The Financial Industry Regulatory Authority Inc. has fined Ameriprise Financial Services $850,000 for failing to detect a broker was transferring customer funds to a business account for personal gain.
The registered representative, who worked as a sales assistant and office manager, took more than $370,000 from five Ameriprise customers from October 2011 to September 2013, according to a
Finra statement Wednesday. The customers included his mother, step-father and grandparents, as well as his domestic partner.
The transfer of the family members' money to a business account associated with the broker went undetected for two years because Ameriprise failed to to adequately monitor the transmittal of customer funds to third parties, according to Finra. The misconduct was discovered in September 2013 when an employee found evidence in a trash can that he'd been practicing the signature of a family member from whom he was scheming to convert funds, Finra.
“Firms need to pay special attention when funds are wired from customer brokerage accounts to accounts controlled by registered representatives,” Brad Bennett, Finra's chief of enforcement, said in the statement. They'll be “held responsible when their representatives use their insider status to prey upon customers."
As part of his scheme, the office manager submitted request forms to transfer funds from the customers' brokerage accounts into the business bank account of the office in which he worked, allegedly to make investments, according to the statement. He then took funds from that account to pay himself additional salary and commissions he had not earned, Finra found.
“Ameriprise failed to adequately investigate red flags associated with nine third-party wire requests, including that the funds were being transmitted to a business bank account associated with an Ameriprise representative,” Finra said in the statement.
The firm, which settled the matter without admitting or denying Finra's charges, had paid restitution to the customers. The registered representative was barred from the brokerage industry in June 2014.
