South Florida Arbitration & Litigation Lawyer Blog
Unauthorized Borrowing of Funds From Clients FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.
March, 2012:
Felix Elbert Deacon III (CRD #2408954, Registered Representative, Richmond, Virginia) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $10,000 and suspended from association with any FINRA member in any capacity for six months. The fine must be paid either immediately upon Deacon’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Deacon consented to the described sanctions and to the entry of findings that he borrowed a total of $221,000 from customers at his member firm without seeking or obtaining the firm’s written approval. The findings stated that the firm’s procedures generally prohibited representatives from taking loans from their customers, except under extremely rare and extenuating circumstances, which were not present in this matter. The procedures stated that any exceptions had to be reviewed and approved in writing by the representative’s branch manager or other supervisor, and then by its compliance department. The findings also stated that Deacon made some payments on the loans but the customers ultimately filed lawsuits to recover the remaining principals, which have since been repaid. The findings also included that for three years, Deacon completed compliance questionnaires in which he was asked if he had taken loans from customers. On each questionnaire, Deacon falsely answered that he had not taken such loans. FINRA found that Deacon failed to amend his Form U4 to disclose material facts. The suspension is in effect from February 6, 2012, through August 5, 2012. (FINRA Case #2010021549901).