At Pershing Insite, a Plea for BDs to Scrutinize Reps’ Outside Dealings

During a panel discussion at the Pershing Insite conference held on June 6 – 8, 2012, broker-dealer executives were encouraged to monitor their reps outside dealings.  A number of issues were addressed during the panel discussion, particularly for both broker-dealers and RIAs including complying with FATCA and the SEC’s large trader rule.  Pershing executive, Joan Schwartz, suggested that broker-dealers’ outside business dealings may cause client fraud.

“This is how bad reps are stealing clients money,” Schwartz explained, suggesting that broker-dealer executives should adopt a more direct approach to pay close attention to reps. She suggested that conducting periodic reviews, making unannounced visits to reps’ offices and conducting random phone calls to end clients would prevent clients from being taken advantage of by reps.  Some broker-dealer executives may be taking the scrutiny to another level by checking the personal checking accounts of the reps’ and the reps’ spouse account for irregular activity.  According to Lynn Young, a Pershing director, enforcing these periodic reviews in person and over the phone will ultimately limit broker-dealer fraud.

Author: Dexter Johnson

The author is a an attorney who for the past 14 years has concentrated his practice in representing, successfully, investment advisers, broker-dealers, corporations and individuals who are subject to SEC, FINRA, State or other regulations and who may be the subject of regulatory examination, review or investigation. He formerly worked at the SEC. His regulatory and litigation experience has encompassed virtually every type of securities issue in the industry. He has also negotiated favorable outcomes in many of these matters for his clients.