The Financial Industry Regulatory Authority has barred a former UBS Financial Services broker who was found to be secretly borrowing from clients and misusing the funds, InvestmentNews reports.
Manuel F. Melendez, a general securities representative who spent 16 years with UBS, was barred from the securities industry and from associating with any FINRA member in all capacities. His alleged misconduct spanned the period between October 2018 and February 2021.
According to a letter of acceptance, waiver and consent, Melendez borrowed a total of $738,000 from two UBS clients without obtaining the firm’s prior written approval, as mandated by both UBS policy and FINRA Rule 3240. That rule prohibits a registered person from borrowing or lending money to customers unless specific conditions are met and the representative has acquired permission from their member firm.
FINRA reported that Melendez borrowed $300,000 from a 65-year-old customer in a written loan agreement, which stated that the loan was for capital to invest in a billboard advertising business. Instead, it was determined that Melendez used thousands of dollars from the loan to pay personal expenses, such as cruises, airline tickets, and retail purchases.
Melendez reportedly received a series of loans from a different customer totaling $438,000 to purchase an ice cream and sign business. Instead, he used thousands of dollars from these loans to pay for his billboard advertising business. While Melendez received three loans from the second customer, a written agreement was executed for only one. FINRA stated that neither of the two clients received any repayments of principal or interest. The misuse of funds is a violation of Rule 2150, which provides that FINRA members may not make improper use of a customer’s funds.
Furthermore, FINRA said that Melendez did not properly disclose his two outside business ventures, the proposed ice cream company and the sign company. Despite taking active steps to acquire and operate these businesses, including forming holding companies and securing loans from UBS clients, Melendez failed to provide timely and accurate disclosures to his employer. When he did eventually disclose these ventures, FINRA said his filings falsely stated that no UBS clients were involved.
Melendez did not admit or deny the findings, but consented to the ban from the industry.
In May 2023, UBS filed a Uniform Termination Notice for Securities Industry Registration (Form U5), disclosing that Melendez voluntarily terminated his employment with the firm on April 27, 2023. On July 4, 2023, UBS filed an amended Form U5 disclosing a settlement with a customer who alleged Melendez borrowed money from her and solicited her to invest in unsuitable, unapproved outside business ventures
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