An irreverent Wall Street Blog
by Bill Singer
 
Join BrokeAndBroker blog on Facebook  Follow the BrokeAndBroker blog on Twitter  Connect with BrokeAndBroker on LinkedIn  Join Bill Singer on Google+  Subscribe to RSS Feed

FINRA Fines And Suspends Broker For Improper Customer Loans
Written: August 1, 2012

Logo

For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority (“FINRA”), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Stephen Paul Tommelleo submitted a Letter of Acceptance, Waiver and Consent (“AWC”), which FINRA accepted. In the Matter of Stephen Paul Tommelleo, Respondent (AWC 2010025098401, July 25, 2012).

Tommelleo entered the securities industry in November 1986, when he was employed by FINRA member firm PFS Investments, Inc. (“PFS”), where he was registered as an Investment Company And Variable Contracts Products Representative/Principal until November 2010.  The AWC asserts that Tommelleo had no prior relevant disciplinary history.

Borrowing

The AWC alleges that in August 2008, Tommelleo began to periodically borrow money from Customer1, to whom the stockbroker occasionally made partial repayments. In 2009, Tommelleo signed a $14,885 promissory note, the full amount he owed. In May 2010, Tommelleo repaid Customer1 $800; thereafter, in August 2010, Customer1 complained to PFS about the unpaid balance due on the 2009 promissory note. In November 2010,  PFS settled with Customer1 for $2,000. Subsequently,  Customer1 sued Tommelleo in state court for $15,000.

In March 2010, Customer2 loaned $2,000 to Tommelleo subject to the understanding that the stockbroker would full repayment by April 1, 2010.  Although the AWC asserts that Tommelleo fully repaid Customer2, such is noted as having occurred in “late 2010.”

In April 2010, 85-year-old Customer3 loaned Tommelleo $3,000, which sum he withdrew from his PFS account. Repayment of this loan did not seem to have been timely forthcoming because the AWC alleges that in  October 2010 PFS settled with Customer3 for $3,000.

Finally, on January 20, 2010, Customer4 loaned Tommelleo $12,000, which he withdrew from his PFS account. On May 15, 2010, Customer4 loaned Tommelleo an additional $2,800, and also paid a money order transfer fee of $190, for a total loan of $14,990. The AWC alleges that Customer4 has not been repaid.

During that relevant period, PFS’s written supervisory procedures did not permit loans between registered representatives and their customers. Further, for 2008 and 2009, Tommelleo completed PFS’s annual compliance attestations indicating that he had not and would not borrow money from any firm customer.

Sanctions

As a result of the loans from the four cited customers, the AWC deemed Tommelleo’s conduct cited above to constitute violations of NASD Rules 2370: Borrowing From or Lending to Customers and 2110 and FINRA Rule 2010.  In accordance with the terms of the AWC, FINRA imposed upon Tommelleo a $5,000 fine; $14,990 restitution plus interest to customer Cusomter4,  and a 3 month suspension  from association with any FINRA member firm in all capacities.

Bill Singer's Comment

Street Sweeper” has extensively covered this topic but despite all those admonitions, registered representatives persist in ignoring the rules.  The excuses for such noncompliance? Well, sure, we’ve covered them amply too: a souring economy, the loss of commission business, and the closing of firms and branches.

Whether employed at Merrill LynchMorgan Stanley, JP Morgan, Wells Fargo, UBS, or smaller firms, the need for cash pushes many brokers to the limit and prompts arrangements with customers to borrow money that are in violation of FINRA and member firm rules. Quite often, the member firms would have permitted the loans subject to the registered person’s compliance with the in-house notification rules.  On the other hand, where a member firm takes a strict line against such loans, brokers are simply risking thousands in regulatory fines and typically months in suspension when engaging in such transactions in violation of FINRA and firm rules.

READ these recent borrowing cases analyzed in “Street Sweeper”:

FINRA Trifecta Earns Stockbroker Fine And Suspension For Borrowing, U4, Private Securities Transactions

Classic FINRA Case Of A Stockbroker Borrowing From A Client

Commonwealth Stockbroker’s Private Securities Transaction and Customer Loan Prove Boiling Frog Story

Borrowing From Customer Costs Stockbroker His Career

Neither a Borrower Nor a Forger Be, FINRA Tells Barred Broker


 
[^top^]

Previous Entries
December 19, 2014
We start with a wife and her children. We add a husband. We toss into that scene a stockbroker. Then come the redemptions. All of which sets the stage... Read On
December 18, 2014
In a recent FINRA regulatory settlement, 18 registered folks sort of fell off their firm's compliance radar.  It's not a case involving eart... Read On
December 17, 2014
The road to Hell is paved with good intentions and a recent FINRA regulatory settlement involving a customer's email request for a wire transfer certa... Read On
December 16, 2014
A Personal Note From Bill Singer:It is with great sadness that I note the passing of my friend and veteran industry compliance professional Richard Be... Read On
December 15, 2014
If a public customer wants to place an idiotic order or insists on engaging in trading that seems destined to commit "economic suicide," what, if any,... Read On
December 13, 2014
Military Veterans Win $7.5 Million Employment Dispute Against Goldman SachsWhen BrokeAndBroker.com Blog's Bill Singer describes a FINRA Arbitration De... Read On
December 12, 2014
When BrokeAndBroker.com Blog's Bill Singer describes a FINRA Arbitration Decision as a "disgrace," you have to know that he's really worked up and ang... Read On
BrokeAndBroker.com Job Search


Related Topics
Tag Cloud
Internet FINRA Bear Stearns Bloomberg SEC NASD NYSE Money Laundering Due Diligence Waiver Forbes China Chepucavage Broy Woody Allen Madoff NAC NPR Marketplace Stanford UBS Ketchum Antitrust NASDAQ RRBDLAW Schapiro Bill Singer BrokerAndBroker USERRA Brokeandbroker.com Morgan Keegan Arbitration Counterclaim BrokeAndBroker.com Khuzami BrokeAndBroker Aleynikov Goldman Sachs brokeandbroker Promissory Note U4 Bill SInger EFL CFTC Huffington Post Flash Crash arbitration RBC RRBDLAW.com Ponzi Affinity Fraud Wachovia Raymond James BrokeandBroker.com Expungement Fraud Securities Fraud Outside Business Activity Registered Rep Magazine FOREX BrokerAndBroker.com FBI Banc of America Pro Se Supreme Court Morgan Stanley Smith Barney E*Trade Margin email Galleon Penson U5 Defamation Protocol Wells Fargo Punitive Damages Citigroup Merrill Lynch ARS Employee Forgivable Loan Street Legal Morgan Stanley AWC Fidelity Bankruptcy Broke And Broker HFT David Sobel Day Trading Ameriprise Commissions Spouse Schwab Commission CRD Kenneth Starr IRS CNBC Complaint ATM Skimming Hacking Phishing Malware Naskovets Poteroba Koval Lincoln Financial Selling Away Outside Business Activities Rakoff 2nd Circuit Second Circuit IRA 401k Forgery Tax RRBDlaw.com Email Netschi Moore Whistleblower Street Sweeper Tran Bharara Facebook Online Severance Bonus Eligibility Rule TD Ameritrade Hedge Fund SAC 1099 Smith Barney Lehman Brothers SIPC IC3 Scottrade Lehman JPMorgan Chase Hertz Insider Trading Bank of America Department of Justice Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Thain Walter Bid Rigging Real Estate Discrimination Wall Street Statutory Disqualification Form U4 Form U5 Indictment Boyland DOJ Corruption bill singer FTC Do Not Call FINRA Arbitration Costa Rica Settlement LIBOR Varney Plea Rule 8210 Eligibility RRBDlaw Appeal Fowler LPL Johnson US Airways Reg D MSSB Vault Loan SunTrust Discovery Employment Rosenthal Recruiting Lawyer Trading Platform JP Morgan Employment Tuesday Wrongful Termination Bank Guarantee WaMu Solicitation REIT Martin Credit Cards Rule 3050 Away Account Credit Repair PN Advisor Placement Group Forex Mortgage Private Placement Moon CGMI Merrill Anderson Exam Lee Borrowing Tax Lien Conversion Oppenheimer Wedbush Felony Misdemeanor Expenses ING Lien OTR Estate Jobs Florida Credit Card Elderly Flash Drive Annuity Expense Reimbursement FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker RIA Prison Disclosure NASAA Aguilar FCPA Subway Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank Hospital God HSBC Private Placements Eric Stein Wire Fraud FINOP CCO Audit Joshua Brown Backstage Wall Street Obstruction of Justice Reuters Retaliation Variable Annuity Arbitraiton Outside Account Options Telephone Wine Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud Retirement OBA Equity Indexed Annuities EIA MetLife Continuing Education Cheating OIP Tax Liens Willful CE Unregistered Impersonation Annuities BBVA Business Expenses ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Impersonator Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks RMBS AML PST Solicited Unsolicited Congress SRO Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement Money Market employment jobs Great Recession Chase Investment Services Arrest Barclays Liens Failure To Supervise Apple Time And Price T&P Willfully Husband Letter of Authorization LOA Sexism Debit Card Knight Test Practice Sale Unfair Competition Signature Judgments Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Charge Sexist NML Argentina Embezzlement Silver Investor Alert Judgment Bank Fraud Deceased TSSB Mary Jo White Trustee Motion To Dismiss Frumento Conspiracy 6th Circuit Proctor Rule 3040 Class Action Beneficiary NYAG Schneiderman Gallagher White Self Regulation Short Sale Compromise Website TRO Supervision Vacatur SDNY BrokeAndBroker Bill Singer Piwowar Stifel Rule 1122 Article V signature Confidential Inside Information VA Regulation SP Customer Rule 3270 Rule 3240 Annual Compliance Questionnaire OWB 2Cir Stockbrokers Altered Records
 
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+