The Financial Industry Regulatory Authority (FINRA) has suspended former Wells Fargo broker George J. Cairnes for four months and imposed a $25,000 fine. The disciplinary action stems from allegations that Cairnes engaged in an unapproved real estate business with a client for nearly eight years.
According to the settlement letter, Cairnes participated in the outside business activity from August 2015 to April 2023 without notifying or receiving permission from his employer, Wells Fargo. This action led to violations of multiple industry rules and his eventual termination from the firm.
Key Takeaways
- George J. Cairnes, a 23-year industry veteran, was suspended for four months and fined $25,000 by FINRA.
- The penalties relate to an unapproved real estate partnership with a client that lasted from 2015 to 2023.
- Cairnes failed to disclose the activity and falsely certified on compliance forms that he was not involved in an outside business.
- He faces additional disciplinary action from Texas state regulators and is involved in a separate pending customer dispute over loans.
FINRA Details Violations and Sanctions
FINRA's investigation concluded that George J. Cairnes breached two significant rules governing broker conduct. The primary violation was of FINRA Rule 3270, which strictly requires brokers to provide written notice to their firms before engaging in any outside business activity (OBA) from which they may receive compensation.
The regulator also found him in violation of FINRA Rule 2010. This is a broader, catch-all rule that mandates all members maintain high standards of commercial honor and just and equitable principles of trade. By failing to disclose his business and providing false information on compliance questionnaires, FINRA determined he failed to meet this standard.
The settlement letter, which Cairnes accepted without admitting or denying the findings, outlines the penalties. In addition to the $25,000 fine, he is suspended from associating with any FINRA member firm in any capacity for four months. According to the documents, Cairnes did not have legal representation during the settlement process.
The Unapproved Real Estate Venture
The core of the issue was a long-term business relationship Cairnes established with one of his clients. According to FINRA, the two partnered to "identify, buy, manage, and sell real estate." This partnership was formalized through a limited liability company (LLC) that Cairnes created specifically for these activities.
Timeline of Undisclosed Activity
The unapproved real estate business operated for a period of seven years and eight months, from August 2015 through April 2023, all while Cairnes was registered with Wells Fargo.
Throughout this period, Cairnes received compensation from the real estate venture. However, he never provided the required prior notice to Wells Fargo. Furthermore, he repeatedly and falsely attested on multiple internal compliance questionnaires that he was not participating in any unapproved OBAs, directly misleading his employer.
State Regulators and Firm Take Action
FINRA was not the only body to take action against Cairnes. His issues began with his termination from Wells Fargo in July 2023. The firm filed a U5 termination notice, which triggered the FINRA investigation, stating that Cairnes was discharged over allegations he "facilitated a loan between clients as well as loans and other transactions between a client and individuals associated with [Cairnes]."
Texas State Securities Board Order
Following his termination, the Texas State Securities Board also launched an investigation. In April 2024, Cairnes consented to a Disciplinary Order from the state board. The Texas order revealed additional details, noting that Cairnes was paid at least $175,000 for his role in helping the client establish and operate the real estate business.
As a result of these findings, the Texas board barred him from registering to be licensed in the state for a period of two years.
Regulatory Triggers
A Form U5 is a standard document filed with regulators when a registered individual leaves a brokerage firm. Disclosures of terminations for cause, like the one filed by Wells Fargo for Cairnes, often trigger independent investigations by FINRA and state securities boards.
Broker's Career and Other Financial Disputes
Cairnes's regulatory issues are compounded by other financial conflicts. In August, a FINRA arbitration panel ordered him to repay Wells Fargo $180,000. This amount was related to two promissory notes he signed when he joined the firm in 2009. Such notes are common in the industry as part of a recruitment package and are typically forgiven over time, but repayment is often required if the broker leaves before a specified period or is terminated for cause.
Additionally, Cairnes faces a pending customer dispute filed in April 2023. According to his public BrokerCheck record, a client alleges they were convinced to establish a line of credit to provide loans to Cairnes, his family members, and his friends. The claim states that this money has not been fully repaid. The filing does not specify the exact amount of damages being sought.
A Long Career in Finance
George J. Cairnes began his career in the financial industry in 2000 at Merrill Lynch. He later moved to Stanford Financial Group in 2008, just a year before the firm was seized by federal authorities in what was revealed to be an $8 billion Ponzi scheme run by its owner, Robert Allen Stanford.
He joined Wells Fargo in 2009. After his termination from Wells Fargo, Cairnes briefly associated with an independent broker-dealer, Chelsea Financial Services. However, according to the Texas State Securities Board order, the firm withdrew his registration application in November 2023.
