FINRA fined a firm for failing to detect and prevent a scheme that resulted in the theft of approximately $1.3 million from an 89-year-old customer's variable annuity account.
FINRA determined that a former registered sales assistant had submitted 114 forged annuity withdrawal requests – four to five withdrawals per month for a total of nearly $50,000 – causing the firm to wire funds from an 89-year-old customer's annuity account to a third-party account (in the maiden name of the sales assistant's wife). FINRA alleged that the firm repeatedly followed the sales assistant's instructions without adequately investigating a variety of red flags that should have alerted the firm to his scheme. These red flags included alerts triggered for every transfer request the sales assistant submitted and the presence of repeated transactions that supposedly were reviewed during six quarterly audits.
FINRA Chief of Enforcement Brad Bennet stated:
Firms must ensure that their supervisory systems and procedures are designed to recognize and follow up on red flags. There were numerous red flags raised over the course of this scheme, and [the firm's] failure to adequately respond to them allowed an unscrupulous actor to prey on an elderly customer.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.