Finra wants registered representatives to get the approval of their broker-dealer firms before becoming a beneficiary, executor, trustee or holder of power of attorney for their clients.
The self-regulator’s Board of Governors gave the go-ahead to Finra staff this week to pursue a rule proposal to require registered reps to receive the approval of their firms before holding positions of trust on behalf of their clients.
Firna will be issuing a regulatory notice to solicit comments on this new rule proposal.
The SRO has issued disciplinary sanctions against registered reps who were alleged to have abused their roles as a beneficiary, executor, trustee or a power-of-attorney holder of their clients.
In May, Lisa Jeanne Lastrapes was given a deferred fine of $5,000 and suspended from association with any Finra member in all capacities for two months.
Finra alleged Lastrapes did not disclose to Merrill Lynch that her adult daughter was named as the beneficiary of a 93-year-old firm customer’s Individual Retirement Account, and that the customer named Lastrapes as medical power of attorney.
In April, John William Cutshall was barred from the broker-dealer industry by Finra.
The SRO alleged Cutshall abused his position as a trustee for trusts he administered on behalf of deceased and elderly customers by converting and improperly using funds from these trusts.
Finra alleged Cutshall served as trustee for the separate trusts of the customers, who were husband and wife, until both customers died.
Cutshall allegedly used his position as trustee to write checks from the account of the wife’s residuary trust, totaling around $400,000, which he deposited into his own bank account.
In February, Guy Stanley Waltman was fined $5,000 and suspended from association with any Finra member in all capacities for three months.
Finra alleged Waltman failed to disclose to UBS Financial Services that he had investment control over five securities accounts for a customer and her trust at three other broker-dealers.
Finra alleged that in contravention of firm policy, Waltman did not disclose to the firm that he had power of attorney and was serving as a trustee for the customer and her trust, and had discretionary authority over her accounts.
The findings also stated that on an annual basis, Waltman completed a firm affirmation on which he should have disclosed the accounts.
All three registered reps consented to the sanctions without admitting or denying Finra’s findings.
The six new rule proposals the Finra Board voted to let staff pursue are:
- Amendments permitting dissemination of aggregated trace data for U.S. Treasury securities
- Amendments to the code of procedure to compensate hearing panelists
- Amendments to capital acquisition broker rules
- Rules to require firm approval of a registered person being a beneficiary, executor, or trustee, or having a power of attorney or similar position of trust for, or on behalf of, a customer
- Changes to the codes of arbitration procedure relating to requests to expunge customer dispute information
- Amendments enhancing requirements for inter-dealer quotation systems that display quotes in unlisted equity securities.