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FINRA Fines Ameriprise & Affiliate

Zacks Equity Research

The Financial Industry Regulatory Authority (:FINRA) has penalized Ameriprise Financial Inc. (AMP) and it’s clearing firm, American Enterprise Investment Services Inc., (AEIS) for $750,000. The company and its affiliate were penalized on the grounds of failure to properly oversee wire-transfer requests and the transfer of customer funds to third-party accounts.

The fine is a consequence of a previous enforcement action taken by FINRA against a former Ameriprise-registered representative. This representative was accused of swindling $790,000 from two senior citizen clients over a four-year span through fake signatures on wire-transfer requests and transferring funds to her own bank accounts.

Upon inquiry, the fraud was uncovered and Ameriprise compensated in full to the victims. The accused representative dismissed from Ameriprise in 2010 and was banned from the securities industry in 2011 by FINRA. The regulatory body also noted that such fraudulent behavior was not possible if the company had maintained strict supervisory system.

FINRA accused Ameriprise and AEIS of having lax managerial system to overview fund transfers. Further, absence of strict policies for detection and prevention of multiple fund transfers to third-party accounts gave a wide berth to fraudulent activities. Lastly, the company did not bother to properly investigate the rejected wire-transfer requests.

The lack of security measures led the single representative to transfer funds several times to her bank accounts. Even after the representative was terminated from job, she managed to dupe the company by another forged wire-transfer request. Though initially Ameriprise remitted the funds, it soon realized its folly and prevented the representative from accessing the funds.

FINRA’s Department of Enforcement and Member Regulation carried out the inquiry. Ameriprise and AEIS neither admitted nor denied the allegations. Ameriprise, in its defense, said that it was pleased to settle the matter and has deployed efficient administrative systems to ensure prevention of such fraudulent activities in the future.

Ameriprise currently carries Zacks Rank #3 (Hold). Other asset managers that are performing better than Ameriprise include AllianceBernstein Holding L.P. (AB), Cohen & Steers Inc. (CNS) and Lazard Ltd. (LAZ). All these stocks carry a Zacks Rank #1 (Strong Buy) status.

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