Brian Lamont Royster (CRD# 4766877) has been terminated from his supervising brokerage firm after allegedly borrowing money from clients and was recently barred by regulators from working in the securities industry.
According to Royster’s BrokerCheck Report from the Financial Industry Regulatory Authority, Brian Royster was terminated after his employer accused him of improperly borrowing money from clients. He has since been barred by FINRA from associating with any FINRA member in any capacity.
Brian Royster’s last registration as a broker was with HD Vest Investment Services Inc., inAnn Arbor, Mich., starting in January 2014. HD Vest terminated his registration in January 2017, alleging he had violated the firm’s policy regarding borrowing money from clients.
FINRA then began an investigation of Royster, according to the Letter of Acceptance, Waiver and Consent that Brian Royster entered into with FINRA. In the course of that investigation, FINRA requested documents and information from Royster in August 2017. The next month, Brian Royster allegedly told FINRA he would not comply with the request. FINRA then sanctioned Royster by barring him from association with FINRA members.
Brian Royster’s BrokerCheck report shows two previous complaints that were settled. In January 2017, a client’s power of attorney alleged the purchase of a New York Life annuity was an unsuitable investment. New York Life rescinded the annuity and charged back commissions of more than $2,500.
In October 2013, a customer accused Royster of misrepresenting an annuity purchased in April 2013, while Brian Royster was at Edward Jones. Edward Jones settled the claim for over $5,400. Royster did not contribute to the settlement.
Brian Royster’s BrokerCheck report shows four other registrations previous to his HD Vest registration:
- LPL Financial LLC, Ann Arbor, Mich., September 2013 to January 2014
- Edward Jones, Ann Arbor, Mich., March 2010 to July 2013
- State Farm VP Management Corp., Ann Arbor, Mich., October 2008 to March 2010
- NYLIFE Securities Inc., New York, N.Y., September 2004 to April 2006
Borrowing money from clients creates an opportunity for abuse in a relationship that is already heavily dependent on a broker’s trustworthiness. For this reason, it is prohibited under securities industry rules except under extraordinary circumstances and only with the supervising brokerage firm’s express knowledge and approval.
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“Borrowing” could be an unscrupulous broker’s easy explanation for what actually amounts to the improper diversion of client funds for the broker’s own use. Some brokers may take control of client funds – whether by misrepresentation, forgery, or other improper means – and use them for the broker’s own purposes.
Having procedures in place that govern borrowing money from clients helps prevent such unscrupulous brokers from explaining unauthorized diversions of funds as a loan. Otherwise, what gets excused as “borrowing” could amount to stealing.
To prevent the abuse of client funds, FINRA rules generally prohibit brokers from borrowing money from clients except in certain limited situations and unless several specific conditions have been satisfied.
Borrowing is not permitted in most broker-client relationships. It may be allowed in certain cases, such as where the client is a member of the broker’s immediate family, or the client is a financial institution issuing the loan in its regular course of business.
Among other requirements, the member firm must have a written procedure governing loans from clients to brokers. The broker must give their firm advance notice of the loan, and the firm must approve the loan in writing.
Misconduct such as borrowing or misappropriating client funds can end in losses for the investor. Fortunately, these losses may be recoverable. With the help of the attorneys at Meyer Wilson, investors all over the country have recovered millions of dollars that might otherwise have been lost to their broker’s misconduct.
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