James Douglas Grimes, formerly with Washington, Pennsylvania based Financial Network Investment Corporation, submitted an offer of settlement after the Financial Industry Regulatory Authority (FINRA) entered findings that he transferred $306,000 from customers' accounts to a business account in the name of another customer without any of the customers' consent or knowledge. Mr. Grimes consented to sanctions and to FINRA's findings that he affected the unauthorized transfers by submitting written journal request forms to his firm that contained forged client signatures. Mr. Grimes wrote numerous checks payable to cash totaling $250,446, withdrew funds from the business account, and converted the proceeds for his own use. Mr. Grimes forged the signature of the holder of the business account on the checks. Mr. Grimes, of Lawrence, Pennsylvania, was banned from association with any FINRA member in any capacity.
FINRA's findings also stated that the firm kept the journal request forms and the numerous checks as part of its books and records. Those documents appeared to contain genuine customer signatures. However, the signatures were forged so the records were therefore inaccurate. By falsifying journal requests and checks, Grimes caused his firm's books and records to be inaccurate.
Broker-dealers must establish and implement a reasonable supervisory system to protect customers from broker misconduct. If broker-dealers do not establish and implement a reasonable supervisory system, they may be liable to investors for damages flowing from the misconduct. Therefore, investors who have suffered damages due to Mr. Grimes's fraudulent activity can bring forth claims to recover losses against Financial Network Investment Corporation, which should have prevented Mr. Grimes from committing the described illegal activity.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.