Finra Suspends Ex-Merrill Star in Boston for False Expense Reports
(Recasts first paragraph to indicate Galuppo violated a Finra business-standards rule by improperly using his firm’s funds, not for cheating on expense account reports.)
Sandy Galuppo, the former Merrill Lynch managing director who oversaw a large , accepted a one-year suspension from the brokerage industry and a $10,000 fine for violating high standards of commercial honor by improperly using firm funds in connection with expense reports, according to a consent order posted late Wednesday on the Financial Industry Regulatory Authority’s disciplinary action website.
Merrill fired Galuppo last November for “conduct including improper submission of personal expenses for reimbursement, resulting in management’s loss of confidence,” according to his BrokerCheck record. He had spent all but a few months of his 21-year career at the firm.
Finra’s enforcement action this week illuminates why firms are cracking down on policy violations unrelated to client issues, even for top brokers who might once have got a mere internal write-up, lawyers have said. In filing false reports, Galuppo prevented Merrill from properly ensuring that its internal policies were enforced, according to the consent order.
Galuppo escaped a second rule violation that Finra was investigating.
The self-regulatory group was probing potential violations of both its “high standards of commercial honor” Rule 2010 and of its Rule 4511 requiring member firms and registered persons to keep accurate books and records, according to BrokerCheck.
The letter of acceptance, waiver and consent (AWC) posted on the enforcement website refers only to his alleged violation of Rule 2010.
Galuppo, who briefly played in the National Hockey League as a goalie in 1994, accepted Finra’s sanctions without admitting or denying its findings. He referred calls for comment to his lawyers.
“We believe that the AWC reflects the lack of any bad intentions on the part of Mr. Galuppo, as these were technical violations of expense reimbursement policies that we understand have been to a large extent been changed [by Merrill] to permit the type of expense reimbursement practices at issue here,” said Mark Rosen, a lawyer at Portland, Maine-based Pierce Atwood.
According to the consent order, Galuppo traveled extensively between 2012 and 2015 on business, submitting through subordinates more than 600 reimbursement requests to cover his “substantial” expenses. Merrill Lynch allowed him to charge meals and entertainment through either a corporate expense account or through a personal “business development account” funded largely by his pre-tax earnings, the order said.
BDA-type accounts, which many firms offer as bonuses for high sales, have been the downfall recently of brokers at UBS, Morgan Stanley and other firms. Concerns about failing to have pay deductions reimbursed can tempt people to file false expense reports, said current and former brokers who spoke on condition of anonymity.
Galuppo “on some occasions” provided information about meals and entertainment that he “knew or was reckless in not knowing was inaccurate,” according to the consent order he signed. Some involved his inaccurate description of meals with colleagues as having been attended by clients, it said.
The consent order alludes to “about 82“ instances of inaccurate filings, mostly for meals, but specified only one example.
“Galuppo submitted an April 18, 2015 expense for $430 that was identified as a client meal with a client representative in attendance, when in fact only Galuppo and another Merrill Lynch employee were present,” it said.