February 1, 2021

Finra Suspends Former NJ Broker Who Borrowed from Clients to Pay Debts

by Jake Martin

broker, Enforcement, Finra, New Jersey, Northwestern Mutual, Rule 2010

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The Financial Industry Regulatory Authority has fined and suspended a former Northwestern Mutual broker in Princeton, N.J., who asked two customers for loans to buy another practice but instead spent the money on himself, according to a settlement letter finalized Friday.

The regulator imposed a 20-month suspension and a $15,000 fine on Manish H. Shah for violating its rules prohibiting brokers from taking loans from customers without firm approval and its ‘catch-all’ Rule 2010 requiring “high standards of commercial honor.”

Shah took out two loans, including $75,000 from a brokerage customer in July 2016 and another in September 2018 for $200,000 from an insurance client. He told both customers that he would use the money to buy another registered representative’s book of business, but instead used the proceeds “mostly to retire other debt and for personal expenses,” Finra said.

Shah failed to repay the July 2016 loan from the brokerage customer in accordance with the repayment schedule, and only repaid the loan in 2019, following his termination from Northwestern and the customer complaint regarding the loan, the regulator said.

In the case of the $200,000 loan from the insurance customer, Shah provided falsified documents to the customer’s accountant, prompting them to file a complaint with Northwestern, according to Finra.

Shah ultimately repaid the insurance customer $70,277, and Northwestern settled with the customer for the outstanding loan balance plus interest and attorney’s fees, the regulator said.

Shah, who started his brokerage career at Northwestern in 2003, has not registered with another Finra member since his exit from Northwestern, according to his BrokerCheck. He is currently a managing partner at River’s Watch Capital Planning, a New Hope, Pa.-based financial planning practice he started in 2019, according to LinkedIn.

He settled the charges without admitting or denying the findings, and did not return a call for comment.

A spokesperson for Northwestern did not immediately return a request for comment.

The firm fired Shah on April 12, 2019 after placing him under internal review for “borrowing money from a client and other potential misconduct,” according to Finra. On July 18, 2019, Northwestern filed a Form U5 amendment disclosing a separate customer complaint, “also relating to a loan,” according to the regulator.