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Regulation and Compliance > Federal Regulation > FINRA

FINRA Bars Another Broker Who Improperly Applied for COVID Disaster Loan

By Jeff Berman

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What You Need to Know

  • A growing number of brokers have been sanctioned by FINRA for improperly applying for COVID-19 Economic Injury Disaster Loans.
  • The brokers ignored a major requirement for taking the loans: They didn't operate small businesses.
  • The former Merrill Lynch and J.P. Morgan brokers in the latest two cases are no longer registered brokers.

Another former Merrill Lynch broker has been barred by the Financial Industry Regulatory Authority after improperly applying for and receiving a COVID-19 Economic Injury Disaster Loan and then declining to cooperate with FINRA’s investigation of his actions in what has become a growing industry trend over the past several months.

Without admitting or denying FINRA’s findings, Manuel Pinazo signed a FINRA letter of acceptance, waiver and consent on Oct. 19, consenting to the bar. FINRA signed the letter on Tuesday.

Meanwhile, ex-J.P. Morgan rep Latonya L. Anderson was suspended from associating with any FINRA member in all capacities for nine months and fined $12,500, also for improperly applying for and receiving a COVID-19 Economic Industry Disaster Loan, according to a FINRA AWC letter signed by the industry self-regulator on Tuesday.

Unlike Pinazo, the former J.P. Morgan rep cooperated with FINRA’s investigation.

Prior Sanctions

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

Other brokers sanctioned by FINRA in recent months on accusations of improper EIDL filings included Kenric L. Sexton, a former Wells Fargo broker who was fined $2,500 and suspended for one month for allegedly making “negligent misrepresentations” in an application to the Small Business Administration seeking the loan, FINRA said in July.

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

The Same Mistake

In each of the FINRA actions, the reps made the same mistake by ignoring one major requirement of the SBA to qualify for the loan: They don’t operate small businesses.

In the case of Anderson, in about June 2020, she submitted an application to the SBA for an Economic Injury Disaster Loan, according to her AWC letter. “Before submitting the application, Anderson did not review the Economic Injury Disaster Loan program requirements to determine her eligibility, nor did she review any instructions concerning the application,” according to FINRA.

Anderson completed and submitted the application using her cellphone and without referring to any documentation, the AWC letter said.

In the application, she “recklessly misrepresented that: (i) she was the owner of a real estate business; (ii) the business had earned revenue and incurred costs in the 12 months prior to January 31, 2020; and (iii) the real estate business had ten employees,” according to FINRA.

Anderson, at the time a registered representative of J.P. Morgan with no disclosed outside business activities, “did not then own any such real estate business or have any other business eligible for an Economic Injury Disaster Loan from the SBA,” the AWC letter said.

“Based on Anderson’s misrepresentations, the Small Business Administration provided her with a $10,000 Economic Injury Disaster Loan advance but denied the loan application,” according to a disclosure on her report at FINRA’s BrokerCheck website.

Anderson legally formed a real estate business after she applied for the loan and used some of the money she received from the SBA to pay for expenses relating to the business, according to FINRA. “To date, Anderson has not repaid the $10,000” to the SBA, the AWC letter said.

On Oct. 26, 2020, J.P. Morgan filed a Form U5 Uniform Termination Notice stating she  voluntarily resigned from the firm while “under internal review to assess whether she had a valid and appropriate reason for obtaining … a Small Business Administration grant,” according to FINRA.

Merrill Lynch declined to comment on Wednesday. In a disclosure on Pinazo’s BrokerCheck report, Merrill indicated he was terminated for his “conduct involving improperly applying for and receiving” the loan. The firm filed a Form 5 Uniform Termination Notice for him on Nov. 12, 2020, according to FINRA.

J.P. Morgan declined to comment. AdvisorLaw attorney Michelle Atlas, who represented Pinazo in his dispute with FINRA, did not immediately respond to requests for comment. Anderson, whose AWC letter indicated she wasn’t represented by a lawyer, could not immediately be reached for comment.

Neither Anderson or Pinazo were registered brokers anymore as of Wednesday and weren’t associated with any FINRA firms, according to their BrokerCheck reports.

In 2020, as a result of the COVID-19 pandemic, the federal government initiated several programs to assist small businesses, including the COVID-19 Economic Injury Disaster Loan Program, which was administered by the SBA.

(Photo: Shutterstock)

Jeff Berman

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