Raymond Schmidt, a former stockbroker employed by LPL Financial, was barred from future employment in the financial industry. The Financial Industry Regulatory Authority (FINRA) claims he borrowed $2.25 million from his customers. Although borrowing money from clients is not illegal, it is frowned upon and most brokerage firms don’t let employees do it. Schmidt ran afoul of the law when he borrowed money without telling his firm. He also broke the law when he lied on compliance questionnaires asking about private transactions with customers.
Mr. Schmidt was based in Oceanside, California. Regulators say that his client’s money used to construct a luxury residence in Hawaii.
FINRA has not accused Schmidt of stealing the money or defaulting on the loans. One customer sued claiming “elder abuse.” The amount sought in the lawsuit was $375,000. LPL paid $150,000.
A customer in another case claimed Schmidt owed $3,866,688 in lost opportunity costs and on loans advanced to him. LPL settled that claim for $275,000.
In ordering Schmidt banned from the securities industry, FINRA made a number of findings including that he failed to cooperate with the investigation. According to FINRA records, “Schmidt failed to provide documents and information as requested by FINRA and stated in a phone call with FINRA that he will not provide the requested documents and information and will not cooperate further with FINRA’s investigation.” Failing to cooperate in a formal investigation almost always means the broker has something to hide.
Mr. Schmidt agreed to the ban without admitting or denying the findings.
Brokers that borrow from customers have a much higher risk of being compliance risks. Refusing to cooperate with regulators is even a bigger red flag.
Luckily for customers, the brokerage firms can often be held responsible for the private or outside conduct of their employees. That means LPL Financial could be stuck repaying any customers who loaned money to Schmidt.
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For more information, visit our LPL Financial page. Ready to see if you have a case? Contact attorney Brian Mahany at or by telephone at . All inquiries are kept strictly confidential. [Cases handled nationwide. We generally limit our practice to losses of $100,000 or more, however if close, give us a call.]
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