FINRA Fines Ameriprise Financial Services, Inc. $850,000 for Failing to Supervise the Transmittal of Funds From Customer Brokerage Accounts
Office Manager Took $370,000 From Own Family’s Brokerage Accounts
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Ameriprise Financial Services, Inc. $850,000 for failing to detect the conversion of more than $370,000 from five customer brokerage accounts by one of its registered representatives. 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. The conversion went undetected for two years because Ameriprise failed to establish and enforce a supervisory system reasonably designed to adequately monitor the transmittal of funds from customer accounts to third parties, including those controlled by registered representatives of the firm. After Ameriprise discovered the misconduct, it paid restitution, plus interest and related fees, to the customers. FINRA barred the representative in June 2014.
Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “Ameriprise failed to exercise reasonable diligence in supervising the transmittal of customer funds to third- party accounts. Firms need to pay special attention when funds are wired from customer brokerage accounts to accounts controlled by registered representatives, and will be held responsible when their representatives use their insider status to prey upon customers.”
FINRA found that from October 2011 to September 2013, a registered representative of the firm who worked as a sales assistant and office manager took more than $370,000 from five Ameriprise customers. The customers were the office manager’s family members, including his mother, step-father and grandparents as well as his domestic partner. The office manager converted the funds through a two-step process. First, he submitted request forms to transfer funds from the customers’ Ameriprise brokerage accounts into the business bank account of the office in which he worked, allegedly for the intended purpose of making investments. He then took funds from that account in order to pay himself additional salary, commissions he had not earned and other money to which he was not entitled.
FINRA found that Ameriprise failed to adequately follow up on red flags, including that the funds were being transferred to an account that the firm knew or should have known belonged to one of its registered representatives. The firm also failed to adequately investigate possible signature irregularities that it flagged on certain wire request forms. In addition, even though four of the nine wire requests were also flagged for further review for other reasons, Ameriprise failed to adequately follow up.
The conduct was discovered in September 2013 when another office employee found evidence in a trash can that the office manager had been practicing signing the signature of a family member from whom he was scheming to convert funds.
In settling this matter, Ameriprise neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2015, members of the public used this service to conduct 71 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA's Disciplinary Actions Online database. Investors can also call FINRA's Securities Helpline for Seniors at (844) 57-HELPS for assistance or to raise concerns about issues they have with their brokerage accounts and investments.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.