Borrowing from customers

How would you answer an exam question like this one?

A registered representative may borrow money from a customer
A. if the customer is a relative of the representative
B. according to the firm's written supervisory guidelines
C. only if the customer is a bank or other lending institution
D. under no circumstances

EXPLANATION: reading FINRA's August summary of disciplinary actions, I see an example of a registered representative at a firm here in Chicago who is no longer a registered representative and probably never will be. Why? He borrowed money from a customer who was not a relative and never repaid the improper $29,000 loan. Of course, if the rep had repaid the loan, I doubt anyone would have found out, but he violated firm policy and FINRA rules by taking the money in the first place. So, can a registered rep borrow money from no customer ever? Not quite, so we can eliminate Choice D. Can the rep borrow $ from a customer who is also a relative? Probably, but not automatically, so we can elminate Choice A. Surely a rep can borrow from a customer if the "customer" is actually the Clover Springs National Bank & Trust, right? Probably, but the only way to borrow money from customers--should you be so crass--is to do it according to your firm's written supervisory guidelines.

ANSWER: B

Typical Series 65/66 question. Two other answers almost work, but only one answer really satisfies the issue raised in the question. I think this one will become clearer if you see the real-world version of what I'm talking about. This is from the FINRA disciplinary wrap-up for August 2009:
Terrence Thomas Alexander (CRD #3273969, Registered Representative, Chicago, Illinois) was barred from association with any FINRAmember in any capacity. The sanction was based on findings that Alexander borrowed $29,000 from a firm customer contrary to his member firm’s compliance manual, which prohibited registered representatives from borrowing from customers other than relatives; the customer and Alexander were not related. The findings stated that Alexander failed to repay the loan.The findings also stated that Alexander failed to respond to FINRA requests for documents. (FINRA Case #2007011261701).
Oh well. It doesn't make him a bad guy--who knows why he needed $29,000? It's just unfortunate that he ended up going against the compliance manual and then blowing off FINRA's requests for documents. I'm thinking he could have reduced it to a suspension and a fine if he had cooperated with FINRA, worked out a repayment plan with the customer, and shown some remorse. In fact, that's exactly what happened at a recent hearing I attended at the IL Securities Department. For whatever reason, this registered rep's broker-dealer either didn't care or didn't discover that he had borrowed a similar amount of money from a client for a real estate deal he had cooked up and then--predictably--couldn't repay the customer. The customer filed a complaint form with the Administrator, and the rep had to come in to convince the "Administrator" not to revoke his license and issue an "order of prohibition" that would make it darned tough to ever re-enter the financial services industry. The hearing officer and the attorney for the Administrator were extremely cooperative and empathetic. The registered rep promised he would repay the gentlemen as soon as he could, and after a few minutes it was decided that by such-and-such date, the (former) rep would work out a repayment plan with the client, submit it to the "Administrator's" office, and go from there. No big deal.
Then again, this registered rep had not, apparently, violated his former broker-dealer's compliance manual, or--more likely--the firm was too busy to give a rip.
In any case, agents must follow their broker-dealer's compliance manual on every single point. And, if you get a request for documents from FINRA or your state securities Administrator, turn them over forthwith.