When two sisters inherited $90,000 from their deceased aunt's estate, they trusted their aunt's broker, by signing checks over to an entity under his sole control.
Such blind faith (account documentation was not requested for a year!) turned out to be misplaced, and almost cost them their windfall, which was seriously misappropriated, according to the Financial Industry Regulatory Authority, the largest regulator of securities firms in the U.S.
The reported freeloader: Richard L. Wood, a Miamisburg, Ohio-based broker, then with American General Securities, Inc., is now barred from the securities industry.
"Preying upon these two sisters by stealing from their accounts and then doctoring documentation with the intent to mislead them is an egregious breach of ethical standards," said Susan Merrill, the Executive Vice President and Chief of Enforcement of FINRA, in a statement.
How It All Began
The deception began in August 2006 after Wood's client passed away and he was liquidating her estate. Wood recommended that the sisters open brokerage accounts with him so they could invest in bonds.
The sisters then signed over checks to STL Financial, Inc., which Wood controlled, not a bona fide brokerage firm. A year later, one of the sisters worried that she had seen no account or investment documentation, and after repeated requests she was sent what later turned out to be falsified statements from Wood.
After FINRA's involvement, the two sisters were repaid and Wood agreed to a permanent bar from the securities industry. (While Wood consented to the entry of FINRA's findings, he did not admit or deny the alleged misconduct.)
The case highlights the importance of fully vetting those who handle your money. According to FINRA, there are important steps you can take to avoid problems with your broker.
How to Protect Your Money
To avoid problems with your broker, FINRA recommends the following:
- Research any potential investment before you make it, as well as the broker and securities firm that are recommending it. Request a prospectus, annual report and/or research information, and read them. Discuss risks and rewards with your broker, certified public accountant or independent adviser before writing a check.
- Thoroughly review and save monthly account statements and any other investment transaction information.
- Immediately question any transaction that you do not understand or did not authorize. If you are not satisfied with your broker's response, contact the firm's branch manager or compliance department.
- To allege improper conduct, write to the management of your brokerage firm's sales office, and then directly to the firm's compliance department. Keep a copy of your letter and of all other related correspondence with the broker/dealer. Follow up if you do not receive a satisfactory response. Consider filing a written complaint with FINRA.
Are you concerned you may have crossed paths with a broker along the lines of Wood? FINRA's online BrokerCheck includes the disciplinary history of a broker or brokerage house, all for free.
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