Finra has fined and suspended a former broker and ex-chief compliance officer for a defunct RIA formerly affiliated with LPL Financial for allegedly playing a role in a representative’s $1 million wire fraud scheme.
Without admitting or denying the findings that he helped falsify a wire transfer form at his firm, Jeffrey Kenneth Kirkpatrick, formerly of Georgia-based Hamilton Investment Counsel (HIC), agreed to a four-month suspension from associating with any Finra member and a $10,000 fine.
The wire was requested by Kirkpatrick’s former business partner, Eric Hollifield, also a former Hamilton Investment Counsel principal, who settled charges with the SEC in July 2020 that he misappropriated at least $1.7 million from two advisory clients and one brokerage customer.
Around the time of the $1 million transfer, which Kirkpatrick allegedly help falsify and approved, Hollifield was funneling money from HIC client accounts into other businesses he controlled and acquired a $1.8 million estate on 37 acres in Georgia, allegedly using money from HIC clients and an HIC brokerage customer, according to the SEC, which settled the charges with Hollifield, Kirkpatrick and the firm last year. The firm ceased operations in April 2022.
Without admitting or denying the charges, Kirkpatrick settled with the SEC and agreed to a cease-and-desist order, a civil penalty of $15,000 and a five-year limitation on his ability to act in a supervisory or compliance officer capacity at a broker-dealer affiliated firm for actions to “willfully aid and abet and cause HIC to violate” the Advisers Act.
Finra said it is suspending and fining Kirkpatrick now because he “falsely attested on the [HIC] form that he had verbally confirmed the amount, timing and payee instructions with the customer, when he in fact had not. Kirkpatrick signed the form without inquiring into the purpose of the wire transfer, and without speaking with either customer before signing and submitting the form to the firm.”
According to Finra’s findings, Kirkpatrick electronically signed the form at the request of another registered representative, who was a co-representative on the account at issue, and submitted it to his firm to effectuate his customers' requested transfer of $1 million from their account to a third-party entity's account.
Kirkpatrick also ran afoul of Finra regulations when he attested on a firm compliance questionnaire that all of his investment, financial, and insurance-related electronic communications were made using only firm approved email addresses, the regulator said.
“Kirkpatrick used his personal mobile phone to exchange text messages with the other representative about firm business. Most of the text messages concerned the signing and approval of wire transfer requests from clients' firm accounts, and one concerned a customer complaint,” Finra said.
Because the firm did not permit registered representatives to send or receive business-related text messages outside of the firm's approved text messaging application, it did not preserve Kirkpatrick's text messages, according to the self-regulatory organization.