Articles Tagged with discretionary trades

shutterstock_102757574The Financial Industry Regulatory Authority (FINRA) sanctioned broker James Madden (Madden) (Case No. 2014040336501) alleging that from March 2010, to February 2014, Madden exercised discretion in executing transactions in the accounts of l5 customers. FINRA found that Madden had received prior verbal authorization from his customers for the transactions but exercised his discretion in executing those transactions on future dates. FINRA found that Madden did not obtain written authorization from his customers to exercise discretion in their accounts and his brokerage firm, Raymond James & Associates, Inc. (Raymond James) did not approve the accounts for discretionary trading.

According to the BrokerCheck records kept by FINRA Madden has been the subject of at least three customer complaints, one regulatory action, and one employment termination for cause. Customers have filed complaints against Madden alleging securities law violations including that the broker made unsuitable investments and unauthorized trades among other claims.

Madden entered the securities industry in 1983. From 1993, until April 2009, Madden was associated with Citigroup Global Markets Inc. Thereafter, from March 2009, until February 2014, Madden was a registered representative with Raymond James. In February 2014, Raymond James filed a Form U5 stating that Madden’s termination was for cause and due to allegations of unauthorized trading. Finally, since February 2014, Madden has been associated with Thurston, Springer, Miller, Herd & Titak, Inc.

shutterstock_186468539The Financial Industry Regulatory Authority (FINRA) has sanctioned broker Kwok Chiu (Chiu) concerning allegations that between March and June 2013, while associated with Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch), Chiu exercised discretionary power in two customer accounts with only oral authorization by making 162 transactions without obtaining prior written authorization from the customers. Under NASD Conduct Rule 2510(b) Chiu was required to provide written authorization to his firm in order to engage in discretionary trading activity.

Chiu entered the securities industry in 1996. In 2005 he was became registered through Merrill Lynch until October 14, 2013, at which time Merrill Lynch filed a Uniform Termination Notice stating that Chiu was discharged for conduct involving the exercise of discretion in non- discretionary customer accounts. Thereafter, in October 2013, Chiu has become registered as a broker with Gilford Securities Incorporated.

In addition to FINRA’s claims, Chiu’s public disclosures reveal that the broker has been subject to at least four customer complaints. These statistics are troubling because so many customer complaints are rare. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. These disclosures do not necessarily have to include customer complaints but can include IRS tax liens, judgments, and even criminal matters. The number of brokers with multiple customer complaints is far smaller.  In Chiu’s case, all of the customers complaints involve allegations of unauthorized trading or failing to follow instructions of the client.

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