John Cutshall Agrees to FINRA Bar to Resolve Allegations of Converting Customer Funds and Abusing Trustee ResponsibilitiesTuesday, May 14, 2019
The Financial Industry Regulatory Authority (FINRA) Department of Enforcement Office of Hearing Officers recently released an Order Accepting Offer of Settlement to resolve allegations of securities industry violations against John Cutshall, a former registered representative based in Woodsboro, Maryland.
According to his FINRA BrokerCheck report, Cutshall was most recently associated with RBC Capital Markets, LLC (March 2009 to June 2013) and Morgan Stanley (June 2013 to June 2014) in Frederick, Maryland as well as Lombard Securities Incorporated (July 2014 to April 2019) in Woodsboro, Maryland. Cutshall was discharged from Morgan Stanley when allegations arose that related to his “disclosure of fiduciary status with respect to outside accounts as well as employee withdrawal from a trust account on one occasion.” Lombard Securities also discharged Cutshall when he was named a respondent in a FINRA complaint for which this Offer of Settlement resolves.
FINRA Department of Enforcement alleged in the complaint that between 2012 and 2014, Cutshall converted funds from trusts that he administered on behalf of separate customers, a married deceased couple and an elderly 91-year old widow. Further, he impeded his member firm at the time, RBC, from properly supervising his trustee activities by failing to disclose that he had been named as beneficiary to a trust for which he was the trustee.
Specifically, Cutshall served as trustee for two of his customers from 1992 when they created separate trusts governing the disposition of their assets, until they both died in 2005 and 2006. The two accounts held at RBC were merged upon their deaths and totaled over $1.43 million. The funds were then administered by Cutshall to their intellectually disabled daughter until her death in 2012. Within weeks of the daughter’s death, Cutshall allegedly abused his position as the trustee by writing 34 checks from the account totaling approximately $400,000 that he deposited into his own bank account.
In 2013, Cutshall brought forth an unwitnessed handwritten note purportedly signed by one of the now deceased trust fund holders in 2012 that named Cutshall beneficiary of 50% of the assets in the trust seemingly to justify taking the funds. Cutshall hired a Maryland law firm to give him an opinion about the validity of the handwritten note. Though the law firm did not take steps to verify that the deceased customer had signed the document, the firm concluded that Cutshall should return all money that he had already taken. According to the Settlement, Cutshall only repaid $229,100 to the trust, keeping the different of $170,900, thus converting funds in violation of FINRA Rules 2150(a) and 2010.
In April 2014, Cutshall allegedly used a check from another trust for which he served as a trustee, to engage in an automated clearing house transaction for $2,000 at Charlestown Gaming in West Virginia to gamble. Cutshall did not repay the trust until a firm compliance employee questioned him about the transaction over a week later, though this alleged unauthorized and improper use of customers’ funds had already violated FINRA Rules 2150(a) and 2010.
Finally, in February 2014, Cutshall allegedly falsely claimed on an annual compliance questionnaire that he was not named as beneficiary of any non-family member account. This false statement constitutes a violation of FINRA Rule 2010.
Based on the foregoing, John Cutshall violated FINRA Rule 2150(a) for converting and improperly using customer funds and FINRA Rule 2010 for failing to abide by standards of commercial honor and principles of trade and making a false statement on firm compliance questionnaire. To resolve the allegations, Cutshall agreed to a bar from associating with any FINRA member in any capacity.
Many times, brokerage firms can be held liable if they failed to supervise a broker who committed misconduct while registered at their firm. If you lost money due to John Cutshall’s advice, you may be able to recover from him or his former brokerage firms, Morgan Stanley, RBC Capital Markets or Lombard Securities Incorporated. Call us (1-877-410-8172) for a free, no obligation consultation. Since 1998, we have been fighting for victims of broker misconduct and investment fraud.