According to FINRA, Kirk James Crossen was named as a respondent in a FINRA complaint alleging that he borrowed a total of $400,000 through three loans from a customer without firm authorization and concealed the loans by making false statements on annual compliance questionnaires.
The complaint alleges that Crossen's member firm's written supervisory procedures did not allow Crossen to borrow from the customer, a trust, because neither the trust nor its beneficial owner was an immediate family member. This prohibition is consistent with industry standards that generally restrict borrowing from customers to specific categories such as immediate family members or lending institutions.
At the time of the alleged loans, the beneficial owner was 84 years old and suffering from diminished capacity. These circumstances create heightened concerns about potential financial exploitation of a vulnerable senior. Diminished capacity can impair an individual's ability to understand financial transactions and make informed decisions, making such individuals particularly vulnerable to exploitation.
The alleged loans totaling $400,000 represent a substantial sum that could significantly impact the senior beneficial owner's financial security. When registered representatives borrow from elderly customers, particularly those with diminished capacity, it raises serious questions about whether the loans were truly voluntary and in the customer's best interest.
The complaint also alleges that Crossen concealed the loans from his firm by falsely stating on annual compliance questionnaires that he had not borrowed money from customers. If true, this concealment demonstrates knowing violation of firm policies rather than inadvertent failure to disclose. Annual compliance questionnaires specifically ask about borrowing from customers to enable firms to identify and address prohibited transactions.
It is important to note that issuance of a complaint represents FINRA's initiation of formal proceedings and does not represent a finding that the allegations are true. Crossen is entitled to defend against these allegations through the disciplinary process.
However, investors should be aware that borrowing by registered representatives from customers, particularly elderly customers with diminished capacity, presents serious red flags. Such arrangements create conflicts of interest and potential for financial exploitation. Customers should be extremely cautious about lending money to their financial professionals and should report any such requests to the firm's compliance department and to regulators.
The allegations in this case, if proven, would represent serious violations of professional standards and firm policies, as well as potential elder financial exploitation. The outcome of the disciplinary proceeding will determine whether the allegations are substantiated and what sanctions, if any, are appropriate.
