Scott Paul Smith of Huntington Beach, California, a stockbroker formerly registered with Edward Jones, has been fined $10,000.00 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity because Smith borrowed customer funds. Acceptance, Waiver, and Consent No. 2020066349702 (January 5, 2023).
Smith served as a registered representative at Edward Jones until April 14, 2020, during the period that the firm submitted a Uniform Termination Notice for Securities Industry Registration (Form U5). The form disclosed that Smith had resigned while being investigated for concerns that Smith obtained a loan from a customer.
From 2009 to 2017, Edward Jones had written supervisory procedures in place that prohibited employees from borrowing money from customers, except in cases involving immediate family members or compliance with conditions outlined in FINRA Rule 3240 or NASD Rule 2370.
The written supervisory procedures also mandated written approval from a principal at the securities broker dealer for any loans made from customers to stockbrokers. However, between December of 2009 and August of 2017, Smith borrowed a total of $78,000.00 from an elderly customer (referred to as Customer A) through five separate loans.
None of these loans adhered to the conditions specified in Edward Jones’ written supervisory procedures, FINRA Rule 3240, or NASD Rule 2370. Customer A, who was one of Smith’s retail customers, was neither an immediate family member nor engaged in lending money as a business. The loan amounts ranged from $3,000.00 to $40,000.00, and Smith utilized the funds for personal expenses. There were no documented payment terms or promissory notes for any of these loans. In 2020, following a complaint from Customer A’s estate, Smith repaid the loans.
The AWC stated that Smith did not inform Edward Jones about any of these loans, but rather concealed them by directing Customer A to wire loan proceeds from her Edward Jones account to her personal checking account held outside of Edward Jones. Smith then told her to write a check to one of his immediate family members. In one case, Smith told Customer A to directly wire funds from her Edward Jones account to his mother, all to evade Edward Jones’ detection. Additionally, Smith falsely attested on three compliance attestations that he did not receive a loan from any customer of Edward Jones.
Therefore, Smith violated FINRA Rules 2010 and 3240 as well as NASD Rule 2370.
Public Disclosure shows that Smith was referenced in a customer initiated investment related complaint that was settled on December 10, 2020, for $32,850.00 in damages based upon allegations that Smith borrowed customer funds when Smith was associated with Edward Jones.
Smith was associated with JW Cole Financial Inc. in Huntington Beach, California, as a stockbroker from May 20, 2020, to February 3, 2023.
