FINRA Sanctions LPL Stockbroker For Unauthorized Trading

Robert Scott Davis (also known as Robert Scott David) a stockbroker formerly employed by LPL Financial LLC has been fined $5,000.00 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity supported by findings that (1) Davis engaged in unauthorized trades in the accounts of LPL Financial customers and (2) Davis effected trades that were in no way suitable for his customers. Letter of Acceptance Waiver and Consent No. 2017055503601 (July 10, 2017).

According to the AWC, from January of 2017 to July of 2017, discretionary trades were effected by Davis in accounts owned by LPL Financial customers. Evidently, twenty-six transactions had been placed by Davis in those customers’ accounts despite Davis never having procured written authorization from them. The AWC additionally stated that Davis failed to generate approval from LPL Financial LLC regarding his exercise of discretion in the customers’ accounts. FINRA found that Davis’ discretionary trading was violative of FINRA Rules 2010 and National Association of Securities Dealers (NASD) Rule 2510(b).

The AWC also reveals that some of those discretionary trades Davis executed in customers’ accounts failed to be suitable. Specifically, a total of six mutual fund positions had been liquidated from customers’ accounts before those customers held their positions for at least a year. Apparently, proceeds obtained from the premature mutual fund sales were utilized by Davis to effect unit investment trust or mutual fund purchases.

Evidently, the Class A mutual funds held by customers were designed to be held for longer periods than what they had been held for. Customers reportedly unwarranted incurred front-end sales charges upon purchasing those investments. Because of the trades placed by Davis, thousands in costs had been incurred by customers. FINRA concluded that Davis lacked an adequate foundation to conclude that his transactions were appropriate for the customers. Consequently, FINRA found Davis’ activities in this respect to be violative of FINRA Rules 2010 and 2111.

FINRA Public Disclosure additionally confirms that Davis is the subject of a customer initiated investment related written complaint which was settled to resolve allegations that while he was associated with A.G. Edwards Sons Inc., the customer’s over the counter equities positions had been maintained when they were supposed to be liquidated, resulting in the customer experiencing unfounded losses.

Davis was discharged by LPL Financial on August 16, 2017 based upon accusations of him violating the policies of the firm by effecting trades in accounts without requisite authorization from the firm or customers.