FINRA has barred broker Michael Mendenhall of Denver, Colorado for allegedly providing false and misleading information to FINRA in connection with an investigation into whether Mendenhall had borrowed funds from customers while associated with UVEST Financial Services Group, Inc.
FINRA's default decision to banish Mendenhall followed a drawn-out multi-year process, due to Mendenhall's appearance in criminal court to face felony counts of theft and securities fraud. Mendenhall was jailed during that time, ultimately found guilty on 25 felony counts, sentenced to 30 years in prison, and ordered to pay $1.4 million in restitution to 25 customers.
FINRA Disciplinary Proceeding #2009020489901
In its investigation, FINRA found that when Mendenhall responded to a FINRA request to identify customers who had loaned funds, Mendenhall provided a false response by under representing the number of customers who had loaned funds.
FINRA/NASD conduct rules state that brokers, principals and representatives shall not borrow money from customers of a FINRA-member firm unless the firm has specific written policies and procedures concerning money lending.
UVEST's policy went so far as to prohibit representatives from borrowing money from customers.
The findings state that in 2007, Mendenhall borrowed $125,110 from a 76-year-old firm customer, at 9% annual interest and a due in full date set one year later. The two parties signed a promissory note, which represented the loan as related to a real estate project Mendenhall was involved in.
In 2008, Mendenhall allegedly borrowed $116,000 from an 80-year-old firm customer, similarly promising a yearly interest rate of 8.25%. Like the previous loan, the promissory note indicated the loan was related to a real estate investment. According to the findings, this customer additionally incurred an early withdrawal charge by liquidating an annuity and Index Fund at UVEST with the purpose of funding Mendenhall's loan. Mendenhall had allegedly agreed to repay the charges by adding it to the loan amount.
Later in 2008, Mendenhall was found to have borrowed nearly $60,000 from an 82-year-old customer, this time promising repayment within three months at an interest rate of 8% per year. Mendenhall allegedly gave this customer a post-dated check, which, when the customer attempted to deposit the check three months later, was dishonored for insufficient funds.
Mendenhall was also found to have improperly borrowed $9,000 from a 90-year-old customer while Mendenhall was associated with Colorado Financial. Like UVEST, Colorado Financial procedures stated representatives were not to borrow money from customers "under any circumstances."
As specified above, FINRA rules state that firm associates may not borrow money from customers unless the firm has specific procedures in place that authorizes such activity. Yet even when firms specifically prohibit the practice, as with UVEST and Colorado Financial, broker/representative misconduct may arise, as was the case of Michael Mendenhall.
If an advisor or stockbroker has solicited a personal loan from you, it may be a violation of FINRA or firm rules and this activity has proven harmful to you or your financial interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.