Conversion and Theft

Conversion and theft occur when your broker wrongfully takes control of your money, and/or transfers it to an account outside your control. If you notice all your investments are disappearing without your knowledge, your broker may have engaged in conversion and theft. A New York investment conversion and theft law firm like Malecki Law can review your account withdrawals and transfers at no cost. These days, theft has become more prevalent rather than less. Not only do you have to worry that your computer may be hacked, or your bank account, but your brokerage firm assets as well.

Conversion and theft mean that your broker misappropriated your funds or investments. Under FINRA Rule 4530(a)(1), firms are required to report incidents where their associated persons engaged in conversion or theft. If your broker misappropriated your funds in any fashion, it may be an indication that she/he committed conversion and theft. A New York investment conversion and theft attorney at Malecki Law will review your situation in a free consultation. FINRA has established rules to combat this exact issue.

FINRA Rule 2150 prohibits your broker from making an improper use of your funds. Further, this rule places limitations on the ability of your broker to share in customer accounts. Your broker is essentially only able to share in profits or losses of the account if you provide a written authorization.

FINRA Rule 3240 prohibits your broker from borrowing or lending to you unless an exception applies. For example, your broker may be able to borrow or lend to you if you are an immediate family member, you are both associated persons of the same firm, or the agreement is based on a certain type of business relationship.

FINRA holds brokers and brokerage firms accountable for conversion and theft, and supervisory issues related to conversion and theft. For example, Lisa Lewis, a Fidelity Brokerage Services LLC (Fidelity), allegedly conducted a conversion scheme from August 2006 through May 2013. The broker lured customers from her former firm, to create joint accounts with her at her new firm at the time. If something similar happened to you, you need investment conversion and theft lawyers in New York at Malecki Law, who are skilled at these types of cases. Over time, broker Ms. Lewis created approximately fifty joint accounts with clients, where she then converted the clients’ assets over to herself. The broker ultimately pled guilty to wire fraud. Fidelity faced FINRA sanctions, $500,000 in fines, and was ordered to pay approximately $530,000 in restitution. The firm failed to adequately supervise and detect red flags related to theft in nine customer accounts, eight of which happened to be senior citizens.

Misappropriation of customer funds can be an indication of conversion and theft. For example, FINRA sought a Temporary Cease-and-Desist Order against Westor Capital Group and its President to stop the misappropriation of its customer funds. The firm refused to allow a customer to withdraw funds from his own account. The firm also acted without authority and misused one customer’s funds to cover another’s short sales. If your brokerage firm or broker acted without authority in your accounts, your firm and/or broker may have engaged in conversion and theft. A New York investment conversion and theft law firm like Malecki Law would be happy to review your potential case.