Florida Broker Barred For Failure To Cooperate With FINRA Investigation Into Alleged Improper Loan From Clients
Eric James Stone (CRD #5227654) is a previously registered investment adviser (RIA) and previously registered securities broker. From February of 2008 through June of 2021, Mr. Stone was a representative of Fidelity Brokerage Services, LLC in Jacksonville, FL. In 2021, he was separated from his employment at the firm after allegations that he took an improper loan from a client.
The Financial Industry Regulatory Authority (FINRA) launched its own investigation into the conduct of former Fidelity Brokerage Services, LLC representative Eric Stone. In violation of industry rules, Mr. Stone failed to properly cooperate with FINRA’s investigation. Here, our Miami investment fraud attorney provides an overview of the enforcement action.
Barred Broker: Former Fidelity Brokerage Services, LLC Representative Eric Stone
On March 2, 2023, Eric James Stone, a Saint Augustine, Florida-based broker, was barred by FINRA from associating with its members due to his noncompliance during an investigation triggered by Form U5. The form—which was filed by Stone’s former firm—alleged improprieties related to client loans.
Mr. Stone, who neither admitted nor denied the charges, failed to provide complete information, deliver required documents, or appear for an on-record testimony, as requested by FINRA. Though, the agency acknowledged that he did provide a belated response. However, the response was deemed to be insufficient.
FINRA Rule 8210 requires all registered representatives to cooperate with investigations, including by providing documents and testimony when requested. A broker that fails to comply with FINRA Rule 8210 can be subject to serious professional sanctions, including an indefinite bar from the industry.
An Overview of FINRA Rule 3240 (Borrowing from or Lending to Customers)
FINRA Rule 3240 addresses the borrowing and lending arrangements between registered representatives and their customers. It is established to protect investors from potential conflicts of interest, unsuitable advice, and financial exploitation. Among other things, the regulation is designed to prohibit brokers from being counterparties to a client’s transaction (loan) without the proper safeguards in place. The rule mandates that no person associated with a member firm in any registered capacity can borrow money from or lend money to a customer unless it meets the specified conditions. Here are three key details:
- The representative’s member firm must have written procedures allowing such borrowings;
- The registered representative must notify the firm prior to entering into the arrangement;
- The Terms and conditions of the loan must be consistent with those available to the public; and
- The lending/borrowing arrangement must be between immediate family members, lending institutions, customers who are also financial institutions, or based on another type of personal relationship or business relationship that is separate from the broker-dealer.
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