Industry regulators last week decided to suspend and fine a Wisconsin financial advisor who was found to have executed 16 unauthorized transactions that allowed a client's ex-wife to nearly empty his individual retirement account.
The client, a retired factory worker, discovered the situation when his electricity cut off while he watched TV, subsequently learning that his former wife — who lived with him and handled the bills — had taken the money and not paid the electric bill for months, according to testimony provided at a Financial Industry Regulatory Authority hearing.
FINRA's hearing office ordered a three-month suspension and $10,000 fine plus hearing and administrative costs for John E. Pelletier, listed on LinkedIn as a senior financial advisor with BMO Investment Services, which offers investment advisory services through LPL.
FINRA's BrokerCheck indicates that Pelletier has been registered with LPL since 2021. He was employed as a BMO Harris registered representative at a call center near Milwaukee during the period relevant to the complaint, according to the FINRA order.
The call center's written policies and procedures "warned specifically against accepting orders from an account owner's spouse," the order stated.
In 2017 and 2018, Pelletier enabled distributions at the direction of the customer's ex-wife, who was not an authorized agent and who subsequently "nearly depleted the account by spending the funds without the customer's knowledge," FINRA's Office of Hearing Officers found, according to a summary on the advisor's FINRA BrokerCheck page.
"Pelletier claims that the customer gave him oral authorization to accept the ex-wife's trade instructions but the panel determined that there is no evidence of the authorization," the summary says.
The client, "DP," entrusted his employer-sponsored 401(k) retirement savings account, accumulated over a 25-year career and representing two-thirds of his financial assets, to Pelletier to roll over into an IRA, according to the order.
"DP expected to rely for years on $500 monthly distributions from the account to supplement his Social Security income," it says. After setting up the account, however, Pelletier executed the 16 trades to enable distributions at the direction of the customer's ex-wife, "NP," FINRA found.
The long-divorced couple had resumed living together but didn't remarry, according to the June 25 decision.
DP was 70 when the hearing was held in February and was living in a small town in Michigan. He had retired in 2015 after a career working on an assembly line producing heavy equipment for the military, FINRA says.
When he initially contacted BMO Harris, he had a vested balance of about $78,000 in the 401(k) account. DP and his ex-wife maintained a joint checking account at his credit union; it was his only checking account, and his Social Security income was deposited into it.
The retired factory worker testified that NP controlled the account and handled their household finances, which included paying the bills and preparing their income tax filings, but did not include anything involving his retirement account, according to FINRA.
When the retiree first contacted BMO Harris and was referred to Pelletier, he wanted to roll his 401(k) account into an IRA and receive regular monthly distributions, FINRA says.
On his application form, DP indicated that liquidity was "very important" to him and that he wished to have access to the funds during the portfolio's 15-year time horizon. The application showed he was the IRA's sole owner and the only one authorized to direct trades in it.
"The account held virtually all of DP's savings; he had no other investments or retirement accounts. His annual income of $19,200 was from his Social Security payments. He testified that he intended to use the $500 monthly distributions to supplement his retirement income to provide him with 'the same amount of cash' he had coming in when he was still working," the order notes.
