Evidently, it slipped the mind of one New York stockbroker that dead men can’t trade.
Eric Anthony Foster, a stockbroker with Halcyon Cabot Partners Ltd., has been fined $10,000 by the Financial Industry Regulatory Authority (FINRA) and suspended for three months for unauthorized trading in the account of a deceased customer while he worked for the Maxim Group LLC.
In addition, Foster was order to pay about $2,500 in restitution to the estate of the deceased customer after he bought and sold warrants and bought shares in six separate transactions over a roughly five month period starting about one month after the elderly customer died.
Eric Anthony Foster Consented To Fine & Suspension
Foster agreed to the fine and suspension and the terms were accepted by FINRA and the National Adjudicatory Council on Feb. 9, according to FINRA’s Order Accepting Offer of Settlement.
To settle the matter, Foster consented to the sanctions as well as the entry of findings and violations consistent with the allegations in FINRA’s complaint, but without admitting or denying the allegations. The action is now part of Foster’s permanent disciplinary record.
The settlement requires Foster to submit satisfactory proof of payment of the restitution within 120 days, or proof of reasonable efforts to pay the restitution.
The Details of Foster’s Fraudulent Scheme
From late February 2006 through early June 2006, Foster performed six unauthorized purchase and sale transactions in the Maxim Group account of a deceased customer, the order said.
The customer was identified in the FINRA order only as LS. He was solicited by Foster to open a securities account with Maxim in late 2003. LS died in January 2006 at the age of 84 as a result of injuries from a fall.
After LS died, Foster performed a number of unauthorized transactions in his account, the order said. On Feb. 28, 2006, Foster purchased 1,000 new warrants of Healthcare Acquisition Corp. with cash available in the account. The price was $2.105 per warrant for a total of $2,125. A warrant is a derivative security that gives the holder the right to purchase other securities, usually equity, from the issuer at a fixed price within a certain time frame.
On March 13, 2006, Foster bought another 1,500 Healthcare warrants using cash available cash in the account, the order said. He paid $2.10 per warrant for a total of $3,170. He then bought another 100 Healthcare warrants for $1.86 per unit on May 3, 2006. The total purchase price was $206.00. Foster again used cash available in the account.
Then on June 6, 2006, Foster sold a total of 7,600 Healthcare warrants in seven separate transactions. The prices ranged from $2.00 and $2.15 per warrant for total proceeds of $15,270.98, the order said.
One the same day, Foster bought two securities in the LS account. He bought 20,000 shares of Harken for $14,580, or $.728 per share. He also purchased 1,000 IGC warrants for $630, or $.61 per warrant, the order said. These purchases were made using proceeds from the sale of the Healthcare warrants.
Foster had no authorization for any of these transactions from either LS or from the representative of the LS estate. Through this unauthorized trading, Foster violated Conduct Rule 2110 of the National Association of Securities Dealers, a FINRA predecessor.
The Order & FINRA Public Disclosure Records
FINRA public disclosure records, as well as the order, show one more regulatory proceeding against Foster. Around the same time the FINRA filed its unauthorized trading complaint regarding LS, the State of Illinois Securities Department entered a consent order through which Foster consented to findings that he violated Illinois securities laws. He was fined $15,000.
The Illinois order, entered in December 2011, said that that Foster “took advantage” of two elderly customers, a husband and wife, who had little experience with trading. Foster used the customers to earn excessive income for himself and Maxim, while the customers’ accounts lost all their value.
Records also show that Foster was involved in four customer disputes that settled from 2010 to 2011 for a whopping total of $1.24 million. For details see Foster’s BrokerCheck report.
Foster first registered with FINRA as a General Securities Representative in 2000. He employed by Maxim from October 2002 to October 2008. He was discharged in 2008 for trading in a customer’s account without the prior consent.
From October 2008 to July 2010, Foster worked for Arjent Services LLC in New York. Since July 2, 2010, he has been working for Cabot Halcyon Partners, also in New York.
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