The Financial Industry Regulatory Authority (FINRA) has accepted a letter of Acceptance, Waiver and Consent (AWC) submitted by Robert Head, a former General Securities Representative. The letter was accepted prior to any hearing or adjudication taking place.

Head submitted the AWC to propose settlement of rule violations alleged by FINRA, and without admitting or denying its findings. But the letter alleges that “from August 2008 until October 2013, Head managed a Stifel Nicolaus trust account for customer ‘ML,’ who was a retiree who was born in 1936,” reports New York securities lawyer and industry blogger Bill Singer.

He adds, “Her original account application listed investment objectives of ‘Growth and Income’ and ‘Speculation / Active Trading / Complex Strategies.’ In November 2009, [however], the account’s investment objective was changed to identify only ‘Speculation / Active Trading / Complex Strategies.’”

The issue, says Singer, is “ML [allegedly] never gave Head written authorization to exercise his own discretion as to what securities to trade in her account. Nonetheless, the AWC alleges that Head routinely placed trades in ML’s account without first consulting with ML about the details of individual trades.”

What’s more, he notes, “the AWC alleges that Head traded ML’s account actively, often choosing high-risk investment products.” In 2011, in particular, “trading in ML’s account rose to some 310 transactions, among which were short option positions and other allegedly high-risk investments. [Those] transactions generated over $41,000 in commissions, and resulted [in] about $13,500 in realized losses.”

The AWC also asserts that Stifel Nicolaus sent two letters to Head (one in 2010 and one in 2012) that requested ML sign off on her high account activity, says Singer, which ML signed—even though the AWC says ML was diagnosed with dementia in June 2011, he adds, the letter also states Head was unaware of her condition until August 2013.

In the end, concludes Singer, FINRA chose to bar Head based on its findings. For more on the case and on Head’s background, and for Singer’s commentary, click here.

Also read:

Dementia puts families, advisors at risk

Pros and cons of no-contest settlements

U.S. regulators want better fee disclosure

SEC could change how small-cap stocks are traded

Originally published on Advisor.ca

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