AG: Jersey City brokerage firm to pay $250k fine due to agent who misapplied $1.4M

0

A Jersey City brokerage firm has agreed to pay a $250,000 due to agent who misapplied $1.4 million from at least three customers between 2009 to 2017, New Jersey Attorney General Gurbir Grewal announced.

Photo via Royalalliance.com.

By John Heinis/Hudson County View

In a consent order filed today, the New Jersey Bureau of Securities found that Royal Alliance Associates, Inc., headquartered in Jersey City, failed to adequately supervise longtime agent Gary Basralian.

He is accused of misappropriating more than $1.4 million from at least three Royal Alliance customers while overseeing a branch office in Maplewood from 2009 to 2017.

Basralian, who is serving a federal prison sentence in connection with the scheme, admitted initiating numerous unauthorized wire transfers from customers’ accounts to the bank accounts of entities that he controlled, then using the funds for his own expenditures, including BMW payments and tens of thousands of dollars in credit card bills.

The bureau revoked Basralian’s agent and investment adviser representative registrations in May 2018, one day after the U.S. Department of Justice filed federal charges of wire fraud and investment adviser fraud against him.

He pleaded guilty in September 2019 and was sentenced to 70 months in prison.

In a consent order wrapping up its investigation into Basralian’s scheme, the bureau found that Royal Alliance’s written policies and procedures regarding wire transfers were not adequate, constituting a failure to reasonably supervise its agents, as required by law.

“Brokerage firms have a legal obligation to reasonably supervise the conduct of their agents so that rogue agents aren’t given free rein to prey financially on the firm’s customers,” Grewal said in a statement.

“We will not allow New Jersey investors to be left vulnerable by financial firms that fail to implement and enforce an adequate system of supervision to protect their customers.”

According to the bureau’s findings, Royal Alliance’s policies and procedures prohibited third-party wire transfers except in limited circumstances. Any exceptions to the third party wire policy needed approval by the firm’s anti-money laundering department.

However, in practice, from at least February 2009 through July 2017, Basralian was able to misappropriate clients’ funds through approximately 60 unauthorized wire transfers from customers’ accounts to bank accounts of entities that he controlled.

Royal Alliance processed the wire transfers without review or approval by its anti-money laundering department, the bureau found.

Additionally, Royal Alliance has paid approximately $5 million in restitution to those harmed by Basralian, which include the Royal Alliance customers and others whose investments Basralian transacted while working at the firm.

Under the consent order filed today, Royal Alliance agreed to pay the Bureau $250,000, which is comprised of a $190,000 civil penalty, $30,000 in costs, and $30,000 that will be placed in a fund to be used for the Bureau’s investor education program.

Royal Alliance also agreed to review and revise as necessary (to the extent it has not done so already) its written policies and procedures, so that they are reasonably designed to prevent the type of conduct described in the consent order from occurring in the future.