The Financial Industry Regulatory Authority Inc. levied a $50,000 fine against an Ameriprise general securities representative who altered his software notes to document his recommendations, for a 78-year-old client, to invest $2 million in Ameriprise variable annuities, the regulator's decision shows.
David B. Tysk, who has been working for Ameriprise in Minnesota since 1988 according to his LinkedIn page, was fined $50,000 and suspended for one year for adding and backdating 54 new entries and changing 13 previous entries in his client-relationship management system, to support recommendations that were claimed to be unfit for his client, according to the document filed on May 16. Mr. Tysk made these changes after the client had complained to the firm, thus initiating an internal investigation. He will be appealing to the Securities and Exchange Commission, said his attorney, Brian L. Rubin, a partner at Sutherland Asbill & Brennan.
Mr. Tysk used ACT! Notes, a CRM not required by the firm but used by half of Ameriprise's Bloomington, Minn., office employees, the document states.
Contemporaneous notes, those made at the time or soon after an event, are "golden" pieces of evidence, and it isn't common to see them altered this way, said David E. Robbins, a partner at law firm Kaufmann Gildin & Robbins in New York.
"You should not be able to replace any of the 10 commandments," Mr. Robbins said. "You shouldn't be able to go back and say, 'I didn't mean that commandment, I meant this one.'"
CRM providers handle this function differently. Junxure allows advisers to alter and backdate notes, but keeps an audit trail only accessible by higher-ups. Wealthbox does the same. Redtail does not allow advisers to modify notes, but has a delete button that is visible in a separate report. The company added a comment feature last year to be tacked on to notes, which has its own time stamp. Those who use ACT!, the program used in this case, can still update, add to or change notes from the past, a spokeswoman said.
Based on the notes Mr. Tysk first handed over in a discovery period, which showed they were last edited by him after the client's complaint, his client's counsel requested to see the edits made.
His BrokerCheck profile is marked as pending regulation as of October 2015, for demonstrating "untrustworthiness and/or incompetence to act as an insurance producer," but shows the decision in a response to his appeal, marked in March 2013.
Mr. Tysk had first made the $2 million recommendations in December 2006. The client invested $1 million first, and purchased another $1 million seven months later. The firm sent an exception report to Mr. Tysk, based on his client's purchase and age, but he overrode it, stating the client's high net worth, available cash on hand, the annuity's deferred tax and that the client did not need the money during his lifetime — it was to be passed on. Months later, the client raised suitability concerns, adding he did not need to insure any assets to his heirs.
Though advisers could enter false information at the time of making the note, they're often not thinking that far in advance, Mr. Robbins said.
"The idea of being able to go back and change history to correct a failing should be detectable," he said. "Everything is detectable these days."