Daryl Winfield Riley, a broker formerly with St. Louis, Missouri based Wells Fargo Advisors LLC, submitted an offer of settlement in which he consented to Financial Industry Regulatory Authority (FINRA) findings that he exercised discretion for solicited purchases in customer accounts without the customers' written authorization and his member firm's acceptance of the accounts as discretionary. The firm's written policies and procedures generally prohibited discretionary accounts and only allowed brokers to exercise discretion in certain types of customer accounts with firm approval. Mr. Riley, of La Habra, California, was fined $5,000 and suspended from association with any FINRA member in any capacity for one month - the suspension was in effect from January 7, 2013 through February 6, 2013.
A discretionary account is an account that allows a broker to buy and sell securities without the client's consent. The client must sign a discretionary disclosure with the broker in order to document the client's consent. A discretionary account sometimes referred to as a managed account. Sometimes certain guidelines are set by the client regarding trading in the account - a client might only permit investments in blue chip stocks.
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. Riley's discretionary activity can bring forth claims to recover losses against Wells Fargo Advisors, which should have prevented Mr. Riley 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.