Tuesday, February 26, 2019

FINRA Continues To Investigate Expense Reports

          There are numerous examples of FINRA cracking down on expense report violations.  Following are a few of the reported cases.

In September, 2017, a former Morgan Stanley corporate stock manager accepted an industry bar over allegations that “event attendees on employee’s expense report incorrectly included one person who did not attend event.”  The employee     said she “couldn’t afford to fight her dismissal or to take the time to work with the regulator.”  “The direct cause of the bar was [her] refusal to appear for the hearing into the matter.”  (https://www.investmentnews.com/article/20170926/FREE/170929952/finra-bars-former-morgan-stanley-manager-over-expense-reports)

In late 2017, “a 21-year veteran Merrill Lynch broker managing director…accepted a one-year suspension from the securities industry and a $10,000 fine for ‘violating high standards of commercial honor by improperly using Merrill funds in connection with expense reports’”  (http://www.shufirm.com/brokerage-firms-and-finra-crack-down-on-broker-expense-account-violations)

In early 2018, a former Merrill Lynch broker was fined and suspended over a “$524 claim for mileage and dinner expenses that he said represented two meetings with prospective clients.  He subsequently admitted to the firm that he fabricated the events in order to use up, and be reimbursed for, the Business Development Account money that was deducted pretax from his compensation.”  https://advisorhub.com/finra-suspends-another-broker-over-expense-issue/

FINRA gets its authority to investigate expense report and other similar documents from Rule 8210, Provision of Information and Testimony and Inspection and Copying of Books.  “A failure to comply with an 8210 Request often results in an immediate enforcement proceeding and a permanent bar from the industry.”  (https://www.seclaw.com/finra-rule-8210-request-response/) Rule 8210 Investigations often spring from violations of Rule 2010, the catch-all, which states that “[a] member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.” 

            Cosgrove Law Group, LLC has represented numerous individuals in their FINRA investigations.  If you are the subject of a FINRA investigation and need counsel, Cosgrove Law Group may be able to help.

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