FINRA Sanctions Merrill Lynch Stockbroker For Unauthorized Trading

Sylvester Knox of Short Hills New Jersey a stockbroker formerly employed by Merrill Lynch Pierce Fenner Smith has been fined $10,000.00 and suspended for nine months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon findings that Knox engaged in unauthorized trades in Merrill Lynch customer accounts. Letter of Acceptance Waiver and Consent No. 2016051621901 (Aug. 6, 2020).

According to the AWC, between June of 2015 and October of 2016, 36 trades had been executed by Knox in at least three customer accounts without the stockbroker first procuring the customers’ authorizations. The regulator indicated that nine trades were placed in the first customer’s account. Seven unauthorized trades had been executed in the second customer’s account. The third customer’s account was subject of Knox’s unauthorized trading on 20 instances. FINRA determined that Knox’s unauthorized trading which totaled $1,700,000.00 in principal value was violative of FINRA Rule 2010.

The AWC also reveals that Knox exercised discretion in customer accounts without authorization. Knox was required under Merrill Lynch’s procedures to refrain from making trades on a discretionary basis unless customer accounts had been approved by the securities broker dealer for that purpose and Knox obtained customers’ written authorizations prior to making trades. Four customers of Knox had not authorized him to engage in discretionary trading in their accounts. Knox did so anyway. The AWC stated that those accounts were not cleared by Merrill Lynch for his exercise of discretion. FINRA determined that 36 trades totaling $2,000,000.00 in principal value had been executed by Knox in violation of FINRA Rule 2010 and National Association of Securities Dealers (NASD) Rule 2510(b).

This is not Knox’s first encounter with a securities regulator based on allegations of his misconduct in customer accounts. Knox was fined by Michigan Corporations, Securities and Commercial Licensing Bureau founded on accusations of Knox concealing information from the regulator about being investigated by Merrill Lynch at the time of his January 5, 2017 termination. Case No. 332047 (May 24, 2018). The securities broker dealer terminated Knox based on allegations of his misrepresentations to customers and unauthorized trading. Knox has also been directed by the regulator to withdraw his Michigan stockbroker registration for dishonesty and lack of ethical business practices.

FINRA Public Disclosure confirms that Knox has been identified in twenty-five customer initiated investment related disputes containing accusations of his wrongdoing while employed by Merrill Lynch. On October 12, 2017, a customer initiated investment related arbitration claim involving Knox’s activities was resolved for $140,000.00 in damages supported by allegations of an unsuitable investment strategy being used by Knox for the customer’s investment account, and the stockbroker’s failure to abide by the customer’s instructions. FINRA Arbitration No. 16-02177 (Oct. 12, 2017). The claim also alleges that transactions had been unauthorized and misrepresented.

Knox has also been identified in a customer initiated investment related written complaint which was settled for $300,000.00 on July 12, 2017 based upon accusations that omissions and misrepresentations had been made by Knox from August of 2012 to May of 2017 relating to municipal debt investment transactions that he effected at Merrill Lynch. On December 13, 2018, a customer initiated investment related complaint regarding Knox’s actions was settled to resolve allegations that unauthorized municipal debt transactions were executed in the customer’s account at Merrill Lynch by the stockbroker.

 

On March 12, 2020, another customer initiated investment related complaint concerning Knox’s conduct was settled for $125,612.40 in damages founded on accusations that equity trades had been executed in the Merrill Lynch customer’s account without the customer’s knowledge or consent.

 

Knox’s employment with Merrill Lynch has been terminated as of January 5, 2017. Between January 12, 2017 and August 15, 2018, he was registered with FSC Securities Corporation.