R.F. Lafferty & Co., Inc. Broker Jay Tomlinson Suspended For Three Months and Fined After Allegations of Improperly Exercised Discretion Without Proper Authorization
Jay Clint Tomlinson (CRD#: 2680269) has been a registered broker at R.F. Lafferty & Co., Inc., since 2013.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on December 11, 2020, Tomlinson was suspended for three months beginning January 4, 2021. He was also fined $7,500 for allegedly using improper discretion without written authorization from customers and his member firm when placing trades in customers’ accounts.
According to the FINRA sanction, “Without admitting or denying the findings, Tomlinson consented to the sanctions and to the entry of findings that he improperly exercised discretion without written authorization when placing trades in the accounts of customers. The findings stated that Tomlinson took over the management of customer accounts that had previously been managed by a third-party investment advisor who utilized a high-frequency, intra-day trading strategy focused on pharmaceutical stocks. Tomlinson continued this trading strategy, but, unlike the investment advisor, Tomlinson did not have written authorization from the customers, or written acceptance from his member firm, to exercise discretion in the accounts.”
The sanction continued, “Tomlinson was [already] subject to a plan of heightened supervision by his firm that forbade him from placing discretionary trades in customer accounts. The findings also stated that Tomlinson caused his firm to maintain inaccurate order memoranda for each of the trades he placed on a discretionary basis. Tomlinson failed to mark any of those transactions as having been entered pursuant to the exercise of discretion. In addition, Tomlinson affirmatively mismarked order tickets for some of those trades. Specifically, Tomlinson mismarked the order tickets for those trades as unsolicited when, in fact, they were not unsolicited orders.”
For a copy of Tomlinson’s FINRA disciplinary action details, click here.
Summary Detail of the Allegations
Tomlinson’s civil and administrative penalty and fine were the results of allegations that he handled customer accounts without the customers’ written authorization and the written acceptance of his member firm. Tomlinson’s member firm had previously forbidden him from handling discretionary trades in customer accounts. It alleged that Tomlinson created inaccurate order memoranda, including failing to mark trades made based on discretion and actively mismarking order tickets for those trades as unsolicited when they were not.
On June 9, 2017, a tax lien for $47,540 was placed on Tomlinson.
On February 2, 2016, customer allegations of poor performance were levied against Tomlinson in a written complaint submitted to his member firm. These allegations were satisfied with a settlement agreement of $36,000 that was recorded on January 9, 2017. The written complaint had sought $84,000 in damages.
On May 30, 2013, a tax lien was recorded against Tomlinson for $2,081,299. Tomlinson said he was unaware of the lien until it was brought to his attention by FINRA, and he disputed the lien with the Internal Revenue Service (IRS).
On May 13, 2013, Tomlinson’s registration was revoked for failure to pay a fine of $7,500 related to FINRA Case 2011025773503, which was a result of Tomlinson’s failing to respond to FINRA’s requests for information and documents in a timely manner. In addition to the fine, Tomlinson was suspended for 30 days beginning December 17, 2012. For a copy of Tomlinson’s FINRA disciplinary action details in this case, click here.
Why Handling Transactions with Improper Discretion Is a Problem for Investors
For a copy of Jay Tomlinson’s BrokerCheck, click here
Discretion allows brokers to buy and sell on their clients’ behalf. Doing so without the written authorization of the customer and written acceptance of the member firm, also called unathorized trading, violates FINRA rules. Rules prohibiting unauthorized trading protects investors from transactions made without their expressed knowledge, which may not be in the clients’ best interest or goals.
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