Seasoned Edward Jones Broker Should Have Known Better, Finra Says
Beware of clients giving gifts and bequest, especially if you are a seasoned broker.
That’s the lesson a former Edward Jones broker with 31 years of experience learned this week when the Financial Industry Regulatory Authority barred her for failing to report that a 91-year-old client paid for her gifts and made her daughter and grandchild beneficiaries of a trust in his name.
Kory P. Keath, who worked for Jones from 1995 to her dismissal in 2015 from the branch she ran in Enumclaw, Washington, “knowingly and intentionally” circumvented the firm’s rules given her long experience in the industry, according to a hearing officers’ decision issued on July 10. Jones fired her for failing to report that the wheelchair-bound client covered the $12,000 cost of her trip accompanying him to Egypt and that her relatives were beneficiaries of his trust.
“With three decades of experience in the securities industry, and lengthy employment with the Firm, Keath should have known she had a responsibility to report…,” the regulator wrote. “Policies and procedures focused on gifts and beneficiaries are not esoteric, abstract or rarely encountered; they are common-sense provisions directed at issues advisors confront daily in the securities industry.”
Neither Keath nor her lawyer, Avi J. Lipman, responded to requests for comment on her bar from the industry or whether they would appeal the decision.
Keath had argued that she was not required to make the disclosures because she had ceded day-to-day portfolio management and other advisory responsibilities on the client’s account to Edward Jones Trust Company in 2009, prior to her trip and the client’s bequests, according to the hearing panel decision. She also testified that she had turned down HD’s attempts to list her as the beneficiary of the trust and had given the client a check that was ultimately returned to her to cover her share of the Egyptian trip.
Her conduct “was neither reckless nor intentional, but, rather, at ‘worst…an honest mistake,’” she testified, according to the decision, which said she sought a monetary sanction and a suspension of one month suspension or less “in light of her ‘excellent record for 32 years as a registered representative.”
The panel said she provided no legal basis for many of her arguments, noting that even after the account was transferred to Jones’ trust company, Keath received commissions and worked closely with the client and the trust company. Her failure to report jeopardized Jones’s responsibilities to monitor advisor conflicts, it said.
“The firm’s policy on client bequests to a financial advisor’s immediate family was straightforward,” the ruling said. “The firm’s policy on gifts was similarly unambiguous.”
Keath’s daughter received $143,725 and her grandson $95,817, which together comprised more than one-third of the estate’s net value after the client died in 2011, according to the ruling.
Keath had successfully grown Jones’ Enumclaw office in the small northwest Washington community. She increased client assets from $20 million when she arrived in 1995 from Waddell & Reed to $135 million at the time of her dismissal and “credits herself with having established ‘Wall Street on Main Street’ in Enumclaw, where Jones has five offices, according to the decision.
Jones itself was never sanctioned by the regulator over Keath’s reporting violations, and “cooperated fully with FINRA’s investigation and proceedings,” a spokesman wrote in an email. It learned of her unreported relationships with the client through an anonymous tip, a Jones investigator testified to the Finra disciplinary panel.