FINRA Fines and Suspends Financial Advisor for Taking Non-Public Personal Financial Information of Clients

The Financial Industry Regulatory Authority ("FINRA") recently fined and suspended a financial advisor for taking his clients' private information when he transitioned to another firm.

The Protocol for Broker Recruiting is a litigation forbearance agreement by which member firms allow their departing financial advisors to remove certain client information (names, addresses, telephone numbers, email addresses and account titles). Although FINRA and the SEC have not endorsed the Protocol, to date enforcement actions have been limited to circumstances in which the financial advisor took more than what the Protocol allows. Enforcement actions typically cite violations of Reg S-P, related to disclosure and use of non-public personal financial information.

In this case, the financial advisor went beyond the Protocol in taking additional information such as his clients' dates of birth, driver license numbers, social security numbers, net worth and annual income.

As one can see, financial advisors and their transition consultants must carefully plan their transitions with the assistance of competent securities counsel.