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Derek Prater, of Baytown, Texas, a stockbroker with Edward D. Jones & Co., L.P., was fined $17,500.00 and suspended for two years from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity after consenting to findings that he engaged in unauthorized trades in customer accounts; and misled his firm in the course of their investigation into his alleged misconduct. Letter of Acceptance, Waiver and Consent, No. 201404037101 (Feb. 22, 2016).
According to the AWC, while in the capacity of an Edward Jones stockbroker, Prater had prompted thirteen transactions consisting of purchases and sales of mutual funds in JM’s and BH’s accounts. Prater reportedly effected such transactions without authorization from the firm’s customers, as JM and BH neither had knowledge of such transactions and had not provided consent.
Specifically, the AWC reported that from June 18, 2013 through October 21, 2013, Prater prompted six of the trades in JM’s accounts for amounts that ranged from an estimated $30,000.00 up to $42,000.00. Prater reportedly effected seven trades in BH’s accounts on October 22, 2013, for amounts that ranged from an estimated $3,100.00 up to $25,000.00. FINRA found that Prater’s conduct in this regard was violative of Rule 2010.
The AWC further reported that per Edward Jones’ policies, stockbrokers such as Prater were not allowed to exercise discretion in the accounts of the firm’s customers. The firm apparently did not accept such customer accounts of JB and BH as discretionary either.
According to the AWC, from July 2013 through December 2013, Prater also prompted thirty-six trades in eighteen of the firm’s customer accounts. In such cases, customers had reportedly given Prater verbal authorization; yet, Prater had not spoken to such customers on trade dates before executing such trades. FINRA found that Prater’s conduct, of failing to ascertain the customers’ written authorization and the firm’s written acceptance of such trades, was violative of FINRA Rule 2010 and NASD Rule 2510(b).
The AWC further indicated that Prater was investigated by his firm on December 18, 2013, concerning his aforementioned trading misconduct. In such investigation, Prater was asked by PW, the firm’s compliance officer, about his trading in JM’s account. Prater reportedly indicated that JM consulted with Prater on numerous dates in 2013 concerning trades that were ultimately effected in JM’s account. FINRA found that such statements that Prater made to PW were false, and that Prater did not actually speak to JM at any point in 2013. FINRA found that Prater’s conduct was violative of Rule 2010 in this regard.
Public disclosure records reveal that on February 11, 2014, Edward Jones terminated Prater for violating the firm’s policies concerning discretionary trading in customer accounts as well as making inaccurate statements during the aforementioned compliance investigation.
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