Initiated By
FINRA
Allegations
Lawrence was named a respondent in a FINRA complaint alleging that he exploited an elderly customer suffering from severe cognitive impairment by engaging in qualitatively and quantitatively unsuitable trading in the customer's accounts, generating more than $9 million in commissions. The complaint alleges that Lawrence controlled the trading in the customer's accounts and bought and sold the same securities multiple times over a short period, which resulted in higher commissions and provided little or no economic benefit to the customer. Often these securities were income-producing bonds, including municipal bonds, intended for customers with long-term investment time horizons, and carried substantial commissions. Lawrence received no commissions from the trading activity in the customer's accounts. Instead, he was paid an annual salary ranging from $100,000 to $150,000 and received a bonus, which ranged from $75,000 to $200,000 that he negotiated annually. Lawrence also effected short-term purchases and sales of bonds without having reasonable grounds to believe that such purchases and sales were suitable for the customer in view of the nature and frequency of the transactions and the transactions costs incurred, and in light of the customer's financial situation, investment objectives, circumstances and needs. Lawrence willfully violated Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder and MSRB Rules G-17 and G-19 by churning the customer's accounts and engaging in an act, practice, or course of business that operates as a fraud or deceit, acting with intent to defraud and/or with reckless disregard of the customer's interests. The complaint also alleges that Lawrence repeatedly exercised trading discretion in the customer's non-discretionary accounts without obtaining written authorization from the customer, supervisory approval of the authorization, or supervisory approval of each use of discretion, including during periods when the customer was hospitalized and unable to communicate.
Resolution
Decision & Order of Offer of Settlement
Bar
Bar (Permanent)
Registration Capacities Affected
All Capacities
Duration
Indefinite
Start Date
10/21/2019
Regulator Statement
Without admitting or denying the allegations, Lawrence consented to the sanction and to the entry of findings that he exploited an elderly customer suffering from severe cognitive impairment by engaging in qualitatively and quantitatively unsuitable trading in the customer's accounts, generating more than $9 million in commissions. The findings stated that Lawrence controlled the trading in the customer's accounts, and bought and sold the same securities multiple times over a short period, which resulted in higher commissions and provided little or no economic benefit to the customer. Often, these securities were income-producing bonds, including municipal bonds, intended for customers with long-term investment time horizons, and carried substantial commissions. Lawrence received no commissions from the trading activity in the customer's accounts. Instead, he was paid an annual salary and received a bonus that he negotiated annually, which ranged from $175,000 to $350,000 in total. The findings also stated that Lawrence effected short-term purchases and sales of bonds without having reasonable grounds to believe that such purchases and sales were suitable for the customer in view of the nature and frequency of the transactions and the transaction costs incurred, and in light of the customer's financial situation, investment objectives, circumstances and needs. The findings also included that by excessively trading and churning in the customer's accounts, Lawrence willfully violated Section 10(b) of the Securities Exchange Act of 1934, Exchange Act Rule 10b-5, and MSRB Rules G-17 and G-19, and violated FINRA Rule 2020. FINRA found that Lawrence repeatedly exercised trading discretion in the customer's non-discretionary accounts without obtaining written authorization from the customer, supervisory approval of the authorization, or supervisory approval of each use of discretion.
