Financial analysts and legal experts like myself take regulatory actions seriously, particularly when these actions raise red flags for investors. Today, I’ll dissect the concerning case of Elan Sanker (CRD#: 5580543), a Merrill Lynch advisor barred by the Financial Industry Regulatory Authority (FINRA). This case is a sobering reminder of Warren Buffet’s famous quote, “It takes 20 years to build a reputation and five minutes to ruin it.”
The Seriousness of the Allegations
The allegations against Mr. Sanker are indeed serious. According to FINRA, he refused to comply with an official request to testify during an investigation. This investigation stemmed from a review of a Form U5 filed by his member firm.
- FINRA’s complaint against Mr. Sanker includes allegations of entering into undisclosed financial arrangements with a client, failure to disclose an Outside Business Activity (OBA), and unauthorized use of personal devices for business purposes.
Investor Implications
These allegations gravely affect investors. Failure to disclose an OBA can potentially cause conflicts of interest, meaning the advisor’s professional judgment may be compromised for personal gain. The unapproved use of a personal device for business further increases the risk of investors’ confidential information being exposed. Data from the SEC suggests that just over 35% of cases involving individual advisors relate to disclosure issues.
A Peek at Mr. Sanker’s History
According to the publicly accessible FINRA BrokerCheck, Mr. Sanker has a previous client complaint on his record dating back to January 2018, rooted in the allegations of “selling away.”
During his career, he was registered with several renowned firms, including MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, NORTHWESTERN MUTUAL INVESTMENT SERVICES, LLC, and EDWARD JONES.
Interpreting the FINRA Rule
Fundamental to understanding this case is FINRA’s Rule 3270. This rule mandates registered representatives to disclose any OBAs they engage in. The rule protects investors by ensuring representatives’ professional responsibilities towards clients aren’t compromised for personal gains.
In simpler terms, if a broker has a side business or a job outside their brokerage firm, they must let their firm and FINRA know. This is to prevent possible conflicts of interest.
Consequences and Lessons
As a result of his failures, Mr. Sanker can no longer work in the securities industry. He did not merely face termination from his firm; he was also barred by FINRA.
Investors should glean two essential lessons from this case:
- Always verify your financial advisor’s credentials, background, and whether they have any past misconduct by leveraging tools like FINRA’s BrokerCheck.
- If you identify unexpected account changes or suspicious behavior, address these concerns with your advisor. If you’re unsatisfied with their response, escalate to the executive levels of the brokerage firm, or report to FINRA.
In conclusion, as Benjamin Franklin said, “An investment in knowledge pays the best interest.” So, always stay informed about your advisor’s actions, industry regulations, and your own rights as an investor.
