BROWSE BY TOPIC
- Bad Brokers
- Compliance Concepts
- Investor Protection
- Investments - Unsuitable
- Investments - Strategies
- Wall Street News
- Investments - Private
- Rules & Regulations
- Bad Advisors
- Boiler Rooms
- Terminations/Cost Cutting
- General News
- Donald Trump & Co.
- Regulatory Sanctions
- Big Banks
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
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
FINRA Wrong to Sanction Broker Twice for Borrowing from Two Customers
by Howard Haykin
A broker with SunTrust Investment Services was sanctioned twice by FINRA for borrowing from customers. He also was permitted to resign from the firm.
- Broker borrowed $528K from DS, a firm customer, between June 2010 and August 2010. [AWC #2017053041801]
- Broker borrowed $322K from MT, a firm customer, in December 2010. [AWC #2015045420301]
In each case, the broker agreed to a $5K fine and a 3-month suspension to settle FINRA’s separate and distinct charges that he had violated FINRA Rule 3240(a) which, in relevant part, “prohibits registered persons from borrowing money from or lending money to any customer without written approval of the firm.”
FINRA FINDINGS. Both cases are relatively straightforward, with few details to ponder. When the broker engaged in his violative conduct, he had been in the industry for 35 years, held a Series 24 General Securities Principal license, and had been associated with SunTrust Investment Services for 7 years. FINRA further notes that: (i) SunTrust did not permit loans between registered persons and customers who were not close family members; and, (ii) the broker “made an inaccurate statement on his firm's annual compliance questionnaires related to his borrowing from a firm customer.” [no doubt affirming that he had not borrowed from a firm customer]
What FINRA doesn’t note in the cases, but which we gleaned from its CRD records, is that the broker settled a customer dispute in 2017, which claimed that he “induced her on 8/12/10 to liquidate a $540,000 variable annuity bought elsewhere and invest $258,000 proceeds into investment real estate with [the broker]. [The broker] also arranged a personal loan with the client to purchase the real estate.”
FINANCIALISH TAKE AWAYS. So, was FINRA correct in sanctioning this broker twice for borrowing from two customers over a 4- to 6-month period? I SAY "NO!"
Had I been representing this individual, I would have argued with FINRA that my client, this broker, committed a single violation twice and thus should have been subject to a single sanction.
I then would have referred to any number of FINRA cases (AWC Letters), which demonstrate that registered persons who are cited for extended (or ongoing) violative conduct are typically sanctioned once, and only once - while the severity of their sanctions will typically be based on the egregiousness of their conduct.
‘DOUBLE JEOPARDY’ has no place in FINRA cases. This broker deserved more lenient sanctions – if not better legal representation.
This case was reported in FINRA Disciplinary Actions for April 2018.
For details on this case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2017053041801.