Finra Permanently Bans Broker

Former UBS rep permanently banned from Finra after secretly borrowing $738k from clients

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Sources: Investment News, FINRA, & numerous legal websites.

A former UBS Financial Services broker has been permanently barred from the securities industry after Finra found he secretly borrowed $738,000 from two clients and misused a portion of the funds. The loan agreements, including one made with a senior client, were used to fund unapproved ice cream and advertising ventures as well as personal expenses, according to Finra.

Manuel F. Melendez, who had been registered with UBS from 2007 until his departure in April 2023, consented to the ban without admitting or denying the findings, according to a Letter of Acceptance, Waiver, and Consent finalized April 15.

In its AWC letter, Finra said that from October 2018 through February 2021, Melendez obtained four loans from two UBS clients without the firm’s knowledge or approval.

The loans violated Finra Rule 3240, which prohibits registered representatives from borrowing money from clients unless certain conditions are met and proper approvals are obtained.

UBS’s internal written supervisory policies also barred such transactions unless pre-approved in writing and only under narrow circumstances.

One of the clients, a 65-year-old woman, lent Melendez $300,000 to invest in a billboard advertising business. A written agreement called for him to repay the loan with $130,000 in interest over five years.

He did not repay the principal or interest.

According to the AWC, “Melendez used thousands of dollars from [the client's] loan to pay personal expenses, such as cruises, airline tickets, and retail purchases.”

Between 2019 and 2021, a second client loaned Melendez $438,000 in three separate tranches for the reported purpose of buying an ice cream business and a sign company.

Finra found that none of the loans were disclosed or approved by UBS, and only one was documented in writing. Melendez did not repay any portion of those loans either.

The agency also found that Melendez used customer funds improperly and failed to disclose outside business activities involving the companies he claimed to be purchasing. In both cases, UBS was unaware that client funds were involved, and Melendez provided false or incomplete disclosures when he later attempted to notify the firm.

“Melendez falsely attested on four compliance questionnaires that he had not received a loan from any UBS client,” Finra said in the settlement.

UBS has since settled claims with both affected clients. Melendez's Broker Check profile reflects one customer dispute that aligns with the timeline set out in Finra's AWC letter, which was settled in January 2023 for $390,000.

"Claimant alleges that the FA borrowed money from her and/or solicited her to invest in unsuitable, unapproved outside business ventures, and that UBS failed to adequately supervise the FA," according to the Broker Check report.