Broker Who Borrowed $45K from Clients Suspended by Finra
The Financial Industry Regulatory Authority has suspended a former Morgan Stanley broker in Laguna Niguel, California, and fined him $7,500 over allegations of borrowing money from customers in violation of firm procedures.
Between December 2013 and September 2015, John-Aaron Lenhert borrowed $44,700 from three customers—agreeing in one case to repay the loans at a 31.5% interest rate—without receiving approval from Morgan Stanley, according to a letter of settlement accepted by the regulator on Wednesday.
Further crossing a line that Finra has been enforcing to keep advisors’ personal financial lives from influencing their practice, Lenhert falsely claimed on annual compliance questionnaires in 2015 and 2017 that he had not extended or accepted loans to customers.
Once Morgan Stanley investigated the loans, he falsely said that he had not signed any promissory notes and attested inaccurately that he borrowed the money before joining the firm, Finra said.
The actions violated Finra Rule 3240 against borrowing from or lending money to customers without approval and its Rule 2010 requiring “high standards of commercial honor,” the regulator said.
Morgan Stanley prohibits brokers from personal loan activity with customers, excluding members of a broker’s immediate family, Finra said.
Lenhert, who represented himself in the Finra investigation, did not return a call for comment at a publicly listed phone number.
The former broker repaid only one of the loans fully. Of the $29,700 that he borrowed at 6% interest from a customer, he repaid $13,060. He also made good on just $2,000 of the $5,500 that he borrowed from another customer at an unstated interest rate.
He fully repaid the $9,500 he had borrowed in July 2015 from a customer with whom he negotiated a promissory note providing the 31.5% interest rate and monthly payments of $250, according to the consent letter published on the regulator’s website.
The letter did not discuss the purpose of the loans.
Lenhert worked as a registered representative for just five years, all at Morgan Stanley prior to his termination by the firm in January 2017, according to BrokerCheck.
The database records just one customer complaint in June 2017. The customer alleged that the FA borrowed money from him on four occasions between 2012 and 2017 without repaying him. Morgan Stanley denied the customer complaint, according to the database.