FINRA’s Department of Enforcement investigated Freeze and alleged he borrowed a total of $20,000 from one of his brokerage customers without disclosing the loans to LPL Financial. According to FINRA, Freeze maintained a personal relationship with the customer whom he borrowed the funds. FINRA alleged Freeze never provided prior notification to LPL Financial of his intent to borrow money from the Firm customer, nor did he obtain written approval from the Firm in connection with the $20,000 loan from his customer.
FINRA alleged Freeze violated FINRA Rule 3240, which prohibits registered persons from borrowing money from or lending money to any customer certain conditions and/or exceptions are satisfied. Specifically, FINRA Rule 3240 prohibits registered persons from borrowing money from or lending money to any customer unless: 1) the representative’s employing member firm has written procedures allowing borrowing from or lending to customers; 2) the borrowing or lending meets at least one of the conditions specified in Rule 3240(a)(2); and 3) the registered person notifies the firm of the borrowing or lending arrangement and obtains pre-approval in writing. A violation of FINRA Rule 3240 also constitutes a violation of FINRA Rule 2010, which requires associated persons to observe high standards of commercial honor and just and equitable principals of trade.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you suffered investment damages with Freeze, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please complete the contact form or contact one of our attorneys at (800) 627-2179 to schedule a free consultation.