According to FINRA, Michael Peter Dmytryshyn was fined $2,500 and suspended for 10 business days on January 28, 2022, for causing his member firm to maintain inaccurate books and records by changing representative codes on trades.
Dmytryshyn entered into an agreement through which he agreed to service certain customer accounts, including executing trades, under a joint representative code he shared with a retired representative. The agreement specified what percentages of commissions each representative would earn on trades placed using the joint code.
Although the firm's system correctly prepopulated trades with the applicable joint representative code, Dmytryshyn changed the code to his personal representative code. He discussed this with the retired representative, who agreed that Dmytryshyn could make the change. However, changing the codes caused the firm's trade confirmations to inaccurately reflect Dmytryshyn's personal code rather than the joint code.
Dmytryshyn's actions resulted in his receiving higher commissions than he was entitled to receive under the agreement. The firm later reimbursed the retired representative for the commission shortfall.
Accurate books and records are fundamental to securities regulation. Trade confirmations must accurately reflect which registered representative handled each trade for supervisory, compliance, and regulatory purposes. When representatives change representative codes on trades, it causes the firm's records to be inaccurate.
Even though the retired representative initially agreed to allow Dmytryshyn to change the codes, this agreement did not make the resulting inaccurate records acceptable. The firm's records should reflect the actual arrangement under which trades were executed - the joint representative code indicating both representatives were involved in servicing the accounts.
The fact that Dmytryshyn received higher commissions than entitled under the agreement is also problematic, even though this was ultimately corrected. Representatives must comply with commission-sharing agreements and cannot unilaterally change arrangements to increase their own compensation.
For investors, accurate trade records are important because they show which representative handled your trades. This information can be relevant if problems arise with trades or if you need to file a complaint. When firms' records are inaccurate, it can complicate efforts to hold the appropriate individuals accountable for any misconduct.
While this case involved a commission-sharing dispute between representatives rather than direct harm to customers, it illustrates the importance of maintaining accurate books and records throughout the securities industry.
