The Financial Industry Regulatory Authority barred a former Tennessee broker who allegedly secretly borrowed more than $850,000 from clients and denied to the member firms with which he was associated that he ever did so.
William Winchester, who worked for Raymond James Financial Services (RJFS) from June 2012 through March 2020, and previously LPL Financial from September 2007 through 2012, in Chattanooga, Tenn., consented to a settlement with Finra without admitting or denying the charges, according to a letter of acceptance, waiver and consent the securities industry regulator filed on Thursday.
Finra said between March 2009 and September 2016, while associated with both firms, Winchester borrowed more than $850,000 from three of his customers without notifying his member firm or obtaining the firm’s prior written approval. Specifically, in March 2009, Winchester borrowed $380,000 from one customer and an additional $350,000 later from another customer.
Finra noted that LPL’s written supervisory procedures prohibited borrowing money from customers, noting that there are a few exceptions such as if the customer is a family member. Winchester also never disclosed that he borrowed money from his customers. In fact, from 2009 to 2012 he lied when completing LPL’s annual compliance questionnaire, which asked if he had borrowed money from any customer, Finra said.
Winchester also repaid the customers between September 2016 and November 2017 without notifying RJFS that he was involved in settlement agreements with the customers, a violation of Finra Rule 2010, “which provides that a member, in the conduct of the member’s business, shall observe high standards of commercial honor and just and equitable principles of trade,” Finra said.
Additionally, later in 2009, Winchester agreed to serve as a co-executor of the estate of a deceased customer, Finra said. He did not disclose to LPL his appointment as co-executor of his customer's estate, and he also failed to disclose that he was serving as co-executor of his customer's estate when he became associated with RJFS, the regulator said.
He borrowed money from the estate and in 2016, he signed a promissory note to the beneficiary of the estate, who also was his customer at RJFS, to establish repayment terms for the funds he borrowed, Finra said. That promissory note, however, was in violation of RJFS’s policy, which prohibited its registered representatives from borrowing from customers, Finra said.
Finra said Winchester’s appointment as co-executor, for which he received $45,000 in compensation, constituted activity outside the scope of his employment with the firm, which violated the firm’s written supervisory procedures. “Winchester twice falsely represented on RJFS compliance questionnaires that he was not, among other things, acting as an executor of any individual’s estate."
Winchester was fired by RJFS in February 2020, at which time he was in the process of repaying the beneficiary the money he borrowed from the estate, Finra said. He joined Cadaret, Grant & Co., Inc., in May 2020 and left a year later, and has not been registered since, according to BrokerCheck.
Winchester could not be reached for comment.
Winchester began his career in 2001 with Amsouth Investment Services Inc., and worked at First Tennessee Brokerage Inc., and Suntrust Investment Services Inc., before joining LPL in 2007.