BrokerDealer.com blog post courtesy of extract from 11 August InvestmentNews.com column by Mason Braswell
Brokerage firms may be monitoring their brokers’ investment accounts for signs that a broker is about to jump ship.
Firms have long monitored brokers’ personal trading accounts for signs of suspicious trading activity. But certain behaviors — such as large withdrawals, moving assets into the accounts owned by family members or suddenly liquidating shares in proprietary products — may also suggest that a broker is planning to switch to another firm.
Indeed, brokers who make big changes to their accounts in anticipation of a job change run the risk of being fired or even facing legal consequences, said Sharron Ash, chief litigation counsel at the Hamburger Law firm, which specializes in representing brokers in transition.
“It’s certainly something that brokers who are planning a transition have to be cognizant of,” she said. “If it falls into the broader basket of anything out of the ordinary it could throw up a red flag.”
Brokers are required to custody their personal investment accounts, and those of their immediate family, at the firms they work for.
Those who are planning to quit often withdraw large sums ahead of the move to cover transition costs, such as paying for property when starting their own office. Also, brokers that owe money on large upfront recruiting loans may also withdraw funds in an attempt to thwart their firms from freezing their assets after they quit.
Liquidating positions in funds held by their firm is frequently done in advance of a move because those products may not transfer easily.
Firms do not take such moves lightly. Continue reading
