Articles Tagged with policies and procedures

One of the well-known and strictly enforced rules in the securities industry is that brokers should not enter into undisclosed private loan transactions with their clients.  A Letter of Acceptance, Waiver and Consent (AWC) was recently accepted by the Financial Industry Regulatory Authority’s (FINRA’s) Department of Enforcement from Paul F. Gans, Jr., who was employed as a registered broker by Raymond James Financial, Inc. up until November 2014.  According the AWC, Mr. Gans inappropriately loaned money to a “family friend” in exchange for a three-year promissory note bearing 8% annual interest, without disclosing the transaction to his employer and ensuring it complied with his employer’s policies and procedures.  Mr. Gans was accused by FINRA of violating FINRA Rule 3240 (Borrowing from or Lending to Customers) and Rule 2010 (Standards of Commercial Honor and Principles of Trade).

Rule 3240 prohibits brokers from borrowing from or lending to customers, unless the transaction is permitted by the employing firm after disclosure and in compliance with the firm’s policies and procedures.  According to the AWC, Mr. Gans did not disclose the promissory note transaction to his employer.

As detailed in the AWC, Mr. Gans was suspended from association with any FINRA member for ten business days, and fined $5,000.  The firm, Raymond James Financial, Inc., disclosed on FINRA BrokerCheck that Mr. Gans was discharged for his lack of disclosure of an outside business activity, which may or may not refer to the promissory note transaction.  It was also disclosed on FINRA BrokerCheck that Mr. Gans was also discharged from his prior employer Morgan Stanley Dean Witter in 2000 for also violating that firm’s policies and procedures, that time for mailing correspondence without prior approval.  FINRA BrokerCheck also revealed that Mr. Gans was the subject of one customer complaint in 1994 for allegedly failing to inform a client in the decline in value of a “mutual investment,” which claim was settled by Morgan Stanley Dean Witter.

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