According to FINRA, Alan Scot Feigenbaum was fined $15,000 and suspended from association with any FINRA member in all capacities for five months for exercising discretion without written authority in customer accounts, using an unauthorized email account for securities-related communications, and mismarking orders.
Feigenbaum was found in violation of multiple rules. First, he exercised discretion without written authorization in customer accounts, including those of senior customers. While the customers permitted Feigenbaum to exercise discretion and had not complained, none had given him written authorization to do so, and neither of his member firms had approved the accounts as discretionary. Feigenbaum exercised discretion despite having previously received a written letter of caution from a supervisor for similar misconduct, demonstrating a pattern of disregarding the rules. Additionally, Feigenbaum inaccurately stated on compliance questionnaires that he had not exercised discretion in any customer account.
Second, Feigenbaum caused one of his firms to create and maintain inaccurate books and records through his use of an unauthorized email account and by mismarking orders as unsolicited. Feigenbaum had an approved outside business through which he provided accounting and tax services to clients. He communicated with certain brokerage customers, including seniors, regarding securities-related matters over the email account he used for his tax preparation business. Because the firm was unaware of and had not authorized use of this email account, it was unable to supervise, preserve, or retain the securities-related emails. Feigenbaum inaccurately stated on compliance questionnaires that he had conducted all business-related communication over his firm email account.
Third, Feigenbaum marked trades in a particular exchange-traded product in customer accounts as unsolicited when he had actually solicited the transactions. Marking trades as unsolicited indicates that the customer initiated the transaction without a recommendation from the representative, which typically reduces the representative's and firm's supervisory obligations regarding suitability. Mismarking solicited trades as unsolicited circumvents these supervisory requirements.
The use of unauthorized email accounts is a serious violation because it prevents firms from supervising communications and detecting potential misconduct. Email surveillance is a critical supervisory tool, and when representatives use personal or outside business email accounts, they deprive firms of the ability to review their communications for red flags. This case demonstrates the importance of representatives conducting all securities business through approved communication channels and accurately completing compliance certifications.
