If you’re shopping for an advisory practice, it’s probably not a good idea to bankroll the venture with client money, as former Raymond James rep David Albert Urovsky has learned.
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Urovsky submitted a Letter of Acceptance, Waiver and Consent to FINRA in connection with allegations he borrowed client money to broaden his book.
From 2005 to 2010, while he was registered with FINRA through an association with Raymond James, FINRA alleges Urovsky borrowed a total of $400,500 from six of his Raymond James customers. The allegations are as follows:
- In or about April 2005, Urovsky borrowed $150,500 from customer LF. The loan’s terms, 1% interest per month with the full repayment due on June 30, 2010, were later documented in a May 7, 2010 promissory note. Urovsky paid off this loan in 2010.
- In August 2009, Urovsky borrowed $100,000 from customers DR and JR (husband and wife). DR was a former Raymond James registered representative and colleague of Urovsky’s. The promissory note, dated August 28, 2009, provided that Urovsky would pay 10% annual interest on the loan with full repayment due in June 2012. Urovsky paid off this loan in May 2012.
- In August 2009, Urovsky borrowed $100,000 from customer DV, who was a former Raymond James registered representative and colleague of Urovsky’s. The promissory note, dated August 28, 2009, provided that Urovsky would pay 10% annual interest on the loan with full repayment due in June 2012. In 2011, another Raymond James registered representative, who was a co-signer on the original note, assumed full responsibility for repayment of the remaining debt to customer DV.
- In January 2010, Urovsky borrowed $50,000 from customers CT and AT (husband and wife). The promissory note, dated January 14, 2010, provided that Urovsky would pay 8% annual interest on the loan with full repayment due on July 31, 2014. Urovsky paid off this loan in October 2011.
FINRA alleges Urovsky used the $350,500 from the first three loans to acquire financial advisory practices from departing Raymond James colleagues. Raymond James knew about Urovsky’s intention to purchase those practices, but not the loans he obtained from firm customers. The letter of acceptance states Urovsky used the $50,000 from the fourth loan for personal expenditures.
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Raymond James’ procedures generally prohibited registered representatives from borrowing money from a customer. The firm sometimes grants exceptions (e.g., when the lender is a family member, friend or otherwise has a preexisting relationship with the representative), but an executive officer must approve the loan. FINRA alleges Urovsky did not seek or obtain the firm’s approval before entering into the loans.
Borrowing money from customers is in contravention of NASD Conduct Rules 2110 (for conduct before December 15, 2008) and 2370 and FINRA Rule 2010 (for conduct after December 14, 2008).
FINRA fined Urovsky $5,000 and imposed a suspension from association with any FINRA member in any and all capacities for a period of one month. In determining sanctions, FINRA took into account the sanctions imposed by the Maryland Securities Commissioner against Urovsky for the same conduct. These included a $20,000 fine, a three-year suspension from acting in a principal capacity at a broker-dealer, and a requirement for special supervision.
Raymond James terminated Urovsky on August 29, 2011.