On June 29, 2015, Mark F. Leone (“Leone”) submitted a Letter of Acceptance, Waiver, and Consent (“AWC”) to settle allegations made by the Financial Industry Regulatory Authority, Inc. (“FINRA”). Currently, Leone is registered with Cambridge Investment Research, Inc.; however, FINRA alleged that while Leone was registered with Morgan Stanley, he exercised discretion in customer accounts without written authorization to do so. To settle the FINRA allegations, Leone submitted to censure, a fine of $5,000 and suspension for fifteen (15) business days. A copy of the FINRA AWC is available here.
Specifically, FINRA alleged that on March 10, 2014, Leone, effected five (5) discretionary transactions on customer accounts without first obtaining written authorization from the customers, or having the accounts accepted as discretionary at Morgan Stanley. According to Leone’s BrokerCheck Report, on April 3, 2014, Morgan Stanley terminated Leone for allegations regarding discretionary trading without written authorization. In response to those allegations, Leone stated, “five clients owned a stock and had a gain in the stock. The market was about to close and I was going out of town. I quickly entered sell orders to close the positions in the account. This generated a bunching report to Morgan Stanley.”
Bunching, or aggregating multiple executions into a single tape report, is prohibited under FINRA Rules Rules 6282(f), 6380A(f) and 6380B(h). Similarly, NASD Conduct Rule 2510(b), FINRA Rule 2010, and Morgan Stanley firm policies all prohibit registered representatives from exercising discretionary control over customer accounts without written authorization from that customer and firm approval. FINRA alleged that Leone lacked any authorization to make transactions in these customer accounts outside of one account where he was given insufficient verbal authorization. As such, Leone violated NASD Conduct Rule 2510(b) and FINRA Rule 2010.
Unauthorized transactions may lead to significant losses to investors. Sometimes, these unauthorized transactions are also indicative of further violative conduct by a financial adviser. If your broker has made unauthorized transactions in your account, contact Lax & Neville LLP today at (212) 696-1999 and schedule a consultation.