Former Merrill Lynch broker Thomas Buck agreed to plead guilty to churning accounts and overcharging customers. He was barred from the industry by the Financial Industry Regulatory Authority (FINRA) in 2015, and this week agreed to pay $5.1 million to settle civil fraud charges with the Securities and Exchange Commission (SEC). He could face up to 25 years in prison, and will be sentenced in January, according to U.S. Attorney James Minker in the Southern District of Indiana. Buck allegedly traded excessively in 50 nondiscretionary accounts, many times without getting the authorization of the client, and lied to Merrill compliance officials about disclosing to customers whether it would be less costly for them to be in fee-based accounts, rather than commission accounts. Around 80% of the revenue generated by Buck between 2012 and 2015 came from those commission accounts, and customers lost $2.5 million because of excessive charges. According to the SEC complaint, Buck intentionally failed to inform some customers that a fee-based option could be cheaper. Excessive trading in customer accounts is sometimes referred to as “churning,” and is a particularly egregious transgression that can occur when a broker trades in and out of securities unnecessarily. It typically results in large commissions for the broker, but unnecessary fees for the client. It is against securities laws and internal firm rules.
According to his online BrokerCheck report with FINRA, Thomas J. Buck was previously registered with Merrill Lynch in Indianapolis, Indiana from December 1981 until April 2015 and RBC Capital Markets in Indianapolis from April 2015 until July 2015. He has 37 customer disputes against him, one of which is currently pending. He has been permanently barred from the industry. The case against him is ongoing.
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