BROWSE BY TOPIC
Stories of Interest
- Credit Suisse Fully Compliant on Sanctions: CEO
- Ex-UBS Metals Trader Beats Spoofing Conspiracy Charge
- Investment Advisor, WCAS Management Corp, To Pay Nearly $800K Over Conflicts of Interest
- Altaba, fka Yahoo!, to Pay $35Mn for Failing to Disclose Massive Cybersecurity Breach - SEC
- SEC Formerly Bars Martin Shkreli from Industry
- HF Billionaire Steve Cohen Buying Into Fintech Start-Ups
- Deutsche Bank Is Weighing Massive Cuts in Its U.S. Cash Equities Unit
- Richard Jenrette, Co-Founder of DLJ Investment Bank, Dies at 89
- Goldman Sachs Makes First Hire in Cryptocurrency Markets Unit
- Special FINRA Election to Fill Large Firm Governor Vacancy
- Chicago-Based Investment Adviser Sentenced to 151 Months in Prison - SEC
- Dun & Bradstreet Hit With FCPA Violations - SEC
- SEC Charges Additional Defendant in Fraudulent ICO Scheme
- Warren Buffett Simply Blew it on Wells Fargo Stock: Dick Bove (Video)
- Barclays and Deutsche Bank to Lag U.S. Trading Peers
- NY AG Schneiderman Seeks to Close Loophole That Could Let Trump Pardons Block State Charges
- 'Fearless Girl' is Moving to NYSE After Year Staring Down 'Charging Bull'
- What's In Your Wallet - American Express Shares Soar After Earnings Release
- Deutsche Bank's Executive Departures Continue Following Change in CEO
- Reflections of an Economist Commissioner (SEC's Piwowar)
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
Brokers Borrowing for Customers: 4 Unique Cases and Sanctions
- Jaime Aguilar agreed to a $5K fine and a 45-day suspension [AWC #2016050297702]
- Jason Likens agreed to a $10K fine and a 15-month suspension [AWC #2016049871601]
- Ronald Weimer agreed to a $5K fine and a 20-day suspension [AWC #2016052117801]
- Thomas Lawrence III agreed to a $5K fine, a 24-month suspension, and restitution of $41K plus interest [AWC #2016051945101]
FINRA Rule 3240, "Borrowing From or Lending to Customers," prohibits registered persons from borrowing from or lending money to customers unless: (i) the member firm has written procedures allowing the borrowing of money from customers of the member, and (ii) the borrowing or lending arrangement meets certain specified conditions.
CASE #1: JAIME AGUILAR … agreed to a $5K fine and a 45-day suspension to settle FINRA charges that he borrowed funds totaling $22,100 from 2 customers.
BACKGROUND. Aguilar, a resident of San Diego, CA, has 17 years’ experience with 2 firms. From June 2009 to May 2016, he was associated with Morgan Stanley. He was discharged by Morgan Stanley over allegations regarding “his conduct with regards to an outside financial transaction between the financial advisor and a client of the firm, which was not disclosed to the firm.”
FACTS & CIRCUMSTANCES. Between December 2012 and April 2013, Aguilar borrowed funds totaling $22,100 from 2 customers without disclosing the loans to the Firm. In addition, in May 2013 and June 2014, Aguilar falsely stated in annual compliance questionnaires that he had not borrowed money from customers in the past 24 months.
- In December 2012, Aguilar and his wife borrowed $10,000 from one of Aguilar's customers at the Firm.
► Aguilar repaid the loan in full in January 2017.
- Additionally, in April 2013, Aguilar borrowed $12,100 from another customer of the Firm.
► Aguilar paid this loan back in full in February 2015.
- Aguilar falsely stated in annual compliance questionnaires that he had not borrowed money from customers in the past 24 months.
CASE #2: JASON LIKENS … agreed to a $10K fine and a 15-month suspension to settle FINRA charges that he borrowed $23,500 from 2 customers.
BACKGROUND. Likens, a resident of Asheville, NC, has 11 years’ experience with 5 firms. From March 2009 until August 2016, he was associated with Oppenheimer & Co.; from August 2016 to February 2017, he was associated with another firm.
FACTS & CIRCUMSTANCES. While associated with Oppenheimer & Co., Likens borrowed money from 2 customers – “RE” and “JB.”
- In December 2014, Likens asked for and received a $5,000 loan from customer RE, who was elderly with significant health issues.
- In October 2015, Likens asked for and received another $5.000 loan from RE.
► Likens did not repay either $5,000 loan on schedule, and did not begin to repay the loans until Customer RE and his family made repeated requests.
- In December 2015, Likens asked for and received a $13,500 loan from customer JB.
► Likens also did not repay this loan on schedule and did not begin to repay the loan until JB made repeated requests.
- In 2015 and 2016, Likens attested on his Firm’s annual compliance questionnaires that he had not “made loans to or borrowed from customers.”
CASE #3: RONALD WEIMER … agreed to a $5K fine and a 20-day suspension to settle FINRA charges that that he borrowed $3,000 from a customer.
BACKGROUND. Weimer, a resident of Stevensville, MI, has 16 years’ experience with 4 firms. From June 2008 until November 2016, Weimar was associated with J,J.B. Hilliard, W.L. Lyons.
FACTS & CIRCUMSTANCES. ln or around April 2014, while associated with J.J.B. Hilliard, W.L. Lyons, Weimer borrowed $3,000 from “RD,” one of his customers.
- In accordance with the loan's terms, Weimer repaid the loan in full within 3 months.
CASE #4: THOMAS LAWRENCE III … agreed to a $5K fine and a 24-month suspension, and was ordered to pay restitution of $41K plus interest, to settle FINRA charges that he borrowed more than $39,000 from a customer.
BACKGROUND. Lawrence, a resident of Chapel Hill, TN, has 27 years’ experience with 4 firms. From June 2006 to December 2016, Lawrence was associated with Ameritas Investment Corp.
FACTS & CIRCUMSTANCES. Around 2002, Lawrence's wife at that time introduced him to Customer, who was approximately 85 years old, and they became friends.
- In November 2013, when Customer was ~96, Lawrence and his wife asked for and received a $39,364.43 loan from Customer to help pay their taxes; Customer wrote a check for $39,364.43 to the U.S. Treasury.
- On 12/1/13, signed a promissory note stating in part that he and his wife "owe ... [Customer] $49,364.43 principal with interest at a rate of 5% per annum payable in twelve months." [The note reflected $39,364.43 loan plus a $10,000 loam that Lawrence's wife obtained from Customer in 2009.]
► Lawrence did not repay any portion of Customer's loan.
► Lawrence never had any discussion with Customer about repaying his loan.
► Lawrence has not spoken to Customer since early 2014.
- Numerous times before and after borrowing from Customer, Lawrence acknowledged to Ameritas that he was not allowed to solicit or accept a loan from a client for any reason.
FINANCIALISH TAKE AWAYS. I have a problem with one of the cases - CASE #3 - in which the broker was fined $5K fine and suspended for 20 days. The broker borrowed $3,000 and repaid that loan in full within 3 months. So I view the sanction excessive. That said, this might have been the minimum sanction that FINRA could allot.
Of more critical importance, in the following observation.FINRA's prime determinant for the severity of its sanctions was whether or not the broker honorably discharged his debt(s). Two brokers apparently paid off their on time and they received 20- or 45-day suspensions. Two others failed to honorably discharge their debts and they received 15- and 24-month suspensions.
- An elderly customer was involved in one case - #4 - but it's difficult to determine the extent to which elderly abuse might have factored into FINRA's sanction.
- Brokers in 3 of the cases the broker attested to the fact that they had not borrowed from customers of the firm - in submitted responses to annual or periodic compliance questionnaires. Once again, it's difficult to determine the extent to which this issue factored into FINRA's sanctions.
These cases were reported in FINRA Disciplinary Actions for September 2017.
For details on this case, go to ... FINRA Disciplinary Actions Online, and refer to the above noted Case #.