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Monthly Archives: November 2017

FINRA Hearing Panel Bars Broker for Defrauding Elderly, Blind Customer

Posted byDavid Weintraub

On November 9, 2017, FINRA announced an extended hearing panel barred broker Hank Mark Werner of Northport, New York, for fraudulently churning and excessively trading the accounts of his customer, a blind, elderly widow, and for making unsuitable recommendations. The hearing panel also ordered Werner to pay more than $155,000 in restitution to the widow, fined him $80,000 and ordered disgorgement of more than $10,000 representing commissions received for recommending the purchase of an unsuitable variable annuity.

Werner had been the elderly widow’s broker, and that of her blind husband until his 2012 death, since 1995. According to the hearing panel decision, Werner plundered his customer’s accounts by engaging in such an active trading strategy that, when the high commissions he charged were taken into account, it was impossible for the customer to make money. The panel found Werner frequently bought and sold a security within a week or two, and charged exorbitant commissions even though the blind widow’s financial circumstances required that Werner invest her assets with a minimum amount of risk. She was 77 and in ill health when Werner began churning her accounts. Werner engaged in more than 700 trades from October 2012 to December 2015, generating approximately $210,000 in commissions while the customer lost more than $175,000 as a result of his reckless trading. The decision also noted that it was apparent to the Hearing Panel that Werner took advantage of the customer’s vulnerability after her husband died in September 2012.

The hearing panel concluded that Werner engaged in egregious misconduct and is unfit to work in the securities industry.

Legend Securities, Inc., which was also named in an amended disciplinary complaint, failed to respond and accordingly was held in default. The complaint charged that Legend failed to reasonably supervise Werner, which allowed him to engage in churning his customer’s account, and failed to establish, maintain, and enforce an adequate supervisory system to ensure that Werner was subject to heightened supervision. The hearing officer issued a default decision censuring and fining the firm $200,000. Legend voluntarily paid $20,000 in partial restitution to the customer.

Evaluating professional designations utilized by financial advisors

Posted byDavid Weintraub

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So, a local financial advisor hands you a business card identifying one or more of the following professional designations: CFP, CFPN, CPFA, CMA, CFMP, CDP, and/or CEA.  Should you be impressed?  What do the letters stand for?  Who are the issuing organizations?  Do the issuing organizations exist?  Were there prerequisites for obtaining the designations?  Were examinations required?  What types of examinations?  Was a college degree required?  Are there continuing education requirements?  Are the continuing education requirements meaningful?  Can you verify the authenticity of the designation?  Does the issuing organization address customer complaints?  Does the issuing organization publish a list of disciplined designees?

Confused?  You should be.  According to records maintained by FINRA, there are more than 150 known so called “professional designations” either in use today by financial advisors, or that have previously been used by financial advisors.  Some of those designations look, sound and feel remarkably similar to each other.  As an example, what is the difference between a CFP and a CFPN?  Are they issued by the same organization?  Are they connected with each other in any way?  They are not.  “CFP” is a designation known as “Certified Financial Planner.”  It is issued by the Certified Financial Planner Board of Standards, Inc.  “CFPN” is known as “Christian Financial Professionals Network Certified Member.”  Though the abbreviations are similar, that is where the similarities end.  The prerequisites for earning the Certified Financial Planner designation are indeed rigorous.  The prerequisites for the “CFPN” designation are less clear.  According to FINRA, one is eligible for the CFPN certification with 10 years of full-time financial experience, signing a “Statement of Faith”, taking three training sessions, and passing a closed-book exam.  Links on the FINRA website to the Christian Financial Professional Network take you to www.cfpn.org  It is unclear whether this organization still exists, notwithstanding the fact that FINRA’s website states that the designation is currently offered.  Web searches lead to an entity called Kingdom Advisors, which offers what it calls a Certified Kingdom Advisor designation.  According to its website, its designation “allows you to work with someone who has committed and been trained to be a person of character who, from a biblical worldview, serves you with biblical financial advice so that you can confidently navigate financial decisions as a faithful steward.”

It is up to each lawyer to diligently determine the value, if any, to place on certain designations.  Both the American National Standards Institute and the National Commission for Certifying Agencies accredit certain designations.  The following link lists the accredited designations:  https://www.finra.org/investors/accredited-designations .  FINRA also maintains a list of designations about which it is aware: https://www.finra.org/investors/professional-designations .  It behooves any attorney who is referring clients to financial advisors to investigate their backgrounds.  One piece of this investigation is verifying any claimed designation, and assessing its value.  The CFP Board’s website contains a section dedicated to verifying whether one’s CFP designation is in good standing.  It takes about 5 minutes to confirm this particular designation.  Time well spent.