As a financial analyst and legal expert, I’ve often said that financial regulation is a crucial part of creating transparent and fair financial markets. The recent case of Anthony Seifert, a former broker registered with Kestra Investment Services, is an example of the importance of following rules to the letter. FINRA suspended Seifert for allegedly executing hundreds of unauthorized trades from January 2021 through March 2022.
The Allegations and Their Impact on Investors
The allegations against Seifert are serious and warrant attention. Not only is there an apparent violation of FINRA rules, but it has also directly impacted several investors. The alleged unauthorized transactions in five client accounts highlight a breach of trust that is unacceptable and harmful in the financial markets.
- Essentially, FINRA accused Seifert of not obtaining prior written authorization from clients before making transactions in their accounts.
- Even though he allegedly had verbal permission, he had not obtained the required written authorization.
- His former firm, Kestra Investment Services, had also not accepted these accounts as discretionary.
The lack of written authorization and firm approval puts clients at risk. Even if the broker makes profitable trades, lack of transparency can lead to a lack of trust between the broker and the client and result in potential conflicts of interest. This particular case highlights how crucial it is for investors to remain vigilant and regularly review their account activity.
Seifert’s Background and Previous Complaints
Formerly registered with Kestra Investment Services, Anthony Seifert underwent termination from the company due to these allegations. This situation isn’t the first time Seifert had been dismissed from a brokerage firm. In 2022, Merrill Lynch also terminated his contract, following allegations linked to discretionary actions in clients’ non-discretionary accounts and the use of a personal device for business purposes.
An investor even alleged that Seifert had executed unauthorized trades and made unsuitable investment recommendations in 2022. This disagreement was resolved for $366,617.85.
FINRA Rules Simplified
If you’re scratching your head wondering what a “discretionary account” refers to, know you’re not alone. I’ll break down these financial terminologies to make it more digestible.
Essentially, a discretionary account allows a broker to make trades without seeking each trade’s approval. But this flexibility isn’t absolute. Both the client and the firm must provide written consent, safeguarding both parties. It’s a rule meant to protect investors from unauthorized trades, ensuring transparency.
Seifert’s behaviors have contravened FINRA Rule 3260 and FINRA Rule 2010. Both rules require brokers to carry out their activities with fair and just practices. Respecting these rules ensure transactions are executed with the due diligence required in trading.
The Aftermath: Consequences and Lessons to Learn
As a result of his actions, Seifert accepted the following sanctions: a 20-business-day suspension from associating with FINRA members and a $5,000 fine. I’d like to drive home the point here, quoting investor advocate Benjamin Graham: “The investor’s chief problem—and even his worst enemy—is likely to be himself.”
So, what can we learn from this incident? It demonstrates the importance of open and trustworthy communication between a broker and their clients. A broker’s actions must be transparent, and their decisions should always align with the investor’s best interests. Always ensure your broker obtains your written permission before making any trades in your account.
The unfortunate reality is that every year, about 7% of financial advisors have misconduct records. While Seifert’s case is concerning, it serves as an important reminder for investors to remain vigilant and proactive in managing their accounts. Always do your due diligence, and remember, an informed investor is a protected investor.
