Recently in Smith Barney Category

August 10, 2011

Citigroup Fined $500,000 for Failure to Supervise and Detect Theft of Customer Funds at Palo Alto, California, Office

mssb.jpgCitigroup Global Markets, Inc has been fined $500,000 by the Financial Industry Regulatory Authority (FINRA) for failing to supervise and detect securities fraud committed by former Smith Barney sales assistant Tamara Moon who worked in the firm's Palo Alto, California, branch office. (Smith Barney is a division of Citigroup Global Markets, Inc. and is now doing business as part of Morgan Stanley Smith Barney, LLC.) As reported in a previous blog posting, Tamara Moon was barred from the industry back in 2009 for bilking as much as $750,000 from elderly and vulnerable customers, including her own father, by taking advantage of Smith Barney's lax supervision. According to FINRA, the firm failed to detect or investigate numerous "red flags" that should have alerted them to Moon's fraud. Brad Bennett, FINRA's Executive Vice President and Chief of Enforcement noted that "Citigroup had reason to know what she was doing and could have stopped her."

Although the firm agreed to reimburse customers and pay a $500,000 fine, the firm consented to the entry of FINRA's findings without having to admit or deny the charges. The practice of paying a substantial fine without having to admit any findings of wrongdoing is a standard procedure in FINRA settlements.

October 5, 2009

FINRA Dispute Resolution Expands Pilot Program for Securities Arbitration Panels

Here is a bit of good news for investors with securities arbitration claims against 14 of the largest brokerage firms, including Merrill Lynch, Morgan Stanley Smith Barney and Wells Fargo. The Financial Industry Regulatory Authority (FINRA) has agreed to extend its year-old pilot program established to give investors the option to request an arbitration panel composed entirely of arbitrators that are not affiliated with the securities industry. Currently, a 3-person arbitration panel must include one industry arbitrator and two public arbitrators. The pilot program was created in response to criticism over whether an industry arbitrator, such as a stockbroker or branch manager, can act impartially when a customer is complaining about securities fraud or account mismanagement by their broker. I've participated in arbitrations with both good and bad industry arbitrators. The trouble is, allowing an industry arbitrator to sit on a panel gives the appearance of bias and takes away from the legitimacy of the proceedings. That should be reason enough to dump the industry arbitrator. My California securities law firm is in favor of the pilot program and we have been actively encouraging clients to participate whenever possible.

The brokerage firms who have agreed to participate in the pilot program are:

Ameriprise Financial Services
Charles Schwab
Chase Investment Services
Citigroup Global Markets
Edward Jones
Fidelity Brokerage Services
LPL Financial
Merrill Lynch
Morgan Stanley Smith Barney
Oppenheimer
Raymond James
TD Ameritrade
UBS Financial Services
Wells Fargo Advisors / Wachovia Securities

Each of the above firms has committed to participate in a limited number of cases under the program on a first come, first served basis. The pilot program will end on October 5, 2010. Since the average arbitration hearing takes 14 ½ months to conclude, most cases in the pilot program have not gone to hearing yet. FINRA plans to compare the results of the pilot program cases with non-pilot cases. Of the 396 arbitration cases that have been decided this year, only 139 (45%) recovered anything at all. Hopefully, the arbitration award results for cases in the pilot program will be much better. If the pilot program results in more awards in favor of customers, will the brokerage industry lobby to keep the industry arbitrator? Let's hope not.

September 1, 2009

Sales Assistant in Smith Barney's Palo Alto, California, Branch Office Barred for Securities Fraud Law Violations

The Financial Industry Regulatory Authority (FINRA) recently announced that a former Smith Barney sales assistant working out of the firm's Palo Alto, California, branch office was barred from the industry for securities fraud law violations that included bilking customers out of more than $850,000. Under the agreement reached with FINRA, the firm agreed to reimburse customers that were victimized by the actions of their former employee, Tamara Lanz Moon of Redwood City, California.

The improper activities went undetected for more than 8 years ending in March 2008. Moon's victims were mostly elderly individuals that were less likely to monitor their accounts. Moon allegedly forged customer's signatures so that she could make transfers between accounts that she controlled. Click here to view FINRA's Press Release.