FINRA fined Royal Alliance Associates (RAA) $400,000 for failing to supervise two brokers who stole $3.8 million from four customers, including a disabled widow. The two brokers—Massachusetts' Kimberly Pine Pitts and New Jersey's Gary John Basralian—pleaded guilty to fraud charges and were sentenced to prison and Royal Alliance, as the firm whose supervisory, policy, and enforcement failures coincided with the massive theft, compensated its customers who fell prey to Pitts' and Basralian's fraud.
RAA permitted Basralian to resign in 2017 after allegations he "misappropriated monies that belonged to the client," while Pitts was discharged after allegations of "conversion or misappropriation of funds."
In AWC #2017056769402, investigators wrote that RAA failed to reasonably respond to red flags of potential misconduct related to the wire transfers through which the two brokers-turned-criminals stole their customer's money.
For instance, Basralian allegedly effected 60 wire transfers totaling $1.26 million from his disabled client, and additionally forged three requests to send $75,000 from this customer's account to an unrelated third-party entity, setting up an LLC (which he controlled) to receive further funds from another customer.
Similarly, Pitts allegedly used forged wire transfer request forms to steal $2 million from a customer through 65 third-party wire transfers to a bank account she controlled, with RAA purportedly failing to identify another additional red flag posed by the wire transfer form identifying the recipient bank account as having a title nearly identical to Pitts' d/b/a name.
When a cashiering group member noticed a discrepancy with customer signatures on the wire forms, Pitts allegedly responded that the customer "always signed her name differently." According to the report, RAA accepted Pitts' explanation without ever contacting the customer "or taking any other steps to verify the signature was valid."
Finally, Pitts purportedly stole $325,000 from a couple by having two checks issued from their RAA accounts to the same LLC, and physically mailed to Pitts' home address and not that of her clients.
If you have invested with a broker or investment adviser who committed fraud by stealing or misappropriating your money through forgery or other nefarious means, that rogue representative's firm may be liable for damages—especially if deficient supervision, such as failure to identify red flags or suspicious behavior, is to blame. If you have suffered such a fraud and financial loss, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.