By Tim Dulaney, PhD, FRM and Tim Husson, PhD
In our day-to-day work, we often come across brokers willing to ruin the lives of the undereducated or underprepared in order to make a quick buck. We thought we'd highlight a particularly egregious example of this from a recent Financial Industry Regulatory Authority (FINRA) press release.
According to the release, Fernando L. Arevalo and Jimmy E. Caballero encouraged an "elderly widow with diminished mental capacity" to sell two annuities for approximately $300,000 and then moved the funds into a joint account with the one of the brokers. The brokers then proceeded to use the account as their personal checking account using the funds to pay off personal loans and make retail purchases.
This misconduct occurred despite both brokers having a clean record on FINRA's BrokerCheck system and working at a major banking institution (JP Morgan Chase Securities). Thankfully this sad story has a somewhat happy ending: JPMorgan did the right thing and reimbursed the customer's funds (even though JPMorgan was not a party to the action) and the brokers have been barred from the securities industry.
For more information about the details of this case, see FINRA's action against Arevalo (PDF) and against Caballero (PDF).
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