Barry David Abrams of Marlton, New Jersey, a registered representative with Securities Service Network, Inc., was fined $5,000 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any and all capacities for a period of fifteen business days after consenting to findings that he had engaged in unauthorized discretionary trading in customer accounts. Letter of Acceptance, Waiver and Consent, No. 2013039371801 (Dec. 15, 2015).
According to the AWC, on December 6, 2013, Securities Service Network, Inc. had filed a Uniform Termination Notice for Securities Industry Registration (Form U5) indicating that Abrams was discharged because he had exercised discretion in a client account without written authorization or firm approval.
The AWC reported that from June 2012 – November 2013, while acting in his capacity of a Securities Service Network registered representative, he had effected an estimated eighty-seven discretionary transactions in the account of customer AM without obtaining prior written authorization from AM and without the firm having accepted the account as discretionary in writing. FINRA found that Abrams’ conduct of exercising discretion without written authority was violative of NASD Conduct Rule 2510(b) and FINRA Rule 2010.
Firms and individuals, not surprisingly, are prohibited from unauthorized use of customer funds, borrowing of a customer’s securities or funds, forgery, non-disclosures or misstatements of material facts, and various deceptions and manipulations. Such conduct can also be found to violate criminal and other civil laws, and be subject to sanction from the federal and state government bodies.
By definition, a broker is liable for making unauthorized trades without the customer’s prior authorization. Absent written discretion, it is a violation of Section 10(b) of the Exchange Act, and Rule 10b-5, as promulgated thereunder, to effect transactions in customer accounts without their prior authorization or consent.
Customers also have a duty to review securities purchase and sale confirmations and review their securities accounts. If a stockbroker has placed unauthorized transactions in a customer account, the customer under most circumstances has a duty to act, or a duty to complain, or else generally, the customer may be deemed to have ratified these transactions, with actual or imputed knowledge, by doing nothing. Under such circumstances, a customer’s damages may be limited to the time they knew or should have known about the unauthorized transactions.
Public disclosure records reveal via FINRA’s BrokerCheck reveal that Abrams has been subject to six disclosure incidents. On January 10, 1991, Abrams settled a customer dispute for $15,000 after the customer alleged that Abrams charged commissions or markup on the sale of a municipal investment trust. On February 5, 2014, Abrams settled a customer dispute for $4,000 after a client alleged churning, misrepresentation, gross mismanagement of account and unauthorized use of discretion in the management of his account.
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