The answer, in most all cases, is “no”
In order to become licensed, one of the things a broker has to do is agree to adhere to the rules and regulations established by the Financial Industry Regulatory Authority (FINRA). One of these rules involves the borrowing of money from clients, and on this matter FINRA is very clear.
Among other stipulations, FINRA Rule 3240 says that unless the person is an immediate family member or a firm has specific written procedures about borrowing and lending, then it constitutes a violation.
In many cases when a broker borrows money, it is from an older client. Frequently, this person does not know what the broker is up to or lacks the capacity to consent. In either situation, this is considered elder fraud.
Unfortunately, this type of elder fraud is becoming common. Recently, broker Ciro Cavazos was fined and suspended by FINRA for borrowing money from a client. Not only was this action undocumented, but there was only a verbal agreement that didn’t include any repayment terms.
In another instance, broker Brian O. Putt was permanently barred from FINRA due to a similar scenario. It was discovered that on three different occasions, Putt borrowed a total of $58,000 from a client who was 89 years old at the time. Putt also claimed in writing to have paid back nearly all of the money, though he never did.
New York broker Melanie Susan Smith received a 10-day suspension for trying to borrow money from a client. Smith created promissory notes for the loan, but the client wouldn’t sign them. In addition, she didn’t disclose the proposed loan to her firm, which was a violation.
At the time, Smith was working for Global Arena Capital Corp, which is no longer a FINRA member due to numerous infractions. Smith also worked for National Securities Corporation, a firm that has a long history of financial malfeasance.
Not only is it prohibited for a broker to borrow money from an unaware or impaired elderly client, it’s also ethically wrong. If a broker borrowed money from you or perhaps a family member, you should take action.
To learn about your rights and what steps to take, contact the Silver Law Group. The attorneys at Silver Law Group are leaders in the field of securities arbitration. We represent individual and institutional investors across the United States who have lost money at the hands of a trusted financial advisor. Scott Silver is currently the chairman of the American Trial Lawyers Association, Securities and Financial Fraud Group and routinely represents investors in securities arbitration claims.
We will put you in touch with an investment fraud attorney for a free consultation. Call us at 800-975-4345 or just fill out this contact form.