In September 2016, while undergoing medical treatments, Melen borrowed $150,000 from a friend and brokerage client who was 87 years old at the time, according to FINRA. That loan was “interest-free and not memorialized in writing,” it said, noting that Melen “repaid the loan in full in January 2017.”
On Sept. 20, 2017, Melen borrowed an additional $110,000 from the same client but the broker agreed to pay interest, according to FINRA. Melen repaid the loan with interest in January 2018 and, that same month, borrowed $25,000 from a second client of his with whom he had a close personal relationship, FINRA said. The broker agreed to pay interest on that loan as well, it noted.
Melen made partial repayments in April and May 2018. In August that year, Melen borrowed an additional $22,000 from the same client and again agreed to pay interest, according to FINRA. In August 2018, Melen repaid the second loan with interest plus the balance due on the first loan, FINRA said, adding that neither client complained.
However, Morgan Stanley’s written policies and procedures prohibited employees from borrowing money from clients without prior written approval from the firm, and he did not inform the firm about the loans. Nor did he have authorization from the firm, according to FINRA.
Melen also “falsely attested to Morgan Stanley in 2017 and 2018 that he had not borrowed money from any customer in the past 24 months,” FINRA alleged.
Additionally, in October 2013, Melen bought beachfront property in Panama, originally intended to serve as a vacation property, according to FINRA. One year later, however, he decided to rent it out for income, FINRA alleged.
From October 2013 to April 2019, Melen received about $200,000 in compensation from the property, FINRA said. He did not disclose the rental property to Morgan Stanley in writing. Nor did he identify it on his annual attestations and, in 2017, “affirmatively stated to the firm that he did not participate in any outside business activities that required disclosure,” according to FINRA.
As a result of his actions, Melen violated FINRA Rules 2010 (governing standards of commercial honor and principles of trade), 3240 (governing borrowing from or lending to clients) and 3270 (governing outside business activities), FINRA alleged.