The Financial Industry Regulatory Authority or FINRA ordered Richard H. Byerly of Chester Springs, Pennsylvania to pay $30,000 in restitution to and was suspended for two years from association with any FINRA member in any capacity for the unauthorized churning of customer accounts belonging to two senior citizens.
Although FINRA found that he “exercised discretion,” meaning that he effected unauthorized trading in 12 of his customer accounts, FINRA only focused on two accounts, where the customers collectively lost $390,000.
Two Focused Victims of Richard H. Byerly
In one account, belonging to a 71 year-old retired facilities manager, Byerly effected more than 127 transactions in stocks and other securities which would have required the account to earn almost 7 percent to simply break even after his commission and fees.
Notwithstanding that the 71 year-old man was risk adverse and was subsisting for solely his social security and investment income, Byerly listed “long term growth” as the customer’s investment objective. From this account, Byerly made approximately $30,000 in commissions.
The other customer was a 78-year-old widow living on a fixed income of about $1,800 a month.
Byerly engaged in similar and effected more than 83 transactions in stocks in other securities. These trades had an annualized cost-to-equity ratio of about 10.9 percent, meaning the account would have to earn a 10.9 percent return to break even. This account lost about $190,000, due to Byerly’s excessive and unauthorized trading, while Byerly received net commissions of about $35,000,
Byerly also lied to FINRA by falsely responding to their initial inquiry that he spoke to the one client almost every week and prior to any transactions being effected in the account. Byerly also lied to RBC by telling them that he did not exercise discretion in any of his customer accounts.
FINRA Slaps Byerly on the Wrist
Notwithstanding that Byerly lied, and made at least $60,000 in commissions, FINRA only required him to give $30,000 back to his customers, and following a 2 year suspension he will be allowed back into the securities business to continue with his activities.
According to FINRA Public Disclosure Records
Public Disclosure Records for Mr. Byerly show that has been the subject of at least nine reported customer initiated investment related complaints or arbitrations alleging fraud in connection with the sale of securities, unsuitable recommendations, unauthorized trading and churning or excessive activity. The Financial Industry Regulatory Authority (FINRA), Office of Dispute Resolution, (formerly NASD Dispute Resolution, Inc.) reports that as of 2003, of the 663,000 registered representatives in the country in 2003, only 2,751 or 0.41 % have been the subject of three or more customer initiated investment related complaints or arbitrations. Here, Byerly appears to have nine customer initiated investment related complaints or arbitrations, many of which pre-date his association with RBC Capital Markets, and which apparently did not deter RBC Capital Markets from hiring him.
RBC Capital Markets was not fined or sanctioned based upon its failure to supervise Byerly whom they terminated in October 2010.
FINRA in levying sanctions against Byerly, called them “sufficiently remedial to deter Respondent from any future misconduct” in the settlement order.
Guiliano Law Firm
If you have been the victim of securities fraud you should consult with an attorney. The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Firm, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.