It starts off with the simple need for a loan to pay off a mortgage. The borrower is a stockbroker. The lender is a client of the broker. In the end, the transaction turns out to be a mess.
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, Pamela J. Caldero submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Pamela J. Caldero, Respondent (AWC 2013036974601, December 18, 2013).
In 1990, Caldero entered the securities industry and during the times relevant to this matter was registered with FINRA member firm LPL Financial LLC. The AWC asserts that Caldero had no prior relevant disciplinary history.
A Secured Loan
The AWC alleges that or the purpose of paying off an existing mortgage on a piece of undeveloped land, in January 2009, Caldero borrowed $150,000 from an LPL client of hers. Pursuant to that loan, Caldero executed a promissory note for a five-year term at 7% interest per annum and subject to a $997.95 minimum monthly payment. The deed of trust for the undeveloped land secured the repayment obligation.
Not Going By The Rulebook
LPL's procedures prohibited borrowing from customers subject to limited exceptions requiring prior written notice and approval, which did not occur in this case. Moreover, in June 2009, Caldero falsely denied on an LPL compliance questionnaire that she had borrowed money from a client.
Sometime around September 2011, Caldero defaulted on her repayment and in January 2013 the lending customer received the land through a deed in lieu of foreclosure.
Adding Up The Costs
Online FINRA records as of December 28, 2013, disclose that LPL terminated Caldero on November 11, 2011, based upon allegations that:
TERMINATION FOR CAUSE FOR VIOLATION OF LPL POLICIES AND PROCEDURES RELATING TO BORROWING MONEY FROM A CLIENT
FINRA asserted that Caldero's borrowing from her customer violated NASD Rule 2370 and FINRA Rule 2010; and in accordance with the terms of the AWC, the self-regulatory organization imposed a $5,000 fine and a six-month suspension from association with all FINRA members in all capacities.