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Financial Industry Regulatory Authority Inc. arbitration panel has awarded two retired schoolteachers a total of $2.38 million in connection with a complex case involving allegations of
excessive trading, unauthorized fund transfers and withdrawals, and fraud. Paying the tab will be Capitol Securities Management of Glen Allen, Va., which the arbitrators said employed the claimants' broker, "who stole funds from the Capitol accounts of Capitol customers during the course of his employment" with the firm.
The retired teachers, Janice Patin of Louisiana and Beryl Lakin of Virginia, are friends who once worked together. They became clients of Capitol Securities in 2009, when Ms. Patin's nephew, a registered representative identified only as "Mr. T" in Finra documents, moved to the firm's Reston, Va., office. Mr. Lakin met Mr. T through Ms. Patin and opened an account with him.
The arbitration award found evidence of numerous trading alerts in Ms. Patin's accounts flagged by automatic monitoring programs. These alerts were reviewed by a branch office manager and many trades were coded "unsolicited," according to
Finra, thereby obviating the generation of more alerts.
"Although the account was coded long-term growth, risk level moderate, and remained that way, it was replete with short-term trading, high margin balances, transfers out to other Capitol accounts and excessive commissions. Based on all the evidence, it is unlikely that Ms. Patin ever suggested any trades," the Finra document stated.
(More: Finra exams find fault with sales of variable annuities, nontraded REITs and private placements)
In March 2017, Finra said Capitol fired Mr. T, who shortly after mailed letters to each party confessing to years of thefts from claimants' and others' accounts. Mr. T then killed himself, Finra said. In a confession letter he stated that he began by trying to make up losses in a customer's account, lost more, transferred funds from other accounts, and lost that in risky trading. The confession estimates that Ms. Patin and Mr. Lakin lost $1.5 million through this fraudulent activity, and that Mr. T supplemented his own income by some $200,000 over six-plus years, in addition to commissions he received on unauthorized trades.
