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Broker Impersonated Client as a Favor, Loses Job, Gets Finra Sanction

November 22, 2019

The Financial Industry Regulatory Authority has suspended a broker with 38 years of experience and fined him $5,000 for impersonating a customer who he says pressured him for help in reducing periodic withdrawals from an annuity.

Harold A. Schwartz, a Florida- and Colorado-based broker who was “permitted to resign” in February from Royal Alliance Associates over the incident, agreed to the fine and 15-day suspension without admitting or denying the findings, according to an acceptance, waiver and consent letter he signed on Thursday.

Finra said he violated its Rule 2010 requiring brokers to “observe high standards of commercial honor and just and equitable principles of trade” because the customer authorized him to reduce the annuity withdrawals but not to impersonate him in doing so.

“I was just doing it for my client’s best interest,” said Schwartz, who has been affiliated with independent broker-dealer Stephen A. Kohn & Associates since leaving Royal Alliance.

Brandon Reif, a southern California-based securities lawyer, said brokers tempted to cut corners as a customer accommodation or for nefarious reasons should take note. “Annuity issuers customarily record the service calls, making it easy to catch the broker red-handed. With the proliferation of countless online financial scams, the practice must end.”

On BrokerCheck, Schwartz wrote that he was not only doing his customer a solid, but was pressured to do so by the customer and his brother. He resorted to calls to the annuity company’s hotline in July 2018 because the firm twice failed to respond to properly submitted paperwork, then put him and the client on hold for over 20 minutes.

“The client was mad, hung up and called us back telling us to ‘Just get it done,’” he wrote. “So I did something I know I shouldn’t have….’’

The client’s brother, who was Schwartz’s “registered assistant” until leaving him for another Royal Alliance team months after the incident, appears to have finked on him, Schwartz wrote in commenting on his forced departure. “The RA left my group…& in October I was accused of making an improper call….I do not believe the punishment fit the crime as I was working, as I have for 45 years, in the best interest of my client.”

Schwartz, whose DMG Advisor Group website says he manages more than $100 million in client assets at the Stephen A. Kohn affiliate, started his career as a registered representative in 1977 with New York Life Variable Contracts Corp, according to his BrokerCheck history.

He joined E.F. Hutton in 1982 and worked there, successor firms and Pruco Securities before setting up an independent practice in 1995. He affiliated with Royal Alliance Associates, a former unit of AIG Advisor Group, in June 2015.

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