According to FINRA, Michael Joseph Schmidt was fined $5,000 and suspended from association with any FINRA member in all capacities for two months for causing the entry of false information in a journaling system used by his member firm when completing fund transfers between an advisory IRA owned by his then-spouse and a jointly owned brokerage account.
The findings revealed a concerning pattern of unauthorized transfers and false documentation. Schmidt caused funds to be transferred from the IRA to the joint account on 26 occasions. He obtained his spouse's express preauthorization for 11 of these transfers, but failed to obtain her preauthorization for the remaining 15 transfers, which totaled $13,543.
The falsification of records was systematic. For all 26 transfers—including the 15 transfers for which he failed to obtain preauthorization—Schmidt caused the entry of information in the firm's system stating that he had obtained his spouse's preauthorization on a particular date and at a particular time, and that she had provided a reason for the transfer. These entries were false for the 15 unauthorized transfers, creating deceptive records in the firm's journaling system.
While the transferred funds were used to cover the couple's joint expenses rather than for Schmidt's sole benefit, this does not excuse the misconduct. The IRA was solely owned by Schmidt's spouse, and transfers from the account required her authorization. By making unauthorized transfers and falsifying records to conceal the lack of authorization, Schmidt violated his spouse's account ownership rights and his firm's procedures.
The falsification of firm records is particularly serious because firms rely on accurate records for regulatory compliance, supervision, and audit purposes. When representatives enter false information into firm systems, they undermine the integrity of the firm's books and records and impair the firm's ability to supervise their activities.
This case also highlights important considerations regarding retirement accounts. IRAs receive special tax treatment and are subject to specific rules about withdrawals and transfers. Account owners must maintain control over their IRAs, and transfers should only occur with proper authorization.
The two-month suspension, in effect from November 17, 2025, through January 16, 2026, along with the $5,000 fine, reflects the seriousness of falsifying firm records, even when the underlying transfers were for joint expenses rather than personal enrichment.
Investors should ensure that all transfers from their accounts are properly authorized and that no one, including spouses or family members, makes unauthorized transactions.
