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Senators Urge Finra to Bar FAs from Receiving Client Inheritance

May 22, 2019

Four U.S. senators want Finra to bar financial advisors from inheriting their clients’ money or property, according to news reports.

Sens. Catherine Cortez Masto, D-Nev., Mike Rounds, R.-S.D., Tina Smith, D-Minn. and Chris Van Hollen, D- Md., have sent a letter to the industry’s self-regulator saying that such inheritance bequests are clear conflicts of interest, according to the Wall Street Journal. The lawmakers are urging Finra to make regulations that would ensure advisors and firms accepting such bequests be required to forfeit them or pay fines and/or be barred from serving in the financial services industry, the paper writes.

“We currently have a loophole that permits unscrupulous financial advisers and firms to take advantage of seniors and vulnerable adults,” Cortez Masto says in a statement cited by the Journal.

The senators’ letter cites a Wall Street Journal article published last month about a state insurance official who was fired after recommending that Lawrence Mieras Jr., be barred from the industry after receiving $500,000 in 2017 from a deceased client, Addie Belle Jones, who died in 2016, according to the paper.

Michael Stefanowitz, an insurance investigator with the Maryland Insurance Administration, recommended that Mieras be barred, arguing that Jones wasn’t competent to sign a bequest that allowed Mieras to get the money outside the estate process.

A Finra arbitration panel, responding to a complaint filed by Jones’ estate, took issue with the conduct of the advisor and the firm where he worked, American Portfolios Financial Services — which had concluded that the bequest was appropriate — but nonetheless didn’t rule against them.

Finra’s enforcement arm also didn’t bring an action against them. The Maryland Insurance Administration overruled Stefanowitz and then fired him, the Journal reported.

By Alex Padalka
  • To read the Wall Street Journal article cited in this story, click here.