FINRA began an investigation after it received a telephone call to its Securities Helpline for Seniors. While employed with Cetera Investment Services, Summers accepted “multiple appointments and designations from one of the firm’s elderly clients.” The client, age 82, made Summers a:
- Successor trustee of his living trust, allowing Summers to receive 90% of the assets upon this customer’s death
- Personal representative of the customer’s estate in the will
- Sole beneficiary for an annuity
- Agent with power of attorney and medical power of attorney (Summers never used these POAs, and is no longer an agent)
Cetera’s firm policies prohibited brokers and investment advisors from being named as a trustee, co-trustee, successor trustee, or executor for a firm customer, or from having power of attorney for a firm customer, or beneficiary in any capacity, unless the customer was also an immediate family member.
Summers circumvented the firm’s policies, and failed to notify Cetera of these designations. He no longer has these designations or appointments.
FINRA issued letter of Acceptance, Waiver & Consent (AWC), which Summers signed on April 13, 2021. Included is a 45-day suspension and a $5,000 fine. Summers’ suspension ends on June 30, 2021.
His employment at Waddell & Reed ended on April 27, 2021.
FINRA Rule 3241: Position Of Trust
In 2020, FINRA adopted a new rule to prevent anyone registered with FINRA-associated firm members become beneficiaries, executor, trustee, have any powers of attorney or other “position of trust” for any of their member firm clients. FINRA Rule 3241 mirrors many broker firm policies, and requires written notification and approval by the firm, and assuming that the customer has the capacity to name the broker. If the firm does not give approval, the registered individual is required to decline.
The rule became effective on February 15, 2021.
The exception to this rule is if the customer is also an immediate family member. The rule does not apply to registered persons who do not have any assigned clients.
FINRA’s concern for investors and potential for conflicts of interest prompted the adoption of Rule 3241. Because brokers and financial advisors may have a close relationship with their clients, the potential for undue influence of a customer is a concern. These “special arrangements” may not become obvious to surviving family members, other beneficiaries, or the member firm for years. Senior investors who may be alone or are experiencing cognitive decline may be particularly susceptible to suggestion.
Many member firms have policies in place that prohibit this kind of arrangement with clients. But as Summers did, many will work to circumvent the policies in order to keep their arrangement. FINRA’s new rule intends to set uniform standards for registered persons in a position of trust.
Did You Invest With Jimmie Summers?
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