Miami, Florida resident Patrick McGrath III submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) with the purpose of settling the alleged violations that he borrowed funds from his member firm’s client and made false statements while under investigation.
McGrath entered the securities industry in 1984 and has been associated with several FINRA-regulated broker dealers throughout his career. In April 2009, McGrath became associated with Oppenheimer & Co., Inc. (Oppenheimer) as a registered representative. However, in January 2014, Oppenheimer filed a Uniform Termination Notice for Securities Industry Registration (Form U5) reporting that McGrath failed “to timely finalize arrangements to repay loans he received” from a Oppenheimer customer.
NASD Rule 2370 and FINRA Rule 3240 “prohibit registered persons from borrowing funds from their customers unless the borrowing arrangement meets one of the conditions specified under the applicable rule and is permitted under the written procedures of the registered person’s FINRA-regulated broker-dealer employer.” Oppenheimer’s written procedures prohibited employees from borrowing funds from a customer unless the customer was an immediate family member.
FINRA alleged that on three separate occasions. McGrath borrowed a total of $210,000 from an Oppenheimer customer in violation of NASD Rule 2370 and FINRA Rule 3240. In January 2010, McGrath borrowed $30,000 from customer DA. In October 2010, McGrath borrowed an additional $150,000 from client DA. On October 20, 2010 McGrath signed a promissory note which memorialized the two loans that totaled $180,000. The promissory note provided for an 8% annual interest rate and obligated McGrath to make $1,200 monthly interest payment to Oppenheimer customer DA.
Later in May 2012, McGrath borrowed an addition $30,000 from DA and signed a promissory note dated May 1, 2012 which memorialized the loan that provided 8% annual interest and obligated McGrath to make $200 monthly payments to DA. McGrath defaulted on the loans in August 2013 and DA filed a lawsuit against him.
FINRA alleged that McGrath arranged for the loan proceeds and loan repayment to be sent to accounts held away from Oppenheimer before they were transmitted to McGrath or the customer in an attempt to conceal the loan. Additionally, FINRA found that McGrath submitted three compliance questionnaires to Oppenheimer in which he denied having borrowed funds from any firm customer. These statements were false. As a result McGrath violated NASD Rule 2370, FINRA Rule 3240 and FINRA Rule 2010. McGrath was ordered to pay a $10,000 fine and suspended from association with any FINRA member in any capacity for a period of four months.
Stockbrokers have been known to engage in many types of practices which violate industry and firm rules, practices, and procedures. In order to protect customers from stockbroker misconduct, FINRA rules require broker-dealers like Oppenheimer to establish and implement a reasonable supervisory system. The implementation of the rules require supervisors to monitor employees to ensure they comply with federal and state securities laws, securities industry rules and regulations, and the firm’s own policies and procedures. If broker dealers and/or their supervisors do not establish and implement these protective measures, they may be liable to investors for damages which flow from the misconduct. As a result, investors who have suffered losses because of their stockbroker’s unlawful or prohibited conduct can file a claim to recover damages against broker dealers like Oppenheimer, which should consistently oversee its employees in order to prevent stockbroker misconduct.
Have you suffered losses in your Oppenheimer investment account due to your stockbroker’s misconduct? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against stockbrokers for unsuitable recommendations, misrepresentations, and/or other unauthorized and prohibited conduct.
The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 35 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities, and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please post a comment, call (800) 732-2889, send Mr. Pearce an email at firstname.lastname@example.org, and/or visit our website at www.secatty.com for answers to any of your questions about this blog post and/or any related matter.