Scott B. Hostutler, formerly a broker with Edward Jones, was suspended for 10 days by the Financial Industry Regulatory Authority (FINRA) for trading in a customer’s account without authorization.
Hostutler was fined $5,000 in addition to his suspension from association with any FINRA member in any capacity.
The sanctions were set out in a Letter of Acceptance, Waiver and Consent (AWC) submitted on April 24 by Hostutler and accepted by FINRA on May 1. Hostutler accepted and consented to FINRA’s findings without admitting or denying the findings.
According to FINRA public disclosure records, Hostutler began his suspension on May 7, and it was to run through May 18.
First registered with FINRA as a general securities representative in May 2004, Hostutler began his career in the Franklin Lakes, N.J., office of Edward Jones. He remained there until he was terminated in April 2010, after the firm investigated allegations that Hostutler had engaged in discretionary trading without customer approval, as stated in the public disclosure records.
The records show that Hostutler admitted that on at least one occasion he switched the investments in a customer’s portfolio without discussing the transactions with the customer.
The misconduct in question occurred in November 2009, when Hostutler performed discretionary trades in a customer’s account without obtaining written authorization from the customer as required by Edward Jones and by FINRA, according to the AWC.
Moreover, the account had not been accepted as discretionary by Edwards Jones, the AWC said. If an account is discretionary, a broker is allowed to buy and sell securities without obtaining customer’s consent in each instance provided the customer has provided his or her blanket consent in writing, and provided the employing firm has documentation of this blanket permission. Such accounts are sometimes also referred to as managed accounts.
Hostutler performed six discretionary trades in the customer’s account on Nov. 19, 2000, even though Edward Jones prohibited such trades, the AWC said. In doing so, he violated Conduct Rule 2510 of the National Association of Securities Dealers, a FINRA predecessor. Section (b) of the rule states that no firm or broker shall exercise any discretionary power in a customer’s account unless the customer has given prior written authorization to a stated individual and the account has been accepted by the firm. This acceptance of an account as discretionary must be evidenced in writing by an officer or manager designated by the firm.
The misconduct also violated FINRA Rule 2010, which states that member firms must observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business.
Since his termination from Edward Jones, Hostutler has not become associated with any other FINRA member firm, the AWC said. He had not been subject to FINRA disciplinary action before this event.
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