Peter F. Butler, of Cambridge, Ohio, a stockbroker and principal for Ameriprise Financial Services, Inc., conducting business under the same Partners Financial Group, was fined $15,000.00 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity after consenting to findings that Butler failed to supervise a registered representative who converted customer funds. Letter of Acceptance, Waiver and Consent, No. 2014040269302 (Sept. 14, 2016).
According to the AWC, Butler was both the owner of The Partners Financial Group, LLC, as well as a supervisor and stockbroker for Ameriprise Financial Services, Inc. Between April of 2010 and September of 2013, Butler was responsible for supervising an office manager employed by him at The Partners Financial Group, where such individual also worked at Ameriprise under Butler’s supervision as a sales representative.
The AWC stated that throughout this time frame, the office manager handled The Partners Financial Group’s credit and banking accounts, payroll, and other financial matters. In his capacity with The Partners Financial Group, the manager reportedly converted monies without authority in order to take in commissions and increase his salary.
The AWC stated that the manager eventually began stealing from Ameriprise customers in October of 2011 through the course of making unauthorized withdrawals. Apparently, between October of 2011 and September 2013, an estimated $370,000.00 in monies were stolen from customers through their Ameriprise brokerage accounts. The office manager reportedly effected the scheme through his submission of forms to Ameriprise for the wiring of funds from the brokerage accounts of Ameriprise customers to The Partners Financial Group accounts in order to make purported investments for such customers. Customers, however, were unaware of the manager’s scheme.
The AWC stated that Butler failed to supervise the office manager in a reasonable fashion, particularly with regard to the office manager’s involvement of The Partners Financial Group’s financial affairs. Specifically, Butler never reviewed the officer manager’s decisions and accuracy of calculations regarding compensation to be provided to staff members. FINRA claimed that Butler’s failed supervision led to the office manager raking in unauthorized compensation.
FINRA further found that Butler’s failed supervision led the office manager to mischaracterize The Partners Financial Group’s expenses and other accounts, which the office manager engaged in to effectively conceal his theft of customer funds. The AWC stated that Butler’s unreasonable failure to audit the credit and account statements in this regard caused the theft by the office manager to occur without detection.
Additionally, FINRA stated in the AWC that Butler failed to properly supervise five of the Ameriprise customer accounts which were affected by the office manger’s conversion, despite Butler being the broker of record on such accounts. FINRA noted that Butler’s failure to manage his relationships with customers and engage in routine reviews of their accounts was a contributing factor in the conversion of customer funds by the office manager. Consequently, FINRA found that Butler’s aforementioned conduct was violative of FINRA Rules 2010 and 3010(a).
FINRA’s BrokerCheck reveals that Butler has been subject to three disclosure incidents leading up to FINRA’s disciplinary action. Particularly, on December 7, 2010, Butler was subject to a customer dispute in which he was alleged to have engaged in misrepresentations pertaining to a variable life insurance policy transaction.
Despite its “franchise” relationship, Amerirpise is responsible for the activities conducted at its “independent” branch offices and is required to reasonably detect and prevent misconduct. “In recent years,” as one commentator has observed, “a growing number of securities brokers are discarding the notion of working for a large wire house in favor of working for a non-traditional brokerage firm in a small satellite office. These non-traditional firms typically employ these representatives as independent contractors in geographically dispersed offices containing anywhere from one to four brokers, and offer up to a 80 or 90 percent commission pay out, may be double what a broker can earn at a conventional firm.” Courts and securities arbitration panels, in identical circumstances, have long held brokerage firms responsible for the conduct of their registered representatives in based upon the broker-dealer’s failure to supervise.
On March 13, 2014, Butler settled a customer dispute for $172,996.22 after the customer alleged that the customer’s monies were liquidated from an annuity and not invested according to the customer’s understanding. On March 21, 2014, Butler resolved a customer dispute for $23,582.25 after the customer alleged that Butler invested the customer’s funds in a manner which was not in accordance with the customer’s expectations.
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