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Regulatory Sanctions

Young Broker Gets 5 Months to Rethink Career Options

January 9, 2019

by Howard Haykin


Within the first 5 years of his financial services career a registered rep borrowed money from 3 different customers. He topped off his violative conduct by lying to the firm about his activities. Sometimes the coverup becomes more serious than the original crime or violation.



Between December 2013 and September 2015, a Morgan Stanley Registered Rep (“RR”) borrowed around $45,000 from 3 Firm customers (the "Loans") without providing prior notice to, and receiving written approval from, the Firm.


FINRA Rule 3240(a) prohibits a registered person from borrowing or lending money to his or her customer unless (1) the registered person's FINRA-regulated broker-dealer employer has written procedures permitting the borrowing from, and lending of money to, customers, and (2) the borrowing or lending arrangement meets at least one of five circumstances specified in the rule.


  • From December 2013 through May 2015, borrowed $29,700 from one customer through a series of loans, subject to 6% interest - as per an oral agreement. RR repaid $13,060 of the $29,700 he borrowed.


  • In July 2015, borrowed $9,500 from a 2nd customer pursuant to a promissory note providing for 31.5% interest rate and monthly payments of $250. RR repaid the note in full plus interest.


  • In or about September 2015, borrowed $5,500 from 3rd customer. RR repaid $2,000 of the $5,500 he borrowed.


THE REGISTERED REP MADE FALSE STATEMENTS TO FIRM.    In 2015 and 2016, in response to Morgan Stanley’s Annual Compliance Questionnaires, the RR falsely affirmed that he had not borrowed money from firm customers over the past 24 months.


In December 2016, when questioned by the Firm during an internal investigation, the RR falsely responded that none of the Loans were documented by a promissory note and that he received some of the loans from one of the customers prior to his employment with Morgan Stanley. These statements were untrue.


In 2016, the firm U5’d the RR for cause due to ”registered representative's conduct relating to an undisclosed outside financial transactions between the financial advisor and three clients of the firm.”



This case was reported in FINRA Disciplinary Actions for December 2018.

For details the case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2017053139401.