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Investor Protection

An Illegal Loan to Your Broker – A ‘Feel Good‘ Story

April 6, 2020

[Photo: Caring for the Elderly /]


by Howard Haykin



Alarms typically go off when we read about a broker who borrows a large sum of money from an elderly customer. We have little doubt the broker will fail to repay the loan and the customer will lose his or her hard-earned retirement savings. 
Well, surprise! In this FINRA case study involving a customer loan to a broker, there’s a pleasant ending – though I’m somewhat disappointed the broker was fined and suspended. In any case, the details of the story prompt me to reach out to the broker and express my best wishes for his actions. Please read on…



A broker with First Western Securities first met his customer some 30 years ago when she sought help with probate proceedings following the death of her husband. The widow requested his assistance because the broker had provided financial services to her husband and other family members.


Integrity and Honor.   From that point on, the customer developed a close relationship with the broker, who provided personal care to the customer over the last several years of her life. That included handling healthcare, maintaining her properties and paying bills. [In other words, this broker was not only competent, but he was a Mensch.]


Loan to Broker.   In 2012, the broker borrowed $150,000 from his 90-year-old customer to cover expenses incurred in litigation. The loan was memorialized with a promissory note that provided for a 10-year term and a 2% interest rate. The broker made one annual payment in January 2014, which the customer never cashed. Six months later the customer passed away, leaving a trust document that forgave the loan. [The broker never disclosed the loan – a violation of firm and FINRA rules.]


Gifts to Broker.   In 2013 and 2014, the broker accompanied the customer on 3 international cruises – which the customer paid for in full. [The broker never disclosed these ‘gifts’ valued at $19,500 – a violation of FINRA rules.]


FINRA Sanctions.   The broker received a $10K fine and a 6-month suspension - the first and only disciplinary action in his career. The broker remains associated with First Western Securities.



[For further details, click on … FINRA Case #2017056557101.]