WASHINGTON — A former broker has agreed to pay a fine of $3,750 and serve a 30-day suspension to settle charges that he violated municipal securities rules by making transactions in 529 plans without his customer's permission.
Mark Stewart Saunders, who until April of this year was registered with Edward Jones in Monroe City, Missouri, settled the charges with the Financial Industry Regulatory Authority late last week. As is typical in FINRA settlements, he neither admitted nor denied FINRA’s findings. His $3,750 fine for violations of the Municipal Securities Rulemaking Board’s Rule G-17 on fair dealing was part of a total fine of $7,500 that included violations of other non-muni rules.
Section 529 plans are set up by states under the Section 529 of the Internal Revenue Code for parents or others to invest funds used to pay for college for children or other beneficiaries. The interests from these funds are considered to be municipal securities and are called municipal fund securities, which is why brokers dealing with them are subject to MSRB rules. FINRA examiners alleged that on March 1, 2018, Saunders opened four new 529 plan accounts for a customer and caused five mutual funds to be purchased in each account, an investment totaling $6,600.
Rule G-17 requires registered muni professionals to “deal fairly with all persons” and “not engage in any deceptive, dishonest, or unfair practice.”
But FINRA examiners found that Saunders did not have permission from the customer to execute those transactions, instead having received authorization from the customer’s daughter. As the daughter did not have “written authorization accepted by Edward Jones to provide instructions for the accounts,” FINRA found, Saunders was not dealing fairly with the customer.
The non-muni violations were related to very similar conduct in which Saunders allegedly made other transactions for that same customer based on improper authorization from the daughter.
Saunders had settled with FINRA for a similar issue before, agreeing in June 2017 to pay $5,000 to put to bed charges that he had executed 15 transactions without his customer’s consent. He was fired by Edward Jones, his only employer in a 19-year career, over concerns that he was “effecting securities transactions without speaking with the client on the day of the trades or effecting securities transactions without speaking with an authorized party," according to FINRA.
Saunders is not currently registered with any firm, and could not be reached for comment.
