Paul R. Meyer, of Minnetonka, Minnesota, a stockbroker associated with RBC Capital Markets was recently sanctions and suspended by FINRA for the unauthorized trading of customer accounts. Letter of Acceptance, Waiver, and Consent No. 2023078776201.
According to the AWC, Meyer “exercised discretion without prior written authorization in connection with 334 trades in 45 accounts belonging to 32 customers without speaking to the customers on the day of the transactions.” While he supposedly did “generally discuss trading” with the clients in question, according to FINRA, the firm never designated their accounts as discretionary.
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. See, e.g. Caiola v. Citibank, 295 F.3d 312 (2d Cir. 2002)(“claims under Rule 10b-5 arise when brokers purchase or sell securities on their clients’ behalf without specific authorization.” Saxe v. E.F. Hutton & Co., Inc., 789 F.2d 105, 112 (2d Cir. 1986); Armstrong v. McAlpin, 699 F.2d 79, 90-92 (2d Cir. 1983)( “By definition, a broker who is liable for making unauthorized trades makes them without the customer’s authorization”); Nilsen v. Prudential-Bache Sec., 761 F. Supp. 279, 289-90 (S.D.N.Y. 1991).
Accordingly, FINRA found that his conduct violated FINRA Rule 3260, prohibiting the exercise of discretionary power in a customer’s account without prior written authorization and FINRA Rule 2010, based upon the failure to“observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business.”
FINRA Public Disclosure also shows that Meyer’s was subject to certain customer or investor initiated, investment related complaints. In 2022, a customer alleged that Meyer failed to execute to follow instructions in connection with the sale of certain securities, This complaint was settled for $72,500. Also in 2022, a customer alleged that Meyer executed unauthorized trades in the customer’s account, and “provided poor overall advice.” This complaint was settled for $20,040.42. A third investor complaint, also filed in 2022, Meyer also engaged in unauthorized trading. This complaint was also settled for $100,000.
The Guiliano Law Group, P.C.
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