FINRA Fines Ameriprise For Missing Fraudulent Transfers
By Carmen Germaine of Law360.com
Ameriprise Financial Services Inc. agreed Wednesday to pay a fine to settle the Financial Industry Regulatory Authority’s claims it failed to catch and stop a sales assistant who was siphoning cash from his relatives’ accounts, even though the firm had just improved its supervisory systems after a similar failure.
Without admitting or denying FINRA’s allegations, Ameriprise agreed to pay an $850,000 fine to end claims its supervisory system failed to detect a sales assistant and office manager who had converted hundreds of thousands of dollars from five Ameriprise accounts owned by his relatives and domestic partner. FINRA’s announcement of the settlement on Wednesday noted that Ameriprise has already paid restitution, plus interest and fees, to the customers.
Brad Bennett, FINRA’s executive vice president and chief of enforcement, announced the deal in a statement on Wednesday, noting that Ameriprise had failed to exercise reasonable diligence in supervising transmission of customer funds to third-party accounts.
“Firms need to pay special attention when funds are wired from customer brokerage accounts to accounts controlled by registered representatives, and will be held responsible when their representatives use their insider status to prey upon customers,” Bennett said.
The settlement concerns a number of conversions FINRA said were made by an Ameriprise registered representative working as a sales assistant and office manager at an Ameriprise practice known as PFG.
According to FINRA, from October 2011 to September 2013 the office manager converted more than $370,000 from his mother, step-father, grandparents and domestic partner by first submitting wire requests to transfer funds from his relatives’ Ameriprise brokerage accounts into PFG’s bank accounts, claiming the transfers were to make investments. He then converted the funds in PFG’s account in order to pay himself additional salary and commissions, and to otherwise take cash for himself, FINRA said.
Ameriprise had previously beefed up its supervisory systems beginning in 2012 as part of another settlement with FINRA, finalized in March 2013, of allegations another Ameriprise representative had converted $790,000 from two customers by forging their signatures on wire transfer requests, the settlement document said. The firm paid $750,000, together with affiliated clearing firm American Enterprise Investment Services Inc., to settle that action, FINRA said.
The changes included implementing a new procedure to refer all signature discrepancies on third-party wire transfer requests to a centralized fraud team, the Anti-Fraud Operations Group, and creating reports used to identify red flags involving wire transfers from customer accounts, FINRA said.
But despite the changes, Ameriprise failed to detect the sales assistant’s conversions, according to the settlement. Although four of the nine third-party wire transfers were flagged for signature discrepancies, the Anti-Fraud Operations Group approved all four of the transfers, FINRA said.
Ameriprise employees also failed to detect or investigate other red flags, FINRA said, including that eight of the nine requests were submitted with coversheets bearing PFG’s name, that the only request submitted by email was sent from a PFG email address, and that all but three of the request forms had fax time stamps between 10 p.m. and 3 a.m.
“Ameriprise employees, however, did not consider the facsimile coversheets, the sender’s email address, and the time of receipt of the requests when processing and reviewing the wire transfers,” the settlement letter said.
FINRA said Ameriprise ultimately detected the office manager’s misconduct in September 2013, when another PFG employee found evidence in a trash can that the manager had been practicing the signature of a family member he hadn’t yet siphoned funds from. The employee brought the evidence to Ameriprise’s attention, and the firm paid $563,161.59, plus interest and fees, in restitution to the five customers whose funds were converted.
In addition to paying the fine, Ameriprise also agreed to certify to FINRA Enforcement that it has adopted and implemented written supervisory policies and procedures designed to supervise third-party wire transfers from its customers’ accounts.
Ameriprise declined to comment Wednesday.
FINRA is represented by Jessica Zetwick-Skryzhynskyy.
Ameriprise is represented by Niels P. Murphy of Murphy Anderson PLLC.
The case is Re: Ameriprise Financial Services Inc., case number 2014040269301, before the Financial Industry Regulatory Authority.
The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.