According to FINRA, Scott Paul Smith was fined $10,000 and suspended from association with any FINRA member in all capacities for 12 months for borrowing a total of $78,000 from an elderly customer without providing prior written notice to or obtaining written approval from his member firm, and for settling a customer complaint without his firm's knowledge or approval.

Smith borrowed the funds from one of his retail customers at the firm, who was not Smith's immediate family member nor was she in the business of lending money. Smith used the funds to pay for personal expenses. No payment terms were discussed or memorialized for any of these loans, nor did Smith provide any promissory notes. After receiving a complaint from the customer's estate, Smith repaid each of the loans.

Smith concealed the loans from the firm by instructing the customer to wire the proceeds for certain loans from one of her firm accounts to her personal checking account held outside of the firm, and then to write a check payable to a member of Smith's immediate family. On one occasion Smith instructed the customer to wire money directly from her firm account to Smith's mother-in-law to evade detection by the firm. Moreover, on compliance attestations, Smith falsely attested that he had not received a loan from any firm client.

Smith also settled a customer complaint without his firm's knowledge or approval. Following the death of the customer, her daughter discovered that the customer had made loans to Smith, and her estate demanded that Smith provide a full accounting of all loans outstanding. In response, Smith sent an attorney representing the estate a check for $40,000, which the estate accepted. Smith did not notify the firm about the complaint or that he had paid money to settle it. After Smith had left the firm and while registered with another firm, Smith offered the customer's estate a second check for $25,000, which the estate accepted. Before making the second payment, Smith did not notify either firm of the complaint or seek authorization to resolve it.

The suspension is in effect from February 6, 2023, through February 5, 2024.

This case involves multiple serious violations centered around borrowing from an elderly customer. The fact that Smith took deliberate steps to conceal the loans from his firm and falsely attested on compliance certifications is particularly troubling.