- On October 2, 2017
In reviewing articles and law firm summaries we found Bill Singer, Esq. of BrokeandBroker.com that thoroughly addressed issues to consider behind the FINRAs new Sanction Guidelines around Borrowing from clients.
Bill Singer excerpts from some of his points he addresses about the new Sanction Guidelines:
- Member firms can choose to permit registered persons to borrow from or lend to their customers consistent with this rule OR the member may prohibit the practice in whole or in part.
- The specific prescription here is from borrowing/lending to any customer of “such person” — the limitation is on contemplated activity with “your” customer and not merely a customer of yours.
- The threshold requirement is that you cannot borrow/lend with your customers unless your member firm has written procedures allowing borrowing/lending between registered persons and customers of the firm. If there are no written procedures, you can’t get around this by walking into someone’s office or making a phone call to some compliance type and getting a verbal “okay.”
- FINRA underscores that the Rule does not merely address borrowing from customers but also lending to them.
- One of the five approved categories of your customers with which you can borrow/lend is an immediate family member if the lender/borrower is your customer and also registered at your member, then that satisfies one of the five conditions under this section.
- The Rule requires the member firm to pre- approve in writing the requested arrangement. You should not rely upon an oral okay.
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