FINRA’s Department of Enforcement investigated Fellow’s alleged misconduct and determined he exercised discretion 34 customer accounts. According to FINRA, in October 2012, Fellows received an automated notification that 34 customer accounts enrolled in a non-discretionary fee-based platform had insufficient liquid assets to allow for the monthly distribution of funds. As a result, Fellows changed the apportionment of investments in these accounts to allow such distributions to proceed without written authorization from the customers.
Based upon the foregoing misconduct, FINRA alleges Fellows violated NASD Rules 2510(b) and 2010. NASD Rule 2510 prohibits a registered representative from exercising any discretionary authority in a customer’s account unless such customer has provided prior written authorization and the account has been accepted by a FINRA member. Thus, a financial advisor must receive a client’s written authorization prior to executing trades in a customer’s non-discretionary account. When a financial advisor executes unauthorized trades, the financial advisor and brokerage firm may be found liable, as well as disciplined by securities regulators. Here, Fellows executed unauthorized and discretionary trades in non-discretionary accounts thereby violating NASD Rule 2510(b).
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you lost money investing with Fellows through Merrill Lynch, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please contact one of our attorneys at (800) 627-2179 to schedule a free consultation.