Financial advisors occupy a position of deep trust, and borrowing money directly from the clients they are supposed to be advising creates an immense conflict of interest. FINRA recently suspended broker Jacob Lee Harper for 22 months and issued a $17,500 fine after discovering he orchestrated improper personal loans with his clients off the firm’s books.

The Allegations According to FINRA’s findings, Harper borrowed $50,000 from two customers—who he also considered friends—without seeking or obtaining the required prior written approval from his employing member firm. FINRA rules strictly prohibit brokers from borrowing money from clients unless the client is an immediate family member or a lending institution, and even then, firm approval is typically required.

The investigation further revealed that Harper submitted compliance questionnaires to his firm in which he falsely stated he had no outside securities accounts, successfully hiding his external financial activities from his employer’s supervision for an extended period.

What This Means for Investors A broker asking a client for a personal loan, a business investment, or a “promissory note” outside the normal channels of the brokerage firm is one of the most critical warning signs of financial exploitation. These off-the-books transactions, often referred to as “selling away,” bypass the firm’s compliance checks entirely. If your broker asks to borrow money, or pitches you an exclusive investment not authorized by their firm, contact a securities arbitration attorney immediately. The brokerage firm may still be held financially responsible for failing to supervise their employee.