By Robert H. Rex, Esq.
The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA's chief role is to protect investors by maintaining the fairness of the U.S. capital markets.
All stockbrokers and broker dealers (brokerage firms) are required to be licensed by and subject to the rules and regulations of FINRA. Each month FINRA publishes disciplinary actions against brokers and broker dealers. Discipline can range from monetary fines and suspensions, or in extreme cases, revocation of licensing and a bar from the securities industry.
See the FINRA website for current and historical disciplinary actions.
Christopher Shawn Vaughn (CRD #4956822, Registered Representative, Leesburg, Florida) was named a respondent in a FINRA complaint alleging that he engaged in a scheme
to convert securities an elderly customer owned. Without the customer's knowledge or consent, Vaughn made his wife the primary beneficiary of the customer's brokerage account. When the account was opened, Vaughn did not inform his immediate supervisor, or any other supervisor at his member firm, that his wife was the beneficiary. As part of his efforts to hide his misconduct, Vaughn provided a false mailing address for the customer on her application, which was for a post office box belonging to his wife's grandfather, preventing the firm from delivering monthly account statements and trading confirmations to the customer at her actual residential address. By doing so, Vaughn caused his firm's books and records to be inaccurate. The complaint alleges that after opening her account, Vaughn recommended and sold the customer a fixed annuity contract for $10,000. The customer informed Vaughn that she wanted her neighbor to be named as the annuity's beneficiary. In direct contravention of the customer's instructions, Vaughn falsely
recorded in the firm's electronic system that his wife was the annuity's primary and sole beneficiary. The complaint also alleges that in connection with the annuity, Vaughn provided the same incorrect mailing address for the customer in the firm's system, thereby preventing the firm or the company that issued the annuity from delivering information
concerning the customer's annuity to her actual residential address. After receiving an email communication from the company that issued the annuity inquiring about the
accuracy of the customer's mailing address, Vaughn falsely represented to the company that the customer's address was correct, and that the customer had informed him that
she had experienced delivery issues with the post office. In addition, the complaint alleges that the customer received a packet of documents concerning her annuity, from which
she learned for the first time that Vaughn's wife was named as the beneficiary of the annuity. The customer did not know who Vaughn's wife was. After being contacted by the
customer's neighbor questioning the inaccurate address and why his wife was named as the beneficiary, and indicating that the customer wanted her $10,000 investment returned,
Vaughn told the customer and her neighbor that he had mistakenly identified his wife as the beneficiary of the annuity because a member of his wife's family purchased a $10,000 annuity at the same time and named his wife as the beneficiary. At her request, the customer's annuity contract was cancelled and the $10,000 was refunded to her.
Moreover, the complaint alleges that after the customer's neighbor informed Vaughn of the customer's death, he informed the neighbor that the customer contacted him to
remove the neighbor as the beneficiary. Vaughn promised to provide the neighbor with documentation to that effect, but he never did. Following the customer's death, Vaughn opened a brokerage account in his wife's name for the express purpose of receiving the assets from the customer's account. Vaughn's wife then presented to his firm a death certificate that Vaughn obtained from the neighbor, and successfully caused the assets
held in the customer's account to be transferred to his wife's brokerage account. The customer's account held mutual funds worth a combined $22,417.58. Furthermore, the complaint alleges that after learning that the customer's assets had been transferred to Vaughn's wife's account, the neighbor and the customer's attorney asked the firm to conduct an investigation into Vaughn's conduct with respect to the customer's account.
The firm did not find any documentation evidencing the customer requested Vaughn's wife to be named as a beneficiary on either the account or annuity. The firm terminated Vaughn's employment in connection with this matter. Vaughn and his wife executed a Mutual Release and Settlement Agreement with the firm, agreeing to transfer the assets held in the wife's account back to the customer's account or an account maintained in the name of the customer's estate. Vaughn's conduct resulted in the conversion of $22,417.58 in assets from the customer. (FINRA Case #2011028581201).
According to FINRA BrokerCheck Records Vaughn is not currently registered. He was previously registered at the following brokerage firms:
SunTrust Investment Services, Inc
Wells Fargo Advisors, LLC
The Villages, FL
A.G. Edwards & Sons, Inc.
The Villages, FL
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.