FINRA has sanctioned broker Stuart Funke for “willfully failing” to amend his Form U4 after being sued for failing to repay a loan and subsequently filing for bankruptcy.
In September 2005, Funke, who had no previous history of FINRA violations, accepted a loan on his and his brother’s behalf for $500,000 in exchange for a promissory note, which had a 6 month maturity period and a 14% interest rate. The people from whom Funke borrowed the money then proceeded to sued him in March 2006 for failing to repay the loan within the agreed upon period of time. The parties were able to settle in January 2007, with Funke agreeing to pay $220,000, with an additional $120,000 promissory note. Funke later filed for bankruptcy in February 2010.
FINRA took the position that Funke “willfully failed” to amend his Form U4 with his civil litigation suit, the settlement of this suit and his bankruptcy filing. Due to this alleged failure, FINRA suspended Funke from associating with any FINRA member in any capacity for 15 months. However, in light of Funke’s bankruptcy filing, FINRA allowed him a bankruptcy discharge, which prevented him from being fined.
Nonetheless, the case highlights a dangerous trap for representatives. While the penalty seems severe, the fact that there was a “willful violation” also means that Funke will be “statutorily disqualified” from FINRA. For most representatives, this amounts to an end to their career in the industry.
Eccleston Law Offices counsel, represent and defend financial advisers nationwide in regulatory, compliance, disciplinary and employment matters in arbitration and litigation, and before regulatory bodies such as the SEC, FINRA and state securities regulators. We frequently defend forgivable loan collection actions, prosecute Form U-5 defamation actions, counsel advisers as to how to transition successfully from firm to firm and negotiate the best possible agreements with their new firm, and provide succession planning, buy-sell agreements and other exit strategies and strategic consulting, practice transitions, mergers, acquisitions and divestitures.
