BROWSE BY TOPIC
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
If You Must Borrow from a Customer, At Least Document the Loan
by Howard Haykin
Let’s review the facts and circumstances of these cases to better understand FINRA’s probable reasons for levying such widely disparate sanctions.
BROKER ONE – WHAT WENT WRONG (AWC #2016050800401). In June 2016, the Merrill Lynch broker borrowed $250,000 from a customer contrary to Firm policies. The broker planned to leave Merrill and affiliate with another firm, and needed the money to remodel office space that he planned to occupy.
- The broker had 8 years’ experience with 3 firms.
- The customer, an attorney, was a personal friend of the broker.
- The loan was documented.
- The loan was repaid with interest in August 2016 – 2 months later.
BROKER TWO – WHAT WENT WRONG (AWC # 2018059481701). In May 2013, an LPL Financial broker borrowed $125,000 from a customer contrary to Firm policies. The broker needed the money to facilitate a real estate purchase.
- The broker had 32 years’ experience with 3 firms.
- The customer was a personal friend of the broker.
- The customer was a senior investor at the time the loan was made.
- There was no promissory note or other document memorializing the loan.
- The loan, based on an oral agreement, had no specific terms regarding interest or repayment.
- The broker misstated on several ACQs (annual compliance questionnaires) that she had not borrowed any money from another individual or entity.
- Under terms of FINRA’s AWC, the broker must repay the $125,000 with interest to the customer.
FINANCIALISH TAKE AWAYS. Here’s what apparently made a difference in the sanctions:
- Broker One’s loan was documented; Broker Two’s loan was not.
- Broker One’s loan carried an interest rate and apparently stipulated a repayment date; Broker Two’s loan specified no interest or repayment terms.
- Broker One repaid his loan with interest after just 2 months; Broker Two never made any payments - principal or interest – over the 5-year period.
- Broker Two borrowed the funds to facilitate a real estate investment that might have carried risk, thus possibly impacting Broker Two's ability to repay the loan.
- Broker Two borrowed from a senior investor lender (a ‘cardinal sin’).
- Broker Two submitted false statements on Merrill’s ACQs (another ‘cardinal sin’).
Here’s what apparently had little impact on the sanctions:
- Broker Two’s clean disciplinary record over her long-term (32 year) career.
- Broker One’s and Broker Two’s personal relationships (friendships) with the customers who lent funds.
These cases were reported in FINRA Disciplinary Actions for January 2019.
For further details, go to ... FINRA Disciplinary Actions Online, and refer to the Respective AWC Number.