My niece works for a securities firm as registered broker, (not CFP) - her mother, my sister, inherited a large sum of money and will be investing 100% of her funds with her daughters business. Is this a conflict of interest?
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1Not any more than any other client-broker relationship. Having said that, your sister’s trust in your daughter may tempt the young woman to embezzle the money.– RonJohnApr 11, 2022 at 0:42
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@RonJohn - SIPC insurance covers embezzlement. Just curious, how does a broker (personal rep not the firm) embezzle money from a brokerage account?– Bob BaerkerApr 11, 2022 at 12:28
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@BobBaerker I don’t know, but I’m sure someone in the field who’s motivated enough could figure something out.– RonJohnApr 11, 2022 at 12:38
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@BobBaerker usually a broker can "embezzle" money (for a layman's understanding of the word) by purchasing (if it is a discretionary account) or recommending securities or trading venues for which they take a higher commission. I've had to deal with instances in the past where an unrelated broker was recommending buying unsuitable securities because they received a higher commission for it– MD-TechApr 11, 2022 at 12:54
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@MD-Tech - Loosely speaking, a layman might consider embezzlement to be the inappropriate use of funds but in terms of legal authorities, it's theft of money from the account. Buying unsuitable securities for a client or a broker churning an account to rack up commissions is in the domain of FINRA whereas actual theft of money from an account is covered by SIPC. These malfeasances are distinct entities.– Bob BaerkerApr 11, 2022 at 14:08
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