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By Erwin J. Shustak of Shustak Reynolds & Partners, P.C. posted on Thursday, April 9, 2020.

Erwin J. Shustak

Erwin J. Shustak

Managing Partner

LocationSan Diego, California
New York, New York
Phone: (619) 696-9500 (Ext. 109)
(800) 496-5900 (Ext. 109)
Email[email protected]

             FINRA rule 2010 is a sweeping provision that mandates brokers and licensed persons subject to FINRA’s jurisdiction maintain “high standards of commercial honor”.  One of the most common violations of that rule, which are aggressively pursued by both employing firms and FINRA, is the prohibition against modifying, completing or altering, in any way, a signed client account document or other form.  A recent case illustrates the risk to licensed persons who modify, complete or alter those forms and documents- even if they do so at the client’s request or for the client’s benefit and particularly during the coronavirus pandemic.

            Claire Cail was a 25-year veteran of the securities industry who spent the last 19 of those years at Morgan Stanley in Manchester, New Hampshire.  She did something she thought was for the client’s benefit, but which resulted in her loss of her job at Morgan, suspension from the securities industry and a FINRA fine.  She filled in missing information on a signed client form, including relatively innocuous information as filling in the client’s address and telephone number and checking a beneficiary box.  She filled out new account and beneficiary forms for a Morgan Stanley prospective client the firm previously had rejected by combining the forms with prior signature pages and submitting them to the firm for processing.

            As a result, the firm violated FINRA’s books-and-records rules by maintaining incorrect client data.  In turn, Cail violated FINRA’s Rule 2010 by altering the documents.  When Morgan discovered what she had done, they terminated her and reported her actions to FINRA.  In turn, she was suspended from FINRA for three months and fined $5,000.00.  FINRA’s letter assessing the suspension and fine states “Altering or completing signed customer documents violates FINRA Rule 2010 even when done to accommodate a customer”.

             In other words, even if the client requests the changes or additions be made; or if the broker thinks he or she is helping and accommodating the customer, it is a black and white “no-no”.  Do not, under any circumstances, modify, amend, complete or in any way alter a signed client document.  Only the customer can make those changes, regardless of how difficult it may be for the customer.

            We expect to see more of these cases coming down the pike during the coronavirus pandemic.  Many clients cannot travel; get to the mail; may not know how to scan, print or email; and may ask, or expect, their broker to make the changes necessary to the account forms.  It doesn’t matter, however, why the broker made changes or additions to the client documents and it is absolutely no defense to take the position the changes were made for the customer’s benefit.  It is strictly prohibited by the rules of every member firm and by FINRA’s own rules, most notably 2010.  What happened to Claire Cail is a lesson for every registered person.  No good deed goes unpunished.  Do not make any changes, of any kind, to signed client account forms and documents.

Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes. We represent many broker-dealers, registered representatives, investment advisors, investors and businesses.  For more information, contact Erwin J. Shustak, Managing Partner [email protected], or call  800.496.5900 ext. 109. 

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