Utah Targets Salomon For Blocking Client Account Transfers

The Utah securities division is seeking to sanction Salomon Smith Barney and a firm branch manager for stopping clients from transferring and effectively freezing their accounts. SSB is denying the charges, arguing that the accounts were covered by a court injunction it obtained stopping an ex-rep from soliciting those clients to transfer to his new firm, Prudential Securities. However, Anthony Taggart, director of the division, said SSB should have allowed the transfer and then sued Prudential if it felt the order had been breached. "If fighting over a client, protect the client; don't put him in the middle," Taggart said. The division is charging SSB with "unethical or dishonest" practices and failure to supervise branch manager Dean Cottle, who the division believes was the person who implemented the account freezing strategy. The regulator is seeking $10,000 "for each account improperly frozen," and the revocation of Cottle's license. George Robison, Utah director of licensing, estimated there were about 160 accounts caught up in the dispute. The division's petition states clients claimed no one was managing their accounts at SSB, which caused losses, and that they were being charged management fees anyway. SSB "froze the accounts in some way to prevent activity," leaving clients in limbo, said Taggart. Calls to Mark Griffin, of Woodbury & Kesler in Salt Lake City, who represented SSB and Cottle, were not returned. Griffin was previously the securities director for Utah.

SSB is arguing it could have been aiding and abetting a violation of the order had it allowed the accounts to be transferred, Taggart said. However, he added, SSB did not actually have proof that any of the client accounts had been solicited in violation of the order. SSB obtained the temporary restraining order from a Utah district court against the ex-representative Lynn Brandenburg on Jan. 17 in an effort to prevent the loss of accounts after he left for Prudential Jan. 12. The case is in discovery for SSB attorneys, and it is unclear whether a settlement or the administrative law judge, J. Eklund, will initially conclude the matter, said Taggart. He added the timeline is also unclear. Any decision by an ALJ would be approved or rejected by himself, he said, and SSB could appeal any decision entered as a result to Ted Boyer, director of the Department of Commerce, and higher still to the Utah Court of Appeals, and the Utah Supreme Court.