Customer Loans Earn Broker A Fine And Suspension

December 26, 2014

This one starts with a registered rep getting $65,000 in loans from two customers. Then you have the spark that sets off the explosion: the rep fails to repay the loans. Then comes the discharge by the firm, which instigates a regulatory investigation. In the end, it all ends badly for the guy who borrowed the money. After the dust settles, however, we are left wondering what took the regulator so long to resolve what appears to have been a slam-dunk case.

Case In Point

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, Stuart A. Cahill submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Stuart A. Cahill, Respondent (AWC 2014040300901, December 8, 2014).

In 1994, Cahill first became registered and by 2004 he was associated with FINRA member firm Triad Advisors, Inc., where he remained until March 2013. The AWC asserts that he had no prior formal disciplinary history with the Securities and Exchange Commission, any self-regulatory organization or any state securities regulator.

$65,000 In Loans

The AWC asserts that in June 2006, Cahill borrowed $30,000 from a Triad Advisors customer and in September 2009, he borrowed $35,000 from a second Triad customer. The AWC asserts that both customers took unspecified legal actions after Cahill failed to make all the required payments on the loans.


At the time of the loans, Triad's written supervisory procedures purportedly prohibited its registered representatives from borrowing money from customers. Moreover, on the firm's 2008 annual compliance questionnaire, Cahill allegedly falsely denied soliciting or receiving a loan from a customer - at that time, he had both solicited and received the 2006 loan. Finally, after the customer involved with the 2006 loan had complained to Triad about Cahill's non-payment, Cahill claimed to have only borrowed from that complaining customer and failed to disclose the other customer involved with the 2009 loan.


Online FINRA BrokerCheck records as of December 26, 2014, disclose that on February 28, 2013, Triad "Discharged" Cahill based upon allegations of:


The BrokerCheck record advises that Cahill stated that the:


Not disclosed in the AWC are the specifics of the referenced legal proceedings. Online FINRA records as of December 26, 2014, disclose the following:
  • On January 21, 2014, a customer filed a FINRA Arbitration (14-00081) seeking $100,000 in damages arising from insurance, real estate security, and the borrowing of funds from the customer. The causes of action appear to include suitability.
  • On February 1, 2013, a lawsuit appears to have been initiated in the Luzerne County Court of Common Pleas, Luzerne, PA (2012-9443) seeking $31,447.51 in damages arising from the alleged failure to repay a $30,000 loan.

FINRA deemed Cahill's conduct to constitute violations of NASD Conduct Rules 2370 and 2110. In accordance with the terms of the AWC, FINRA imposed upon Cahill a $10,000 fine and a one-year suspension with any FINRA member in all capacities.

Bill Singer's Comment

I think it a fair question to ask what took so long for FINRA to resolve this case via settlement -- or, ultimately, take the Respondent to a contested hearing.

It appears that Triad was unaware of the loans when they were made, so, in fairness to FINRA, I am not suggesting that the self-regulatory organization should have been expected to have acted much before, say, early 2014. Triad discharged Cahill on February 28, 2013, however,and as of that date FINRA was on notice about the loans and the lawsuit in Luzerne, PA. As such, the AWC settlement between FINRA and Cahill occurred something like 22 months after Cahill's termination by his firm.

You'd sort of think that way, way, way before the expiration of nearly two years that FINRA would have either settled this matter or taken it before a hearing panel for adjudication. Keep in mind thatby the date of the AWC settlement, the loans at issue were nearly 8 and 5 years of age.