FINRA Charges Broker for Improper Borrowing from a Customer
FINRA charged a broker with improperly borrowing money from an elderly customer and making false statements.
According to a Complaint before FINRA's Office of Hearing Officers, the Defendant obtained $400,000 in personal loans through three promissory notes from a customer's account whose beneficial owner was an 84-year-old client, later deemed incompetent due to dementia. FINRA alleged that the Defendant's conduct violated firm policies that prohibit borrowing from customers who are not immediate family members. The loans, FINRA said, were never disclosed to the firm, despite requirements to report such arrangements.
FINRA also said the Defendant concealed the borrowing by failing to seek approval and by falsely certifying on two annual compliance questionnaires that he had not borrowed money from anyone outside a bank or credit union. FINRA alleged that these false attestations prevented the firm from detecting the misconduct. The firm ultimately discovered the borrowing after concerns were raised by the customer’s family, and the loans were repaid in full.
FINRA charged the Defendant with violating FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade") and 3240 ("Prohibition on Borrowing From or Lending to Customers").
FINRA is seeking (i) findings that the broker committed the violations alleged, (ii) monetary penalties under FINRA Rule 8310 ("Sanctions for Violation of the Rules"), and (iii) an Order requiring the broker to bear the costs of the proceeding pursuant to FINRA Rule 8330 ("Costs of Proceedings").