Borrow's tightrope, ethics hold fast, friends fall away, family's path cast. Client's hand, a forbidden fire, officer's loan, in compliance's wire. Tread cautious, broker's soul, lest shadows rise, and trust takes its toll.
An employee of a broker-dealer has strict limitations on who they can borrow funds from due to regulations aimed at preventing conflicts of interest and insider trading. Here's the breakdown of each option:
a. The employee's friend: No. FINRA rules generally prohibit borrowing from friends or family members regardless of whether they have accounts at the firm.
b. The employee's sister: No. Similar to friends, family members are typically off-limits due to potential conflict of interest concerns.
c. An officer of an institution that is one of the firm's clients: Depends. FINRA allows borrowing from officers of client institutions under specific conditions, such as if the loan is made on commercially reasonable terms and pre-approved by the firm. However, there's likely still conflict of interest risk, so firms may have additional internal restrictions.
d. A customer who has granted the employee with discretionary authority: Absolutely not. This scenario presents a clear conflict of interest and is strictly prohibited by FINRA regulations. As the employee manages the customer's account with discretion, borrowing from them could influence investment decisions for personal gain.
Therefore, the only possible option is c, with caution due to potential conflict of interest and internal restrictions. The rest (a, b, and d) are definitely not allowed.
It's crucial for financial professionals to adhere to ethical and regulatory guidelines to maintain trust and market integrity. Borrowing from clients or related individuals can easily violate these principles and lead to serious consequences.