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FINRA Arbitration Panel Scolds David Lerner Associates, Broker

A recent FINRA arbitration decision points out that brokers and branch support staff need to strictly adhere to firm procedures in processing the ordinary account activity that occurs in a branch on a daily basis.

Antoinette Peloso maintained two accounts at David Lerner Associates (“DLA”) serviced by broker David Beckerman. As recounted in the explained decision of the Pittsburgh, PA panel, sometime after her death, her son, identified in the award (15-03270) as JP, presented Beckerman with a transfer on death (“TOD”) form and an IRA beneficiary form, naming JP as the beneficiary, for the two accounts. Beckerman improperly notarized the signature of the decedent on the TOD form, although the form did not require a notarized signature.

As later became apparent, either before or shortly after Ms. Peloso’s death, JP forged his mother’s signatures on the forms. Both forms directed DLA to transfer the assets in the two accounts to JP, which was done. However, before JP could access the funds in the two accounts, the claimant, who was the executrix of Ms. Peloso’s estate, advised DLA that there was a dispute regarding the accounts. Therefore, DLA “froze” the accounts.

Thereafter, according to the panel, the claimant’s probate attorney inexplicably failed to resolve the dispute between the estate and JP. That resulted in the accounts being frozen for two years and the claimant filing the FINRA arbitration claim against DLA and Beckerman.

The claim alleged fraud, forgery, embezzlement and violations of various Connecticut state laws. Claimed damages were approximately $532,000.

The panel denied the claims against DLA and Beckerman. The panel noted that the only bad actor in this saga was JP. The panel made it clear that it saw no evidence that DLA or Beckerman colluded with JP in his efforts to gain control of his mother’s estate. Ultimately, JP gave up his attempt to hold on to the estate funds and the accounts were returned to the executrix – but not before she ran up $72,000 in legal fees, which became part of her arbitration claim.

Although the panel denied the claim, the panel did assess all the FINRA hearing session fees relating to the arbitration ($7,800) jointly against DLA and Beckerman. The panel noted that the respondents’ “conduct with respect to the improper notarization, its failure to respond to many of the Claimant’s inquiries, and its failure to take proactive action presented by the problem with the forgeries were partially responsible for this litigation….”

Ultimately, the claim against DLA and Beckerman was dismissed. But DLA and Beckerman had to retain attorneys to defend the claim through a hearing. Beckerman now has a customer dispute on his CRD and BrokerCheck report. Since the allegation that he improperly notarized a signature is true it is unlikely a panel will order that expunged. Beckerman’s improper notarization of the TOD form presented by JP, although not a significant factor in the final outcome, makes Beckerman appear extremely sloppy and could well lead to a regulatory inquiry.

Lubiner, Schmidt & Palumbo is an experienced securities litigation, regulatory and employment firm. If you have questions or concerns relating to the securities industry, contact us now.

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