Former UBS Rep Barred for Borrowing $738K From Clients and Misusing Funds

The Financial Industry Regulatory Authority has barred former UBS Financial Services general securities representative Manuel F. Melendez from associating with any FINRA member in all capacities, following a series of violations involving unauthorized loans from clients, misuse of customer funds, and undisclosed outside business activities.

According to FINRA, between October 2018 and February 2021, Melendez borrowed a total of $738,000 from two UBS clients without obtaining the firm’s prior written approval, as mandated by both UBS policy and FINRA Rule 3240, which prohibits a registered person from borrowing or lending money to customers unless specific conditions are met and the representative has acquired permission from their member firm. In this case, the clients were neither members of Melendez’s immediate family nor engaged in the business of lending.

FINRA reported that Melendez borrowed $300,000 from a 65-year-old customer in October 2018. Melendez and the customer executed a written loan agreement, which stated that the loan was for capital to invest in a billboard advertising business. Instead, Melendez used thousands of dollars from the loan to pay personal expenses, such as cruises, airline tickets, and retail purchases.

Additionally, Melendez reportedly received a series of loans from a different customer totaling $438,000 to purchase an ice cream and sign business. Instead, Melendez used thousands of dollars from these loans to pay for his billboard advertising business. While Melendez received three loans from the second customer, a written agreement was executed for only one. FINRA stated that neither of the two clients received any repayments of principal or interest. The misuse of funds is a violation of Rule 2150, which provides that FINRA members may not make improper use of a customer’s funds.

Finally, FINRA said that Melendez did not properly disclose his two outside business ventures – the proposed ice cream company and the sign company. Despite taking active steps to acquire and operate these businesses, including forming holding companies and securing loans from UBS clients, Melendez failed to provide timely and accurate disclosures to his employer. When he did eventually disclose these ventures, his filings falsely stated that no UBS clients were involved.

Melendez was registered with UBS Financial Services Inc. from 2007 until his resignation in April 2023. UBS, however, later amended his Form U5 filings to reflect the client complaint and its resolution. UBS ultimately settled with both affected customers. Terms of those settlements were not disclosed.

As a result of the findings, Melendez has been permanently barred from associating with any FINRA member firm. Melendez consented to the findings without admitting or denying them.

According to his BrokerCheck record, Melendez started his career in 2003 with the broker-dealer Popular Securities Inc. before moving to UBS in 2007. Prior to the 2023 complaint and this most recent regulatory action, Melendez had also experienced four other customer disputes between 2007 and 2018. Those disputes were either denied, settled, or closed without action.

Click here to visit the AltsWire directory page.