According to FINRA, Alan Robert Price was assessed a deferred fine of $5,000 and suspended for 18 months on January 25, 2022, for borrowing $150,000 from an elderly customer without receiving written permission from his firm, and for failing to respond to FINRA's requests until after a complaint was filed.
Price borrowed $150,000 from a customer without receiving written permission from his firm as required by the firm's procedures. At the time, the firm's written procedures prohibited lending or borrowing between registered representatives and customers unless specific exceptions applied, and required the firm's written approval prior to any loan. Price did not notify the firm of the loan, and none of the specified exceptions applied.
Additionally, Price failed to respond to FINRA's requests for documents and information until after a complaint was filed in connection with an investigation into whether he borrowed money from the elderly customer or other customers. During on-the-record testimony, Price failed to provide testimony about whether he borrowed money from the customer. When his counsel withdrew representation and FINRA suspended his testimony, Price refused to appear later to complete his testimony until after FINRA initiated the proceeding.
Borrowing money from customers creates serious conflicts of interest and potential for abuse. Registered representatives have significant influence over customers who trust them with their financial affairs. This power imbalance makes customers vulnerable to pressure or manipulation regarding loans.
Firm policies requiring approval before borrowing from customers exist to enable firms to evaluate whether such loans are appropriate and to implement additional supervision when loans are permitted. When representatives borrow without firm approval, they circumvent these important protections.
The fact that the customer was elderly is an aggravating factor. Elderly investors are often more vulnerable to financial exploitation and may have difficulty refusing requests from trusted advisors. Financial professionals owe heightened duties of care when working with elderly or vulnerable customers.
Price's failure to cooperate with FINRA's investigation compounded the underlying misconduct. The duty to cooperate with regulatory investigations is fundamental, and Price's refusal to provide information until forced to do so demonstrates disrespect for regulatory oversight.
For investors, particularly seniors, this case serves as a warning to be extremely cautious if your financial advisor asks to borrow money. Such arrangements are heavily regulated and often prohibited because they create conflicts of interest and put customer funds at risk.
