Michael Scott Lincoln, of San Diego, California, a stockbroker with LPL Financial, was fined $15,000.00 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity after consenting to findings that he failed to supervise unauthorized outside business activities and unauthorized loans, and falsified statements to his firm. Letter of Acceptance, Waiver and Consent, No. 2015045352901 (Sept. 20, 2016).
According to the AWC, between October of 2009 and September of 2013, Lincoln supervised a registered representative, RS, in Lincoln’s branch office. Apparently, in 2011, Lincoln provided RS with funds in order for RS to pursue a Hawaii based real estate investment project. The AWC stated that RS’s vacation rental property, which he solely operated and owned, was never made known to his firm as an outside business activity.
The AWC stated that by February of 2012, Lincoln became apprised that RS’s real estate venture was an outside business activity, and even reached out to the firm’s customers regarding it. FINRA found that Lincoln knew that RS had not disclosed his outside business activity to his firm, and claimed that Lincoln did nothing in his supervisory role in order to further investigate or report misconduct by RS to LPL Financial.
The AWC further detailed that Lincoln approved of documentation provided by RS and another registered representative, CK, with regard to loans which were provided to RS. Particularly, RS indicated in his firm’s disclosure forms that loans provided to him from Lincoln and CK were for purposes of his residence, when such was not the case. FINRA found that Lincoln’s conduct in this regard was violative of FINRA Rules 2010 and 3010(b).
Additionally, the AWC stated that seven customers provided an estimated $2,250,000.00 to RS in connection with the purchase of the aforementioned Hawaii real estate venture. Lincoln reportedly knew that these loans came from firm customers, and that the firm’s procedures did not allow individuals such as RS to borrow funds from firm customers in the context in which RS borrowed the funds.
The AWC stated that despite Lincoln’s knowledge regarding the unauthorized loans coming from firm customers, he did not take the requisite steps in order to further investigate RS’s violative conduct, and failed to notify his firm regarding such. FINRA found that Lincoln’s conduct in this regard was violative of FINRA Rules 2010 and 3010(b).
Lincoln was further cited by FINRA for falsifying his firm compliance questionnaires. Particularly, Lincoln denied ever having loaned funds to an individual, when he had factually loaned funds to RS in the aforementioned transaction. Lincoln also reportedly stated to his firm that there were no concerns with RS, despite Lincoln’s concerns that RS’s conduct was violative of his firm’s policies. Lincoln reportedly falsified statements regarding his knowledge of RS’s vacation property when questioned by firm personnel. FINRA found that Lincoln’s false statements in this regard was violative of FINRA Rules 2010.
According to FINRA’s BrokerCheck, Lincoln is currently subject to a pending customer dispute from November 11, 2015, in which customers have requested $850,446.57 in damages in connection with allegations against Lincoln for breach of his supervisory and fiduciary duties, and fraud in connection with monies which customers lent to a firm representative for the investment in property.
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