According to FINRA, Patrick Keith Sloan was fined $10,000 and suspended for three months after falsifying customer signatures on documents and exercising unauthorized discretion in customer accounts.
Sloan electronically signed documents on behalf of customers—two of whom were seniors—with their prior permission. However, the firm's policies and procedures explicitly prohibited signing a customer's name or initials regardless of the customer's knowledge or consent. Sloan also falsely attested in a compliance questionnaire that he had not signed or affixed another person's signature on a document, demonstrating a lack of honesty about his conduct.
Additionally, Sloan exercised discretion in customer accounts without prior written authority from the customers or approval from his firm. While he made the trades pursuant to an investment strategy the customers agreed to, and no customers complained about the trades, this does not excuse the lack of proper authorization. Compounding this violation, Sloan falsely stated in compliance questionnaires that he had not exercised discretionary authority over any brokerage accounts.
These violations are serious even though customers gave permission and did not suffer harm. Firms have policies prohibiting representatives from signing customer names for important reasons—to prevent forgery, ensure customers actually authorize transactions, and maintain clear documentation. Even with customer permission, allowing representatives to sign on behalf of customers creates opportunities for abuse and makes it difficult to determine whether the customer truly authorized specific actions.
Similarly, exercising discretion without written authorization and firm approval violates fundamental customer protection rules. Discretionary authority allows representatives to make investment decisions without consulting customers first. FINRA rules require written authorization from both the customer and the firm before exercising discretion to ensure customers understand they are granting this authority and firms can properly supervise discretionary trading.
The false attestations in compliance questionnaires are particularly concerning, as they demonstrate Sloan knew his conduct violated firm policies and chose to hide it rather than correct it. Honesty in compliance certifications is essential to effective supervision.
For investors, this case illustrates important protections around account authorization and discretion. Never allow your representative to sign documents on your behalf, even for convenience. If you want to grant discretionary authority, ensure it is properly documented in writing with firm approval. Be wary of representatives who suggest shortcuts around firm policies, as these policies exist to protect you. The three-month suspension reflects the seriousness of document falsification and false attestations, even when no customer harm resulted.
