Lisbeth Cherrington's long, strange career, fraught with regulatory actions, takes another bizarre turn over her latest FINRA sanction--lying about her age

After 27 years and five firms--fraught with legal disputes and regulatory actions--Lisbeth Cherrington's super-producer career just took the strangest twist of all.  FINRA slapped her with a 60-day suspension and $15,000 fine for engaging in a rare, illegal broker practice.

She "cosmetically enhanced" her background by repeatedly misstating her age.  Her age is not disclosed in the FINRA documents and remains publicly unknown.

While it may seem like a little white lie-- or even an act of vanity--lying about personal details on internal documents relating to employment applications, personal brokerage accounts, records, or investments is a serious violation of several FINRA rules. 

On Aug. 13, Cherrington signed a letter of acceptance, waiver and consent (AWC) and unequivocally submitted -- "without admitting or denying the findings" -- to FINRA's judgement, waiving her right to appeal.

The letter, ostensibly, brings the matter to an end, but the bizarre nature of the infraction is one more chapter in Cherrington's long strange career. She's constantly veered into controversy, racking up eight formal complaints, and two regulatory actions in 20 years. Only 12% of reps across the securities industry have one or more disclosures.

In all, Cherrington has been fined $17,000 and shelled out $25,988.95 in individual contributions as part of settlements. The companies she represented contributed a further $213,244.97 to such settlements. See" After home raid allegedly turns up wild evidence, the SEC goes after Dawn Bennett for civil fraud

Yet through all her firm hopping and regulatory stumbles, the charismatic broker had at one time amassed an impressive $300 million in assets under management.  Four years ago, she took her group to Atlanta, GA.-based FSC Securities Corp., a part of the Phoenix, Ariz.-based Advisor Group IBD network. It came after a giant battle with Morgan Stanley. 

Insiders baffled

According to reports, Cherrington understated her age by six years. Industry insiders say they are baffled, because making yourself seem younger has no practical benefit for advisors or brokers. To the contrary, senior advisors often use their maturity--and attendant experience--as a client-recruitment selling point. 

What is known is that Cherrington, in June 2010 and July 2011, obtained a driver's license with a false date of birth. She first used the license to verify her age at Wells Fargo on updated personal brokerage account records.

Then in November 2011, she used the false date of birth, again, on her Morgan Stanley employment application, her WebCRD search consent form, her Form 1-9  and the account opening documents for her personal brokerage accounts.

In January 2014, she used it again at FSC, on various documents, including a fingerprint card used to conduct background checks and account opening documents. 

 Cherrington also lied on Form (U4) and used the false date on variable annuity change of ownership forms and a June 2016 life insurance application that was subsequently withdrawn.

Each time she did so, she not only violated FINRA rules, but she also caused Wells Fargo, Morgan Stanley and FSC to violate Section 17(a) of the Exchange Act and Rule 17a-3, which require firms to maintain accurate records. 

To make matters worse, Cherrington lied to FSC during an internal investigation, claiming that the driver's license was inaccurate because of an unknown "someone" and compounded through an "oversight when it automatically renewed." 

The AWC states the contrary: “Cherrington knew that she personally obtained a driver's license with a false date of birth, and provided copies of and/or access to that driver's license to her firm, employer, and office personnel for business purposes. Cherrington also knew that her responses were false and misleading.”

Wrist slap?

In that light, FINRA's suspension and fine could be viewed, arguably, as a slap on the wrist.

Bill Singer, outspoken regulatory critic and writer of the Broke and Broker blog, says her sanction could--or should-- have been far worse.

"Cherrington agreed that her misstatements were 'willful', and that constitutes a Statutory Disqualification," he says via email.

FINRA states a broker-dealer may be subject to disqualification for "any convictions and certain misdemeanor convictions within the last ten years, certain investment-related temporary or permanent injunctions, as well as a variety of other investment-related legal or regulatory actions/sanctions."

"It means either leaving the industry, permanently, or having to file an MC-400 and trying to convince FINRA that you should be permitted to remain in the industry, albeit subject to heightened supervision and extra scrutiny from FINRA," Alan M. Wolper of Ulmer & Berne LLP, writes in a blog post. 

This is true, but there are a number of hurdles to overcome, says Singer. "Depending on the reason for the false birth date, she may be a candidate for an MC-400 'waiver,' but would first need to find a sponsor FINRA member firm to file the request," says the former regulatory attorney with both the American Stock Exchange, and the NASD (now FINRA).

"The issue for the self-regulating organization [i.e. a broker-dealer] is the balancing act between the absence of sales practice fraud and the absence of any financial harm to the public and her employer, versus the repetitive nature of her false statements and the idiotic "someone" made me do it explanation," Singer writes.

As it is, Cherrington can return to her job after the 60-day suspension, a source with knowledge of the case says. Whether she's fired for her actions at FSC Securities Corp. remains to be seen. But Cherrington has had an uncanny ability to land on her feet every time she faces a setback. 

Dodging bullets

Between 2001 and 2007, she was investigated for eight different complaints, filed as early as 1998, and as late as 2007. Six of the eight complaints  pertained to her time at American Express. 

In 2014, she was involved in a high profile $6.7 million dispute with Morgan Stanley, during which time her lawyer, Thomas Campbell – whom she still retains – slammed the wirehouse for “breach of contract” and “outrageous defamation."

During the dispute, Cherrington claimed she faced widespread sexual harassment and discrimination because she was openly gay, an allegation Morgan Stanley strenuously disputed. The claims were resolved two years later in a confidential settlement in May 2016.

Cherrington dodged another bullet in Dec. 2016. She stood on the brink of having her license revoked by the South Carolina Department of Insurance for the same infraction "renewing her producer's license four times with an incorrect date of birth on her license application," according to a consent agreement written and signed by Raymond Farmer, the department's director of insurance.

Farmer says he exercised his "discretionary authority"  in the order of consent and only required Cherrington to pay a $2,000 administrative fine with expectations of future good behavior. This state insurance action is thought to have tipped FINRA. 

RIABiz contacted Morgan Stanley, FINRA, FSC, and the Chicago-based crisis PR firm Media and Communications Strategies that previously represented Cherrington, as well as compliance experts. All declined to comment.

They biggest mystery of all is why a successful rep with a strong client base falsified her age 20 years into her career, and why she continued to do so at three separate firms over the next seven years.

"As to 'why' she did it, I've been on Wall Street since 1982 and have long-since learned that the human mind is capable of many irrational thoughts" says Singer. "Given the AWC's lack of background on that very point, I won't even fathom a guess."