At Hauserís request, firm customers borrowed a total of $202,000 from the cash value accumulated in whole life insurance policies that Hauser previously sold to them. Hauser then borrowed the funds from these customers, pursuant to secured (as to two of the loans) and unsecured (as to one of the loans) promissory notes providing for annual interest. Hauser has not made interest or principal payments on the notes.
Hauser's firmís WSPs prohibit associated persons from engaging in borrowing or loaning funds with a customer, unless the customer is an immediate family member and the firm provides prior written approval; none of the customers from whom Hauser borrowed funds were members of Hauserís immediate family, and Hauser did not seek or receive prior approval for the loans.
While associated with a member firm, Axel, through a company in which he held an ownership interest and co-managed, borrowed $200,000 from two customers in three transactions.
The first loan for $50,000, which Axel later repaid, was contrary to Axelís firmís written policy that prohibited individuals from borrowing money from firm customers, and Axel did not seek or receive his firmís approval for the loan he received from the customer. Prior to receiving the loan, the firmís CCO explicitly stated that Axel did not qualify to raise money with his customers.
Axel left the firm and became associated with another member firm; Axel, through his company, solicited another $50,000 from the first customer, who had now transferred his account to the firm where Axel remained his account representative. Axel did not repay the funds he borrowed in the second loan.
Finally, Axel, through his company, borrowed $100,000 from a second customer. The customer has received partial payment of the loan. Axel accepted these two loans contrary to his firmís written policy that prohibited registered persons from borrowing money from a customer, Axel had not asked for, nor had received, the firmís permission to borrow these funds.
Axel provided false information to his second member firm, when he responded that he never loaned money to, or borrowed money from, a customer, or arranged for a third party to loan or borrow from a customer on a compliance certification.
Porporino executed two unauthorized trades in a customerís account without the customerís prior knowledge, authorization or consent, which cost $474,000 and $444,000 respectively, resulted in approximately $37,000 in losses to the customer and netted Porporino approximately $16,200 in commissions.
Contrary to firm procedures that generally prohibited registered representatives from borrowing funds from customers unless they had the firmís presidentís prior written approval, Porporino borrowed $40,000 from a customer without disclosing the loan to his firm; he repaid the loan, including $8,000 in interest. The was unaware of and did not otherwise approve the loan.
Head conveyed false and exaggerated account values to customers verbally and with falsified documents; and borrowed $20,000 from a customer and has repaid only $1,000 to the customer, contrary to the firmís written procedures prohibiting representatives from borrowing from customers without branch manager or other supervisor approval and the written approval of the firmís compliance department. Head did not request or obtain permission from her firm to borrow money from the firmís customer.
Head settled and/or offered to settle a customer complaint without her firmís knowledge or authorization. Head sent an unapproved and materially false letter to a bank by preparing, signing and mailing a letter to a bank stating that a customerís assets totaled over $4 million in order to assist the customer in obtaining a mortgage loan; although the firmís procedures required that outgoing correspondence be reviewed and approved before mailing. Head neither sought nor obtained approval for the letter.
Head exercised discretion in customer accounts without written authorization; Head neither sought nor obtained authorization from customers or her firm to exercise discretion in their accounts.
Head mischaracterized solicited trades in customersí accounts as unsolicited, causing her firmís books and records to be inaccurate. In addition,
Head repeatedly sent emails and text messages to customers from her personal email accounts, which violated her firmís policies forbidding the use of personal email accounts and mandating that business-related electronic communications with customers occur within the firmís network. Headís use of her personal email account prevented the firm from reviewing her email and text messages, and delayed the discovery of her misconduct in customersí accounts.
Head submitted false and evasive information to FINRA in response to a written request for information; and subsequentlyfailed to appear or otherwise respond to FINRA requests for testimony.
Dusenberry borrowed $742,500 from his customers and, in several instances, Dusenberry used the proceeds of one loan to repay an earlier loan from a different customer. Dusenberry failed to repay a total of approximately $500,000 to his customers.
The firm prohibited borrowing money from customers unless the borrowing arrangement fell within certain enumerated exceptions, such as a loan from an immediately family member; regardless of the circumstances, however, employees were required to obtain the firmís written pre-approval for all loans, and Dusenberry neither requested nor received the firmís written pre-approval for any of his loans.
In order to effect one of the loans, Dusenberry signed the customerís name to a Letter of Authorization (LOA) and submitted it to the firm, which caused the firm to transfer $30,000 from the customerís account to another customerís account. In order to effect a loan from a different customer, Dusenberry signed that customerís name to an LOA without her knowledge, authorization or consent, and submitted it to the firm, which caused the firm to transfer $32,000 from the customerís account to another customerís account.
Golembiesky borrowed $30,000 from a customer without his member firmís knowledge or approval. The firm prohibited registered representatives from borrowing money from customers unless that customer was a member of the registered representativeís immediate family and the registered representative had requested and received prior written permission from the firm. The customer was not a member of Golembieskyís immediate family and the loan was thus prohibited under the firmís written procedures.
By the time the firm became aware that Golembiesky had borrowed money from the customer, Golembiesky had repaid the customer $10,000 on the loan. The firmís bank affiliate repaid the balance of the loan to the customerís estate.
Golembiesky entered into an agreement whereby Golembiesky promised to pay the bank $22,275 plus any applicable interest; Golembiesky has reduced the outstanding balance to $10,000.
Aretz established an outside business activity and never made a written request to, or received permission from, his member firm to engage in the outside business activity.
In connection with the outside business, Aretz borrowed approximately $242,800 from firm customers without requesting or obtaining permission from his firm, and has yet to repay the loans. Aretzí firm prohibited its registered representatives from borrowing funds from customers without the express written consent of the firmís chief compliance officer or a member of the firmís senior management. Aretz failed to disclose the loans on several annual firm compliance questionnaires and that he failed to respond to FINRA requests for information.
Poe borrowed a total of $125,000 from an elderly customer of his member firm without seeking or obtaining his firmís approval for any of these loans.
Poe and the elderly customer memorialized the loans by executing a promissory note in which Poe promised to repay the $125,000 that he had borrowed; Poe has not repaid any portion of the loans.
Poe completed the firmís annual sales questionnaire and falsely answered ďnoĒ in response to a question that asked whether he had received loans from any of his clients or family members who have accounts at the firm within the preceding 12 months. The Firm terminated Poe and, on a Uniform Termination Notice for Securities Industry Registration (Form U5), reported that Poe had been under internal review for violating firm policy by borrowing money from a client.
Subsequently, Poe caused his Form U5 to be amended to include a comment addressing the internal review in which Poe stated, among other things, that the loan at issue was made by the elderly customer, who he had known since adolescence and served as a mentor and pseudo-grandfather. FINRA found that Poe had not known the customer since adolescence and had met the customer several years earlier when he had solicited him to become a client.
Veile borrowed $800 from one of his customers at his member firm. The loan was not reduced to writing and had no repayment terms, and Veile did not disclose this loan to his firm and the firm had a policy prohibiting representatives from borrowing money from customers.
Veile paid back the customer after FINRA began its investigation. Veile completed an annual compliance statement for the firm in which he falsely stated that he had not engaged in any prohibited practices, including borrowing from or lending to a client.
Simha borrowed approximately $51,000 from customers at his member firm in order to complete renovations on his house.
The loans were not reduced to writing and had no repayment terms; the customers had been Simhaís friends for many years, and one was his relative. The firm had a policy prohibiting representatives from borrowing money from customers; one of the loans was repaid before Simha disclosed it to the firm and the other loans have since been forgiven by the customers.
Simha sent an email to a former customer requesting a share of the profits that were made in the customerís account while the account was with the firm. In that email, Simha represented that FINRA was auditing the customerís account, but this was not correct; the client never sent Simha the share of the profits he requested.
Contrary to his member firmís prohibition on accepting loans from customers, Kepes borrowed $50,000 from a customer in the form of a loan, not documented and not backed by collateral, was a ďbridge loanĒ pending payment of the firmís annual retention bonus, to assist Kepes with a number of immediate expenses.
Kepes held the loan for six months and 20 days, repaying $53,000 to the customer. Kepes encouraged the same customer to loan $30,000 to a realtor to assist in ďflippingĒ (buying, repairing and then selling) a house. The customer advanced the funds as a favor to Kepes, without documentation or collateral, but the realtor never repaid the loan. Kepesí firm paid the customer $30,000 to compensate her for the money the realtor failed to repay.
Kepes accepted a $1,000 check as a gift from the customer although firm policy prohibited accepting gifts in excess of $100.
Moreover, contrary to firm policy and without informing his firm, Kepes entered into an Advisory Board Agreement to serve as an independent contractor for a privately held business and was compensated by stock options with some of the shares being exercisable on the date the agreement was signed, in recognition of services already provided prior to signing the agreement. Furthermore, Kepesí supervisor directly informed him that he could not join the company advisory board or engage in other activities called for by the agreement when compensated by stock options; nevertheless, Kepes signed the agreement and engaged in various activities called for by the agreement. Subsequently, Kepes requested approval to participate on the Advisory Board without informing his firm that, prior to his request, he signed the agreement and began service as an independent contractor to the company. After the request was denied, Kepes continued his service to the company as an independent contractor without informing his firm until the firm terminated him.
Von Lumm borrowed $5,000 from one of his customers and executed a promissory note stating that the loan was to be paid in full by a certain date, with $1,000 interest. Von Lumm repaid approximately $2,100 to the customer but did not disclose the loan to his member firm, which prohibited its representatives from borrowing from customers.
The same customer gave Von Lumm $500 towards the purchase of auto and homeowners insurance, but Von Lumm failed to procure any insurance policies for the customer and did not immediately return the funds to the customer. Pursuant to the customerís request, Von Lumm wrote a note to the customer promising to return the $500 and has since returned the funds to the customer.
Von Lumm provided an incomplete response to FINRA requests for information and failed to appear for testimony.
Kurzmann borrowed $5,000 from one of his customers at his member firm. The loan terms were not memorialized in writing, and when the borrowing occurred, Kurzmannís firm prohibited its representatives from borrowing money from customers. Kurzmann did not obtain the firmís approval to borrow money from the customer and did not disclose to the firm that he had borrowed money from a customer; moreover, the borrowing arrangements did not otherwise meet the conditions set forth in NASD Rule 2370(a)(2).
Kurzmann served as the treasurer and as a board member of an incorporated scholarship fund. As the fundís treasurer, he received monthly account statements for a securities account that the fund owned at a FINRA member firm; Kurzmann was the representative for that account. and he provided board members, orally and in writing, materially false information about the total value of the fundís investments, in that he overstated the total value of the fundís investments.
Rivera borrowed a total of approximately $19,000 from a firm customer, signing promissory notes for the loans, contrary to firm policy that prohibited representatives from borrowing from a customer unless the customer was an immediate family member and the representative received the firmís prior written approval. The customer was not a family member and Rivera never informed the firm of the loan.
Rivera failed to repay the funds in full and his firm entered into a settlement with the customer, repaying the $17,700 still owed to the customer; Rivera did not make any contribution to the settlement.
Contreras engaged in private securities transactions by recommending that customers invest in promissory notes, which were not approved investments of his member firm. Contreras failed to provide written notice to his firm describing in detail the proposed transactions and his proposed role therein, and stating whether he had received, or might receive, selling compensation in connection with the transactions.
The company that issued the promissory notes filed for Chapter 13 Bankruptcy, and all of Contrerasí customers lost their entire investment.
Contreras borrowed approximately $65,000 from his customers, contrary to his firmís written procedures prohibiting registered representatives from borrowing money or securities from any prospects or customers, including non-firm prospects/customers, and Contreras failed to pay back any of the money he borrowed.
Contreras failed to respond to FINRA requests for information and testimony.
Kang made loans totaling at least $294,000 to a firm customer who was also a close personal friend. The loans were in the form of cash and checks to the customer and undertaken to assist the customer in meeting her business obligations.
Although the customer had signed promissory notes, she died and Kang has not been fully repaid. At the time she made the loans, Kang was aware that her member firm did not permit loans from or to customers unless they were immediate family members; however, Kang did not obtain pre-approval from her firm prior to lending monies to the customer, nor did she otherwise inform the firm of the loans.
McKinnon recommended the purchase of bonds, bond funds and annuities to an elderly customer who entrusted McKinnon with funds for their purchase. McKinnon deposited the funds into his personal bank account and made improper use of the funds, which included payment of personal expenses.
McKinnon accepted additional funds from the customer, which he used for personal expenses, and accepted additional funds from the customer in exchange for a promissory note he signed. McKinnon did not notify his member firm nor obtain its approval prior to entering into this arrangement with the customer. McKinnon provided false and misleading statements during FINRA testimony regarding the amount of funds he had accepted from the customer, the disposition of the funds and his purchases of securities for the customer in connection with the receipt of the funds.
Whitehurst improperly borrowed funds from customers at his member firm. He borrowed a total of approximately $15,000 from a customer. The borrowings were unsecured and the loan terms were not memorialized in writing; to date, Whitehurst has only repaid $10,000 to the customer.
When these borrowings occurred, Whitehurstís firm prohibited its representatives from borrowing from customers. Whitehurst did not obtain the firmís approval to borrow money from the customer and did not disclose to his firm that he had borrowed money from her.
Whitehurst borrowed a total of approximately $10,000 from another customer and has repaid the loans.
When these borrowings occurred, the firmís written policies prohibited borrowing from customers unless the firm approved an exception, but Whitehurst did not obtain his firmís approval to borrow money from the customer, and did not disclose to it that he had borrowed money from her. In addition, With both customers, the borrowing arrangements did not otherwise meet the conditions set forth in NASD Rule 2370(a)(2). Moreover, FINRA found that Whitehurst provided FINRA with a false written response in regard to an investigation.
White borrowed $20,000 from a customer at his member firm, in order to purchase a house, without providing prior written notice to or obtaining prior written approval from, the firm. White borrowed the money, and the firmís written procedures prohibited borrowing from customers unless the customer was either an immediate family member, or a person or entity regularly engaged in the business of lending money, and Whiteís customer was neither.
White completed an annual firm compliance survey and answered falsely that he had not borrowed money from clients.
Keyes borrowed at least $214,000 from customers without disclosing such borrowings to his member firm, and used the loan proceeds to meet personal financial obligations. Each loan was an undocumented personal loan and functioned like a line of credit; Keyes would borrow an amount, repay a portion and then borrow additional funds. Keyes repaid the outstanding balances owed to each of the customers but did not fully repay two customers until after he was terminated from his member firm and FINRA began its investigation.
Keyes failed to disclose the existence of the initial loans or the subsequent borrowings from them to his firm contrary to firm policy forbidding registered representatives from borrowing funds from customers except under certain circumstances, none of which fit Keyesí borrowing. Keyes was aware of the firmís procedures, certified to the firm that he had received and read the firmís policies and procedures, and understood that he was prohibited from borrowing money from customers. Keyes falsely certified to the firm that he had not received checks from customers made payable to him, and had not borrowed money from customers.
Reimers borrowed approximately $75,768 from one of his customers at his member firm despite the fact that the firmís procedures prohibited representatives from borrowing money from a customer, unless the customer was a family member and written notice was provided to the firm. The customer was not a family member and Reimers did not inform the firm of the loan, which was repaid in full, together with interest totaling $11,259.
Reimers falsely represented on his firmís annual compliance questionnaire that he had not borrowed money from a customer.
Medearis became an additional credit card holder on a customerís credit card accounts which were revolving lines of credit. Medearis made charges to the cards totaling approximately $134,000, effectively borrowing this amount through the credit card transactions, and subsequently made payments to cover the charges.
Medearisí member firmís written procedures prohibited registered representatives from borrowing money from or loaning money to customers unless the customer was a member of the registered representativeís immediate family and the registered representative had requested and received prior written permission from the firm. Medearis borrowed an additional $132,000 from the customer in separate transactions, and Medearis never informed his firm.
Medearis loaned $6,420.33 to a customer who was a member of his immediate family but failed to obtain the firmís prior written permission before entering into the loan arrangement with the customer.
Cutter borrowed a total of $55,000 from his customer in the absence of firm procedures allowing such borrowing; Cutter has repaid only $6,000.
Cutter made false statements to his firm concerning material facts relating to his borrowing or receiving of any money from the firmís customer, particularly in the context of the firmís attempts to discharge its supervisory functions. Cutter failed to provide information FINRA requested.
- Accredited Investor
- Affirmative Determination
- Annual Compliance Certification
- Annual Compliance Meeting
- Away Accounts
- Best Efforts Offering
- Blank Forms
- Campaign Contributions
- Check Kiting
- Clearing Agreement
- Confidential Customer Information
- Contingency Offering
- Continuing Education
- Corporate Credit Card
- Credit Cards
- Customer Protection Rule
- Debit Card
- Do Not Call
- Due Diligence
- Electronic Communications
- Electronic Storage
- False Statements
- Finder Fees
- Foreign Language
- Form ADV
- Guaranteeing Against Losses
- Hedge Fund
- Heightened Supervision
- Insider Trading
- Installment Plan Contracts
- Instant Messaging
- Investment Advisor
- Joint Account
- Life Insurance
- Mark-Up Mark-Down
- Material Change Of Business
- Membership Agreement
- Minimum Contingency
- Money Laundering
- Mutual Funds
- Net Capital
- Outside Accounts
- Outside Business Activities
- Power Of Attorney
- Private Placement
- Private Securities Transaction
- Producing Manager
- Production Quota
- Promissory Notes
- Proprietary Traders
- Public Appearances
- Referral Fees
- Reg D
- Reg U
- Regulation 60
- Regulation S-P
- Reverse Mortgage
- Rule 8210
- Sharing Profits
- Statutory Disqualification
- Stock To Cash
- Supervisory System
- Suspense Account
- Third Party Vendor
- Time And Price Discretion
- Trading Limits
- Trading Volume
- Trust Account
- U.S. Treasuries
- Unauthorized Transaction
- Universal Lease Programs
- Unregistered Person
- Unregistered Principal
- Unregistered RRs
- Unregistered Securities
- Unregistered Supervisor
- Variable Annuity
- Variable Insurance