On September 18, 2023, the Securities and Exchange Commission (“Commission”) instituted cease-and-desist proceedings against Pierre Economacos, a registered representative at a registered broker-dealer (the “Firm”). The seriousness of this allegation arises from Economacos’s failure to report suspicious and unusual transactions in a brokerage account of his long-time customer (the “Customer”). These transactions surrounded the announcement of the acquisition of the company where the Customer’s close family member was an executive (the “Executive”).
The Seriousness of the Allegation
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This case involves the failure of Pierre Economacos to report suspicious and unusual transactions to the Firm’s anti-money laundering (“AML”) group. Economacos was the registered representative for a brokerage account held by the Customer and brokerage accounts held by the Executive. In 2019, Economacos complied with a request from the Customer to make a $50,000 wire transfer to the Customer’s close relative (the “Relative”), who was also a close family member of the Executive.
Case Information
Three days after the wire transfer, the company where the Executive worked announced that it would be acquired, and its stock price increased by approximately 30%. Economacos knew the Executive worked at the Company and learned of the acquisition on the Announcement Date. One day after the Announcement Date, the Relative wired $50,000 back to the Customer’s Firm account. The following day, the Relative sent another $50,000 wire to the Customer’s Firm account. Five days later, the Relative sent two additional wires each in the amount of $90,000 from brokerage accounts the Relative controlled in the names of two immediate family members. These wire transactions, which closely surrounded the acquisition announcement of the company where the Executive worked, were unusual in the context of the Customer’s account history.
Understanding the Allegation and the FINRA Rule
In simple terms, this case involves a violation of the FINRA Rule regarding anti-money laundering. Registered representatives, like Economacos, are required to escalate “red flags” or unusual account activity to the Firm’s AML group. This allows AML investigators to review the activity and determine whether the Firm should report the transactions to the appropriate authorities, such as by filing a Suspicious Activity Report (“SAR”).
The FINRA Rule
The FINRA Rule requires registered representatives to abide by the Firm’s AML and ethics policies. These policies emphasize that registered representatives are the “first line of defense” with respect to detecting and reporting suspicious activity in customer accounts. However, Economacos failed to inform the Firm’s AML group of the above wire transactions surrounding the acquisition announcement. This caused the Firm to fail to timely file a SAR regarding the activity, in violation of Exchange Act Section 17(a) and Rule 17a-8 thereunder.
Why This Matters for Investors
Investors should be aware of the seriousness of such allegations as they highlight the potential risks associated with financial advisors who do not adhere to regulatory rules and guidelines. A failure to report suspicious transactions can potentially lead to financial losses for investors and can undermine the integrity of the financial markets.
Furthermore, this case underscores the importance of financial advisors in maintaining the trust and confidence of their clients. Advisors who fail to comply with regulatory rules and guidelines can face serious sanctions, including fines and suspension from the industry.
Red Flags for Financial Advisor Malpractice
Investors should be aware of certain red flags that may indicate financial advisor malpractice. These include unusual account activity, such as frequent wire transfers; transactions that do not align with the investor’s financial goals or risk tolerance; and a lack of communication or transparency from the advisor.
How Investors Can Recover Losses
Investors who have suffered losses due to financial advisor malpractice may be able to recover their losses through FINRA Arbitration. Haselkorn & Thibaut, a national investment fraud law firm with offices in Florida, New York, North Carolina, Arizona, and Texas, is currently investigating this advisor and company. With over 50 years of experience, successful financial recoveries for investors, and an impressive 98% success rate, Haselkorn & Thibaut offers free consultations to clients. Their toll-free consultation number is 1-800-856-3352 and they operate under a “No Recovery, No Fee” policy.
Investors should not hesitate to seek legal advice if they suspect financial advisor malpractice. The sooner they act, the better their chances of recovering their losses.
