According to FINRA, William Henry Weisbrod was barred from association with any FINRA member in all capacities on August 2, 2023.
FINRA found that Weisbrod breached fiduciary duties owed to a community bank for which he served as an advisory director and consultant. The bank was a customer of Weisbrod's member firm and relied upon his investment knowledge and experience to determine its investment strategy. Weisbrod breached his fiduciary duties to the bank by directing it to engage in an investment strategy that generated revenue for Weisbrod but exposed the bank to excessive risk and unnecessary trading costs.
At Weisbrod's recommendation, the bank opened brokerage accounts at the firm with a registered representative who worked in the same office as Weisbrod. Although Weisbrod represented to the firm that he would not be involved with the bank's investments through it, Weisbrod directed the trading in the bank's accounts. Weisbrod recommended that the bank engage in a risky trading strategy involving fixed-income securities purchased through the firm.
Weisbrod's trading generated over $1 million in commissions for the registered representative assigned to the bank's accounts, who directed more than $370,000 of these commissions to Weisbrod through a series of payments that Weisbrod did not disclose to the bank. Weisbrod recommended that the bank trade through the firm even though it lacked a fixed-income trading desk. Because the firm lacked a fixed-income trading desk, it had to use a third-party "broker's broker" to acquire fixed-income securities for the bank, which caused the bank to pay approximately $1.25 million in additional markups to the broker's broker. Weisbrod did not disclose these markups to the bank.
As a result of Weisbrod's trading strategy, the bank spent more than $600,000 to remediate the risk of its investment portfolio. FINRA also found that Weisbrod falsely represented to the firm that he was not involved with the bank's investments through it in connection with the firm's inquiry into his outside business activity involving the bank.
This case demonstrates the serious harm that can result when financial professionals breach their fiduciary duties to customers. Weisbrod put his own financial interests ahead of his customer's interests by directing a trading strategy that generated substantial commissions for himself while exposing the bank to excessive risk and unnecessary costs. His failure to disclose the payments he received and the additional markups the bank was paying compounded the breach of trust.
Investors, including institutional investors like banks, should be wary of financial professionals who have conflicts of interest or who recommend strategies that generate unusually high fees or commissions. They should ask questions about how their advisor is compensated and whether there are less expensive alternatives available. Transparency about compensation and costs is essential to ensuring that financial professionals are acting in their customers' best interests.
