Prudential Annuities Distributors received a $950,000 fine from FINRA for its role in the theft of $1.3 million from an 89-year-old customer.
The regulator says Prudential missed a series of “red flags” that allowed Travis Wetzel, a former registered sales assistant at LPL Financial and since-convicted felon, to forge 114 wire requests.
Wetzel, who is now barred from the industry and was sentenced to 42 months in federal prison, stole the funds by cutting and pasting the victim’s signature onto 4 to 5 withdrawal requests a month, sending the money to a third-party account that he controlled.
FINRA found that Prudential’s signature verification protocol was insufficient and failed to detect the misconduct.
'Withdrawals Appeared Legitimate'
All wire requests over the 26-month period, ending in 2012, triggered automated alerts within Prudential’s post-transaction review system—but all were eventually approved, says the regulator. “The firm did not further investigate these alerts,” FINRA added in a statement.
At one point, Prudential's own fraud specialist “concluded that the withdrawals appeared legitimate, without sufficiently investigating or determining the relationship” between the victim and the “person” receiving money that was being stolen from her, according to the investigation.
“Firms must ensure that their supervisory systems and procedures are designed to recognize and follow up on red flags,” says Brad Bennett, FINRA executive vice president and chief of enforcement. He added that Prudential’s oversights “allowed an unscrupulous actor to prey on an elderly customer."
Read more: IRS rules FINRA fines are not tax deductible
LPL and Prudential reimbursed the victim in 2013. “We believe that the settlement is in the best interests of all concerned,” says Prudential in a statement. The company did not admit or deny the charges in the settlement.
LPL had no comment on the settlement.
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