Raymond James & Associates Inc. has agreed to pay a civil penalty of $500,000 for failing to supervise a former broker who stole more than $920,000 from two elderly clients, including a now-deceased 98-year-old World War II veteran, according to the Securities and Exchange Commission.
As part of the SEC order, the firm also was censured and cited for its poor communication within its supervisory and compliance rank regarding investigating potential external threats of financial exploitation of seniors.
Frederick M. Stow, 66, of Franklin, Tenn., was sentenced in May 2021 to five years in prison. He was charged in June 2020 with securities fraud, wire fraud, and aggravated identity theft. He pleaded guilty in August 2020.
According to the SEC, from October 2015 to March 2019, Stow misappropriated $901,500 from an Individual Retirement Account (IRA) of a 98-year-old retired airline pilot and World War II veteran. The SEC said Stow forged wire transfer authorization letters and diverted the customer’s funds to his personal bank account. He also stole $22,400 from the account of an 86-year-old woman who lived in a memory-care facility.
Stow’s fraudulent behavior came to light in January 2018, when Raymond James named a new branch manager at its Cool Springs, Tenn., branch. Upon reviewing the branch’s senior citizens’ accounts, the manager became alarmed at what he cited, in several memoranda in June 2018 and discussions with his supervisors and compliance officer, as “extremely high” amounts of money being wire transferred from the veteran’s account.
The branch manager was especially alarmed at the seemingly excessive living expenses of the customer, who had a full-time caregiver. The SEC noted that the branch manager had personal knowledge in this area because he had experience managing the finances of his parents, who also required full-time caregivers. The SEC said he also noticed that the wire transfers were frequent, at a rate of one to two wires per week at times, and that Stow, who was in arrears on a $361,000 from the firm and not earning much in commissions from the account, was footing the bill for the transfers. Further, there was no trusted contact or power-of-attorney on file for the customer’s account.
In June 2018, the branch manager visited the customer. “Branch manager noted that customer was aware of the balance of his account and that he ‘just sign[s] checks that are put in front of [him],’” the SEC said, adding that after the nearly hour-long meeting, the branch manager “determined that customer’s memory was impaired and that he could be vulnerable.”
The branch manager met with Stow after the meeting to discuss the customer’s account and other issues relating to business practice and “declining performance,” the SEC said. When asked about the wire transfer fees that he paid, Stow told the manager that he was “just trying to help the client out.”
The SEC said the branch manager also questioned Stow about the account of his 86-year-old client because she, too, did not have a power-of-attorney on file. But Stow explained that he thought he had a power-of-attorney for the son. The branch manager was concerned that Stow executed unauthorized trades in this customer’s account at the direction of the customer’s son.
The branch manager took his concerns about the clients’ accounts, as well as Stow’s “declining performance, to the firm's supervisors and compliance officer. The group met to discuss the situation and agreed to refer it to the firm’s Senior-and-at-Risk-Clients group (SARC), which was formed in 2017 to investigate potential external threats of financial exploitation of a senior customer. But the SEC said, “none of the group understood SARC’s process or the scope of SARC’s work in supporting supervisors.”
The SEC said SARC took “limited” steps to investigate the matter. “Aside from the branch manager’s notes and meeting summaries which were provided to SARC, neither the SARC analyst nor anyone else from SARC ever spoke to the customers, branch manager, or Stow,” the SEC said.
“Upon completing this limited investigation, on July 10, 2018, the SARC analyst replied to compliance officer’s initial email, stating that he did not see anything that would require SARC to take immediate action, such as Adult Protective Services notification or account restrictions,” the SEC said. The SEC further noted that “when SARC’s work was completed, Stow’s supervisors were not adequately informed that the review of Stow’s customers focused on external threats.”
The SEC said Stow’s performance continued to decline after the SARC review and in November he was placed on a performance improvement plan. But the SEC said from July 2018 to March 2019, when the war veteran died, Stow continued to steal monthly from his account.
When that account was frozen, Stow dipped into the account of the
elderly woman. He confessed his scheme to his supervisor in May 2019
after being questioned repeatedly by the executor of customer’s estate
about the missing money, the SEC said.
Stow entered the industry in 1979 and worked for Merrill Lynch for 10
years before moving to several firms including Suntrust Equitable
Securities and Wells Fargo Advisors before joining Raymond James in
2013, according to BrokerCheck.
He was fired by Raymond James in May 2019 and barred by the Financial Industry Regulatory Authority in October 2019 for not cooperating with its investigation of the case. The SEC barred him in July 2021.
The SEC said as a part of the settlement offer, Raymond James has taken remedial steps to improve its SARC program. Among other things, it said the firm has enhanced “SARC’s communication with supervisors and control functions and provides “boots on the ground” engagement by supervisory personnel on senior exploitation issues.”
Raymond James did not respond to an inquiry for a comment.
Full Article & Source:
Raymond James Penalized $500K For Ex-Broker's Theft From Elderly Clients
No comments:
Post a Comment