FINRA fines, suspends broker for MSRB rule violation

A former broker and investment advisor has been suspended by the Financial Industry Regulatory Authority for violating MSRB Rule G-8 on recordkeeping as a result of failing to identify the intended beneficiaries of multiple 529 or education expense plan accounts.

Wayne Von Borstel has agreed to a deferred $5,000 civil and administrative fine and is suspended from all capacities for 15 business days beginning Aug. 1 and ending on Aug. 19.

Von Borstel agreed to settle FINRA's charges against him without admitting or denying the findings.

The matter arose when in 2016, Von Borstel's firm, LPL Financial, implemented a new policy that prohibited the purchase of Class C shares in 529 plan accounts for young beneficiaries, unless the firm granted an exception.

“After the new policy became effective, some of Von Borstel’s customers decided to close existing 529 plan Class C share accounts for young beneficiaries and to open new 529 plan Class C share accounts,” the filing said.

“However, when Von Borstel completed the required forms to establish the new 529 plan Class C-share accounts, instead of identifying the young beneficiaries on the account forms, he identified adults who were related to the young beneficiaries.”

By doing this, Von Borstel then enabled the new accounts to bypass the firm’s review process, following the implementation of its new 529 plan policy, and caused the firm’s books and records to be inaccurate.

MSRB Rule G-8 states that municipal securities brokers and municipal securities dealers must make and keep current the records stated in the rule, including, method of recordkeeping, account records, securities records, records for agency and principal transactions, customer account information and three years of written communications.

Von Borstel was a representative for LPL Financial from 2001 until Aug. 2020. FINRA records show the firm permitted him to resign and cited a “failure to report written customer grievances,” in addition to a “failure to adhere to firm policy regarding the use of mutual fund c-shares in 529 plans.”

Violations of MSRB Rule G-8 came up in a notable FINRA action last year when Samuel A. Ramirez & Co. agreed to pay a $35,000 fine to FINRA for violations of multiple MSRB Rules, including G-8, where Ramirez failed to record the accurate maximum applicable interest rates at the time of certain interest rate resets.

Von Borstel's lawyer did not respond to a request for comment.