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Regulation and Compliance > Federal Regulation > FINRA

FINRA: Ex-Wells Fargo Rep Applied for SBA Loan He Wasn’t Entitled To

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What You Need to Know

  • The ex-Wells Fargo broker applied for an SBA Economic Injury Disaster Loan despite not operating a small business.
  • FINRA fined him $2,500 and suspended him for one month; he is not registered as a broker or advisor.
  • The former broker allegedly violated FINRA Rule 2010 by making misrepresentations in his loan application.

The Financial Industry Regulatory Authority has fined a former Wells Fargo broker $2,500 and suspended him for one month for allegedly making “negligent misrepresentations” in an application to the Small Business Administration seeking an Economic Injury Disaster Loan, according to FINRA.

When applying for the loan in June 2020, Kenric L. Sexton ignored one major requirement by the SBA: He doesn’t operate a small business.

Sexton signed a FINRA letter of acceptance, waiver and consent on June 30 in which he consented to the imposition of the regulator’s sanctions against him. FINRA signed the letter on Wednesday.

Wells Fargo declined to comment Thursday on FINRA’s allegations and sanctions against the ex-broker.

However, according to a disclosure on Sexton’s report on FINRA’s BrokerCheck website, Wells Fargo said it terminated him because he “applied for business support from the Small Business Administration when the employee did not have a pre-existing formal business as required.” That activity was “not related to the securities business of Wells Fargo Clearing Services [and] no related customer harm was identified,” the firm added.

‘Negligent Misrepresentations’

Sexton was registered as a general securities representative through his association with Wells Fargo from Aug. 20, 2014 through Dec. 10, 2020, according to the FINRA AWC letter. On Dec. 10, Wells Fargo filed a Form 5 Uniform Termination Notice stating that it had discharged Sexton.

Sexton is not currently registered or associated with any FINRA member firm and is not currently registered as a broker or advisor, according to BrokerCheck.

He violated FINRA Rule 2010 governing standards of commercial honor and principles of trade when he sought the loan, which had been made available after the start of the COVID-19 pandemic to help small businesses, FINRA noted.

“Sexton did not read the Economic Injury Disaster Loan program requirements carefully before applying” for the loan, according to FINRA.

Sexton, at the time a registered representative of Wells Fargo with no disclosed outside business activities, did not operate any business eligible for a small-business loan from the SBA, FINRA said.

“Instead, Sexton was seeking an Economic Injury Disaster Loan to fund his self-directed online trading account” and, in his application, he “negligently misrepresented that he operated his self-directed online trading account as a sole proprietorship,” according to FINRA.

Based on Sexton’s negligent misrepresentations in the loan application, the SBA granted him a $1,000 advance on a loan but, in July 2020, the SBA denied his loan application, FINRA said.

(Photo: Adobe Stock)


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