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Regulation and Compliance > Federal Regulation > FINRA

FINRA Bars Ex-Merrill Rep Who Received COVID Disaster Loan

By Jeff Berman

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What You Need to Know

  • The former broker allegedly refused to cooperate with Merrill Lynch and FINRA investigations.
  • His former firm and FINRA were trying to learn if he improperly applied for a COVID loan.
  • Not cooperating with a FINRA investigation is a surefire way to be barred from the industry.

The Financial Industry Regulatory Authority has barred a former Merrill Lynch general securities representative from associating with any FINRA member in all capacities after he refused to cooperate with investigations by both the firm and the industry self-regulator into whether he improperly requested and received a COVID-19 Economic Injury Disaster Loan.

Without admitting or denying FINRA’s findings, Scott Madison signed a FINRA letter of acceptance, waiver and consent on Aug. 18, agreeing to be barred from the industry. FINRA signed the letter Monday.

Merrill declined to comment Friday. Gregg Breitbart, a Florida attorney with Kaufman Dolowich & Voluck who represented Madison, did not immediately respond to a request for comment.

 A Growing Trend

This is just the latest of several cases in which FINRA has sanctioned brokers and advisors related to requests for COVID-19 emergency loans.

For example, FINRA fined and suspended ex-Wells Fargo rep Kenric L. Sexton, whose firm terminated him, saying he “applied for business support from the Small Business Administration when the employee did not have a pre-existing formal business as required.”

More Details

Madison was registered with FINRA through multiple firms from March 2001 to December 2017, including Stifel, Barclays Capital, Credit Suisse Securities, Goldman Sachs and Jefferies & Co., according to his report on FINRA’s BrokerCheck website.

In December 2017, Madison became registered as a rep through an association with Merrill Lynch, where he worked as a broker.

On March 19, however, Merrill filed a Form U5 Uniform Termination Notice stating that Madison’s registration was terminated for conduct including “failure to produce documents requested as part of a firm review.” The Form U5 also disclosed that, at the time of termination, he was under internal review “to determine if registered representative improperly applied for and received an Economic Injury Disaster Loan (EIDL).”

On July 2, in connection with an investigation into the circumstances of Madison’s termination from Merrill, FINRA sent a request to him for the production of information and documents related to the matter, according to FINRA.

Madison acknowledged he received FINRA’s request but said he would not produce the information or documents requested at any time, FINRA alleged.

By refusing to produce the information and documents as requested, Madison violated FINRA Rules 8210 (governing the provision of information and testimony) and 2010 (governing the standards of commercial honor and principles of trade), FINRA alleged.

(Photo: Shutterstock)

Jeff Berman

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