On May 24, 2019, Washington securities regulators suspended the securities agent registration of Roger Duval. The regulator alleges that between June 2017 and April 2019, Duval made unauthorized withdrawals totaling $246,400 from three customer accounts, two of which belonged to elderly customers and one of which was property of the estate of a recently deceased customer. Duval allegedly misappropriated the funds by depositing them into a credit union account under his control.
Victims of Duval’s fraud may be able to recover some or all of their losses from the brokerage firms where he worked, even if they did not have an account with the firms. Duval was most recently registered with the firm Pruco Securities. Before that he was registered with the firm MML Investors Services.
Misappropriation / Respondeat Superior
Courts have consistently held that brokerage firms may be held liable in cases where the firm failed to detect and prevent the theft or misappropriation of customer funds by a registered representative of the firm. For example, in As You Sow v. AIG Financial Advisors, Inc., 584 F. Supp. 2d 1034 (M.D. Tenn. 2008), the court denied a motion to dismiss filed by a FINRA member firm after the firm was sued by investors who had been defrauded by one of the firm’s financial advisors. The firm moved to dismiss the claims on the grounds that the firm did not owe a duty to the plaintiffs because the advisor was acting outside of the scope of his employment with the firm. The court denied the motion to dismiss, reasoning in pertinent part as follows:
Federal courts that have held that broker-dealers are liable under principles of respondeat superior where their affiliated agents steal client’s money. See Henricksen v. Henricksen, 640 F.2d 880, 887 (7th Cir.1981), cert denied, 454 U.S. 1097, 102 S.Ct. 669, 70 L.Ed.2d 637 (1981); Alvarado v. Morgan Stanley Dean Witter. Inc., 448 F.Supp.2d 333 (D.P.R.2006). A contrary rule would cause injury unfair to the investing public. . . . Broker dealers may not enjoy the benefits of their relationships with affiliated agents without discharging their supervisory duties[.]