YOLO? Finra Raps Ex-Wells Broker Who Sought Pandemic Loan to Fund His Online Trading Account
The Financial Industry Regulatory Authority fined and suspended a former broker with Wells Fargo Advisors who allegedly sought to use a government small business pandemic relief loan to fund his self-directed brokerage account.
Kenric Sexton, who had been a broker for six years with Wells in Charlotte, North Carolina, agreed to a $2,500 fine and one-month suspension, according to a Finra letter of acceptance finalized on Wednesday.
In June 2020, Sexton “negligently misrepresented” that he operated his self-directed online trading account as a sole proprietorship and received a $1,000 advance on an Economic Injury Disaster Loan, according to the settlement.
The Small Business Administration in July last year denied his loan application, but Sexton’s misrepresentations violated Finra’s Rule 2010 barring “any unethical business-related misconduct, regardless of whether it involves a security.”
“Sexton, then a registered representative of Wells Fargo with no disclosed outside business activities, did not operate any business eligible for a small business loan from the SBA,” Finra said.
Sexton, who did not respond to a request through social media to comment for this story, did not admit or deny Finra findings, the AWC letter states. His Linked In page identifies him now as a commercial loan consultant in Charlotte for Dividend America, a division of DPG Investments.
Finra appeared to credit Sexton’s negligence to carelessness rather than malicious intent.
“Sexton did not read the Economic Injury Disaster Loan program requirements carefully before applying for a loan,” the Finra letter states.
The SBA on its website defines as the purpose of the EIDL-dispensed funds: “To meet financial obligations and operating expenses that could have been met had the disaster not occurred.”
Finra began its investigation of Sexton’s loan after Wells Fargo terminated him and filed a Form U5, stating that it had discharged him after he applied “for business support from the Small Business Administration when [he] did not have a pre-existing formal business as required,” according to the Finra letter.
A Wells Fargo spokesperson declined to comment on this story.
For one industry observer, Sexton should be granted the benefit of the doubt.
The Finra allegations against Sexton fall under the same category as a “no-harm-no-foul” event on a basketball court, Bill Singer, a securities lawyer who blogs about brokers’ legal battles, writes in a July 22-posted opinion piece.
“Notably, there is nothing in the AWC that asserts that Sexton knew that he was engaging in or intended to engage in any kind of fraud–to the contrary, it sort of seems like he may have thought (negligently as his state of mind may have come into being) that he had a legitimate basis to seek the loan,” Singer adds.