Misuse of Customer Assets

What this video covers

• Why short-term unauthorized borrowing is always improper use, even if the registered person intends to repay and the customer never notices
• How pledging, rehypothecating, and commingling customer assets violate both the FINRA rule and the Securities and Exchange Commission (SEC) customer-protection rule
• Why a guarantee against loss is a violation the moment the words are spoken, regardless of whether any loss actually occurs or the trade is profitable
• The critical distinction between a rep's pre-trade promise to cover losses (always forbidden) and a firm's after-the-fact reimbursement for a bona fide operational error (permitted)
• The three-pronged exception for sharing in non-family customer accounts: prior written firm authorization, prior written customer authorization, and proportionate financial contribution
• How the immediate-family exception removes the proportionality requirement but still requires both written authorizations in advance
• How supervisors must detect and escalate each violation type to protect the firm and preserve licenses