Senators Seek Penalties on Brokers Who Inherit

"I'd like your opinion about an inheritance question," a woman told the Ethicist at Investment News. Her aunt had died, leaving a will that named the aunt's financial adviser and his attorney friend as co-executors. The will left 25 percent of her estate to the questioner's father. Another 25 percent was left to the aunt's close friend. The rest went to the financial adviser.

Kosher? No, ruled the Ethicist. The financial adviser should not have assumed the role of executor. As for his inheritance (close to half a million, apparently) "if the financial adviser is wise, he will step down immediately and disclaim any rights to his former client's assets."

Now, another case of questionable inheritance reported by Gretchen Morgenson in The Wall Street Journal has prompted a bipartisan foursome of U.S. Senators to write Finra urging closer regulation. Advisers accepting such gifts “should forfeit the bequests, pay large fines and/or be unable to serve as financial professionals in the future.”