon
Edward Jones fired Harmon in November 2009 when it discovered that she had been misappropriating client funds. FINRA began its investigation when it learned of the circumstances of the termination, the default decision said. It retained jurisdiction because the misconduct in question occurred while Harmon was associated with a FINRA member firm.
Department of Enforcement Permanently Bars Harmon
Harmon’s failure to provide information, and her failure to appear at any proceeding, led FINRA’s Department of Enforcement to file a request for a default decision in December 2011.
The Department of Enforcement sought to permanently bar Harmon because her misappropriations involved a substantial amount of money over a prolonged period of time in a large number of customer accounts.
According to the default decision, Harmon’s misappropriations were so egregious as to cast in doubt her ability to comply with the fundamental regulatory requirements of the securities business. Her conduct also cast doubt on her capacity to fulfill her fiduciary duties. For these reasons, FINRA held that a permanent bar was the appropriate sanction to remedy the misconduct, as well as deter similar behavior.
FINRA did not seek restitution from Harmon because Edward Jones offered to pay restitution to all 21 of the affected customers. Nineteen customers accepted the restitution and two rejected the offer, according to the default decision.
Harmon Violated General Standards of Business Conduct
When she misappropriated more than $63,000 that should have been placed in customer accounts, Harmon violated the general standards of business conduct set out in Rule 2110 of the National Association of Securities Dealers, a FINRA predecessor. She also violated FINRA Rule 2010 concerning standards of commercial honor and principles of trade.
As a branch office administrator at Edward Jones, Harmon was responsible for the processing of account transfers and the opening and closing of accounts, according to the default decision.
In November 2006, Harmon opened an account in the name of her husband, Clint D. Harmon Jr., without his knowledge or authorization, the default decision said. She opened an account in her own name around the same time.
Between that time and September 2009, Harmon deposited funds intended for a number of customer accounts at the firm into her husband’s account, eventually transferring the majority of the funds into her own account. She then used the money to pay personal bills, the default decision said. She forged her husband’s signature on several letters in order to transfer the funds without her husband’s knowledge or authorization.
Harmon also improperly deposited two customers’ checks into an Edward Jones account held jointly by her and her husband.
Edward Jones discovered Harmon’s misappropriations in November 2009 when the firm’s Field Supervision Department discovered that certain checks that were supposed to be deposited into the account of three customers were never deposited.
The firm began to investigate the missing deposits and tracked them to Harmon’s husband’s account, the default decision said. In late November 2009, Edward Jones questioned Harmon regarding the missing deposits. She said she didn’t know why the funds had been deposited in her husband’s account, suggesting that it was an administrative error.
Paradoxically, Harmon also claimed the funds may have been payment for some work her husband had performed for the entities in question, the default decision said.
Further questioning revealed that Harmon could not explain why Edward Jones’ internal deposit records showed that the checks in question had been placed in Harmon’s husband’s account when these checks had the correct customer account numbers written on them before they were deposited. Nor could Harmon explain why the check numbers on the internal deposit records did not match the check numbers on the deposited checks, the default decision said.
About a week later, Edward Jones questioned Harmon again. This time, Harmon admitted that she diverted the funds to her husband’s account in order to help out a relative. In total, Harmon misappropriated more than $63,000 from at least 21 Edward Jones’ customers between November 2006 and September 2009.
After FINRA began to investigate the alleged misappropriations, its staff requested information from Harmon a number of times, but she Harmon failed to respond, in violation of FINRA Rules 8210 and 2010.
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