In February 2019, FINRA former Merrill Lynch, Pierce, Fenner & Smith financial advisor Thomas Buck (CRD# 1024868) to 40 months in prison following a guilty plea to one count of securities fraud in October 2017.
Buck was registered with RBC Capital Markets, LLC in Indianapolis, Indiana from April to July 2015 and previously with Merrill Lynch, Pierce, Fenner & Smith Incorporated Indianapolis, Indiana from 1981 to 2015, when he was terminated regarding, “Allegations including failing to discuss service level and pricing alternatives with a customer, providing inaccurate information to firm management during account reviews regarding this issue, mismarking bond cross trade order tickets as unsolicited, and providing information to a client during an active account review that did not correspond to the firm’s records.”
According to the U.S. Attorney in its charging document, Buck traded excessively in 50 non-discretionary accounts, some without getting customers’ required authorization. He also lied to Merrill Lynch compliance officials about disclosing to customers whether it would be less costly for them to be in fee-based rather than commission accounts.
In February 2018, The Securities and Exchange Commission (SEC) barred Buck for participating in any offering of a penny stock. “The Commission’s complaint alleged that Buck, among other things, impermissibly exercised discretion when placing certain trades in certain customer accounts without obtaining authorization from the customer and made material misrepresentations and omissions to customers and investment advisory clients regarding the fees or commissions charged in their accounts.”
In October 2017, the Securities and Exchange Commission alleged that Buck represented to certain customers with commission-based accounts that the total annual commissions they paid would not exceed certain limits, and then he traded in those accounts and generated commissions that exceeded the amounts he promised. It is alleged that Buck failed to inform the customers that their total annual commissions were exceeding the promised limits, and Buck intentionally failed to inform the customers that a fee-based option could be cheaper compared to the total annual commissions being paid based on trades executed in an account. Buck also exercised discretion by placing trades in the accounts of certain customers without authorization. Buck received more than $2.5 million in excessive commissions and fees from at least 50 retail customers and investment advisory clients in a three-year scheme. Merrill had a 2.75% maximum fee on advisory accounts, however the commissions paid by one of Buck’s customers reached 4.39% of assets. Buck agreed to pay a $5 million civil penalty.
FINRA barred Buck in July 2015 after he consented to the sanction and to the entry of findings that he willfully committed fraud. It has been reported that Buck’s business generated annual revenues ranging from $6 million to more than $10 million, at least 85% of which was directly attributable to Buck’s individual production. Approximately 80% of the revenues generated by Buck came from commission-based activity; whereas approximately 70% of his member firm’s Indiana complex’s revenue was generated through fee-based accounts.
Buck has been the subject of 37 customer complaints between 2006 and 2017, according to his CRD report. Many settled claims were regarding excessive trading, misrepresentation and omission of material facts and unsuitable investment recommendations. Recent settled complaints include:
- October 2017. “The Customer alleges excessive trading from December 2011 to February 2015.” The case was settled for $88,201.78.
- February 2016. “The Customers allege unauthorized trading, excessive trading and misrepresentation and omission of material facts from January 2009 to March 2015.” The case was settled for $395,338.78.
- January 2016. “The Customers allege misrepresentation and omission of material facts from January 2010 to March 2015.” The customer sought $950,000 in damages and the case was settled for $430,000.
- November 2015. “The Customer alleges misrepresentation and omission of material facts and unsuitable investment recommendations from February 2000 to March 2015.” The customer sought $425,000 in damages and the case was settled for $135,000.
- October 2015. “The Customers allege misrepresentation from May 2011 to March 2015.” The case was settled for $565,000.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Merrill Lynch, Pierce, Fenner & Smith may be liable for investment or other losses suffered by Buck’s customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.