Articles Tagged with private securities transactions

shutterstock_179203754The investment fraud lawyers of Gana LLP are investigating the employment termination filed with The Financial Industry Regulatory Authority (FINRA) by Wells Fargo Advisors, LLC (Wells Fargo) and the regulatory action filed by FINRA involving broker John Hoekman (Hoekman). According to BrokerCheck records Hoekman has been subject to six customer complaints and one employment separation for cause.

According to Wells Fargo, the firm terminated Hoekman after alleging Hoekman resigned after the firm reviewed allegations made in a customer complaint.  Thereafter, in July 2016, FINRA barred Hoekman after alleging that Hoekman consented to the sanctions that he failed to provide documents and information requested by FINRA during the course of an examination into allegations that Hoekman engaged in certain outside business activities (OBAs) and participated in private securities transactions.  (FINRA No. 2015045695501).  Often times such filings indicate that the broker is engaging potentially in private securities transactions, promissory notes, or loans away from the firm.  The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.

At this time it unclear the scope of Hoekman’s OBAs and/or private securities transactions.  According to brokercheck records Hoekman has disclosed OBAs listed as including Naturally Advanced Technologies.  Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, real estate brokers, or insurance agents to clients of those side practices.

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shutterstock_103681238The investment fraud lawyers of Gana LLP are investigating the employment termination filed with The Financial Industry Regulatory Authority (FINRA) by Morgan Stanley involving broker Robert Beck (Beck). According to BrokerCheck records Beck is subject to three customer complaints and one employment separation for cause.

According to Morgan Stanley, the firm terminated Beck after raising concerns relating to employee’s disclosures relating to outside activities.  Often times such filings indicate that the broker is engaging potentially in private securities transactions, promissory notes, or loans away from the firm.  The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.

At this time it unclear the nature and scope of Beck’s OBAs and/or private securities transactions.  According to BrokerCheck records Beck disclosed that he is involved in outside business activities including rental property in Philadelphia.   Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, real estate brokers, or insurance agents to clients of those side practices.

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shutterstock_188383739The investment lawyers of Gana LLP are investigating the regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against Thomas Stamborski (Stamborski) working out of Palatine, Illinois alleging that the broker failed to disclose certain changes to an outside business activity.  According to the FINRA regulatory action (FINRA No. 2015044783401) Stamborski consented sanctions in the form of a permanent bar because he failed to provide documents and information requested by FINRA during the course their investigation into allegations concerning his resignation from his member firm, LaSalle St Securities, LLC (LaSalle St). LaSalle St allowed Stamborski to resign after it was alleged that he failed to update an Outside Business Activity with his firm when a material change occurred.

As a background, the providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible outside business activities and private securities transactions – a practice known in the industry as “selling away”.  At this time it unclear the nature and scope of Stamborski outside business activities.  However, according to Stamborski’s public records his outside business activities includes Axis Financial Corporation.  Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, or insurance agents to clients of those side practices.

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shutterstock_180412949The investment lawyers of Gana LLP are investigating customer complaints against broker Garland Benton (Benton). There are at least 3 customer complaints against Benton, one of which appears to be filed in connection with the solicitation of private securities transactions. In addition, there is one employment separations disclosed. One customer complaint alleges that Benton caused $946,670 in damages by failing to conduct due diligence on an investment while the firm has responded that the Benton was not a representative of the customer. In April 2015, Reef Securities Inc. (Reef) terminated Benton stating that the broker was permitted to resign after allegations were made that Benton failed to follow firm policies and procedures regarding private securities transactions from 2008. The conduct allegedly engaged in by Benton is also referred to as “selling away” in the industry.

Benton entered the securities industry in 2002. Between October 2002 and April 2015, Benton was associated with Reef.

In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. However, even though when these incidents occur the brokerage firm claims ignorance of their advisor’s activities the firm is obligated under the FINRA rules to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away misconduct often occurs where brokerage firms either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.

In cases of selling away the investor is unaware that the advisor’s investments are improper. In many of these cases the investor will not learn that the broker’s activities were wrongful until after the investment scheme is publicized, the broker is fired or charged by law enforcement, or stops returning client calls altogether.

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shutterstock_186772637The securities lawyers of Gana LLP are investigating Clifford Morgan (Morgan) bar from the securities industry. The Financial Industry Regulatory Authority (FINRA) recently brought an enforcement action (FINRA No. 2011025610501) against Morgan alleging that between November 2011 and December 2014, while he was associated with brokerage firm Uhlmann Price, Securities, LLC (Uhlmann Price) Morgan participated in private securities transactions – also referred to as “selling away” in the industry – without providing notice to his firm. FINRA also found that in engaging in the private securities transactions Morgan made material misrepresentations to customers and also participated in numerous outside business activities without providing the required notice to the firm.

Clifford Morgan entered the securities industry in January 2004. Between January 2007 and December 2014, Morgan was associated with Uhlmann Price. On December 5, 2014, Uhlmann Price filed a Form U5 reporting that Morgan had been “permitted to resign” with the explanation that the ”registered representative participated in private securities transactions in conflict with firm policies.”

It is unclear from the regulatory filings what companies were invested in but from publicly available information, Morgan’s brokercheck disclosures reveal several outside business activities including US College Planning, W&C Business Management, Strategis Wealth Consulting, and Strategis Wealth Advisory Group.

FINRA alleged that between September 2013 and August 2014, Morgan referred approximately 20 people to an investment in promissory notes in a company that was a private trading and financial services company. In connection with the referrals FINRA alleged that Morgan participated in meetings and telephone calls regarding the promissory notes offered, provided marketing materials to the investors, and answered questions regarding the offering. In total, FINRA found that Morgan referrals purchased approximately $1.8 million of the companies notes. In addition, FINRA found that Morgan personally invested more than $200,000 of the notes.

FINRA also found that Morgan participated in two additional private securities transactions. One in March 2012, resulted in a customer investing $25,000 in return for an equity stake in a company and another in May 2013, where Morgan referred a customer to invest in another company.

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shutterstock_138129767The Financial Industry Regulatory Authority (FINRA) brought and enforcement action against broker Jeffrey Mohlman (Mohlman) (FINRA No. 2015044734401) resulting in a bar from the securities industry alleging that Mohlman failed to provide FINRA staff with information and documents requested. The failure to provide those documents and information to FINRA resulted in an automatic bar from the industry. FINRA’s document requests related to the regulators investigation into claims the Mohlman engaged in unapproved and undisclosed private securities transactions – also referred to in the industry as “selling away.”

FINRA’s investigation appears to stem from Mohlman’s termination from Questar Capital Corporation (Questar Capital) in February 2015. At that time Questar Capital filed a Form U5 termination notice with FINRA stating in part that the firm permitted Mohlman to resign under circumstances where there was allegations that Mohlman was under internal review for failure to follow firm policies and procedures regarding participation in private securities transactions. It is unclear the nature of the outside business activities from publicly available information at this time. However, Mohlman’s brokercheck disclosures reveal several outside business activities including being a co-owner of NexGen Vapors – a vapor needs business – and Ann Arbor Annuity Exchange where Mohlman discloses that he works as an insurance agent.

Mohlman entered the securities industry in 2001. From October 2002 until March 2009, Mohlman was associated with MetLife Securities Inc. Thereafter, from June 2009 until May 2011, Mohlman was associated as a registered representative with Investacorp, Inc. Finally, from June 2012 until March 2015, Mohlman was associated with Questar Capital.

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shutterstock_180342155The Financial Industry Regulatory Authority (FINRA) sanctioned (Case No. 2013036262101) broker Sylvester King Jr. (King) concerning allegations that from July 2009, through November 2012, while King was registered Morgan Stanley Smith Barney LLC (Morgan Stanley) and later Wells Fargo Advisors, LLC (Wells Fargo), circumvented Wells Fargo’s policies and procedures by assisting another broker in concealing nearly $400,000 in loans to three firm customers, loaned $25,000 to a customer without permission, participated in an undisclosed private securities transaction, otherwise referred to in the industry as “selling away”, where eight customers invested more than $3 million, and provided false information to Morgan Stanley on two separate questionnaires.

King entered the securities industry in 1999. From 2006, until June 2009, King was registered with Citigroup Global Markets Inc. (Citigroup). From June 2009, until October 2010, King was associated with Morgan Stanley. Thereafter, from October 2011, until May 2015, King was associated with brokerage firm Wells Fargo. On April 27, 2015, Wells Fargo filed a notice of Termination Form U-5 on the same day that FINRA entered into its agreement with King in which King accepted a fine and sanctions stating that King was discharged from the firm because of the settlement with FINRA which included an 18 month suspension. Thereafter, FINRA filed a second regulatory action stating that King failed to pay the $35,000 required as part of the settlement as of July 28, 2015.

FINRA alleged that in 2009, King and his partner referred to by the initials “AP”, formed PKG, a d/b/a branch office located in Florida registered through Morgan Stanley and then Wells Fargo. PKG allegedly provided financial “concierge” services to professional athletes who played in the NFL and the NBA. FINRA alleged that King committed the violations contained in the complaint for the supposed benefit, of several of these athletes.

FINRA found that from November 2011, through January 2012, while King was registered with Wells Fargo, King assisted his partner in loaning approximately $399,500 to three professional athletes in the NFL and NBA. In order to conceal the loans from Wells Fargo, FINRA alleged that AP wired the loan funds first to an entity referred to as “BPKG”, an entity owned by King’s and AP’s family members. FINRA alleged that King controlled the finances of BPKG and could effect transfers of funds from the account. FINRA alleged that King, at AP’s direction, wired the loan funds from BPKG to the customers. FINRA found that King understood that AP transferred the loan funds through BPKG in order to avoid Wells Fargo’s reporting requirements.

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shutterstock_102242143According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Homer Vining (Vining) has been the subject of at least one customer complaint and three regulatory actions. The customer complaint against Vining alleges a number of securities law violations including that the broker made misrepresentations concerning penny stocks and a claim of investment sold away from the firm among other claims.

Vining entered the securities industry in 1991. From 2005 through August 2009, Vining was associated with Ameriprise Advisor Services, Inc. Thereafter, from August 2009, until March 2015, Vining was associated with J.P. Turner & Company, L.L.C. (JP Turner).

Vining has three regulatory actions against him. The first is a suspension by FINRA for failing to comply with an arbitration award. The second is also a suspension by FINRA for failing to comply with an arbitration award. The third regulatory action is by the state of Georgia which suspended Vining until the broker comes into good standing with FINRA.

Penny stocks are extremely risky investments. The term “penny stock” generally refers to securities that trades below $5 per share, issued by a small company. Penny stocks often trade infrequently making it difficult to sell and price. Due to the size of the issuer, the market cap, the liquidity issues, and other reasons penny stocks are generally considered speculative investments. Consequently, the SEC requires broker-dealers effecting penny stock transactions to make a documented determination that the transactions are suitable for customers and obtain the customers’ written agreement to those transactions.

A broker-dealer must: (a) document the customer’s suitability by sending a written statement to the customer describing the basis of the suitability determination two days prior to purchase and obtain a written agreement from the customer to purchase the penny stock in a specific quantity prior to the transaction; (b) furnish the customer a standardized risk disclosure document two days prior to effecting a penny stock transaction and receive and maintain a signed and dated acknowledgement of its receipt; (c) disclose the current inside bid and ask market quotations; (d) disclose the amount of compensation the broker or dealer will receive for the transaction orally or in writing prior to effecting the transaction; and (e) send monthly account statements showing market and price information for each penny stock

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shutterstock_180735251The Financial Industry Regulatory Authority (FINRA) recently sanctioned and barred David Chu (Chu) concerning allegations Chu refused cooperate with requests made by FINRA in connection with an investigation into possible outside business activities and private securities transactions. Such activities are often referred to as “selling away” in the industry. According to FINRA BrokerCheck records Chu has no outside business activities listed. It is unclear what businesses or investments FINRA’s investigation concerns.

Chu entered the securities industry in 2004, when he became associated with NYLife Securities LLC (NYLife). Chu held a Series 6 license which is a license that only allows the broker to sell investment companies (i.e. mutual funds) and variable contracts products. On March 16, 2015, NYLife filed a termination notice (known as a Form U5) with FINRA disclosing that Chu was discharged from the firm under circumstances that included a notification from the SEC that the agency was reviewing Chu’s books and records including his outside business activities and private securities transactions. NYLife conducted its own review and believed that Chu’s activities exceeded the scope of his approved activities with the brokerage firm.

According to FINRA, in April 2015, the agency began investigating whether Chu had engaged in outside business activities by soliciting investments or promissory notes. As part of its investigation FINRA sent a request to Chu for certain documents and information. According to FINRA, Chu provided a partial response to FINRA but thereafter through subsequent communications stated on a call with FINRA staff that he will not cooperate with the investigation. Consequently, Chu was barred by FINRA.

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shutterstock_1081038The Financial Industry Regulatory Authority (FINRA) recently sanctioned and barred broker Daniel Retzke (Retzke) concerning allegations Retzke refused to appear for on-the-record testimony requested by FINRA in connection with an investigation into possible private securities transactions and the soliciting of a loan (also referred to as “selling away”). According to FINRA BrokerCheck records Retzke has disclosed outside business activities include Country Inn & Suites, Galena Lodging Photography, Galena Lodging, and Retzke LLC. It is unclear whether FINRA’s investigation concerns these particular outside business activity. In addition, there have been at least three customer complaints filed against Retzke some which allege unsuitable investments.

ln December 1983, Retzke first became registered with a FINRA firm. In January 1992, Retzke became associated with Edward Jones. On November 13, 2014, Edward Jones filed a Uniform Termination Notice with FINRA disclosing that Retzke was discharged on October 14, 2014.

According to FINRA, in January, 2015, the agency began investigating whether Retzke had engaged in a private securities transaction and solicited a loan from a client. As part of its investigation, on January 30, 2015, FINRA sent a request to Retzke. According to FINRA, Retzke stated on a call with FINRA staff on February 3, 2015, that he will not cooperate with the investigation. Consequently, Retzke was barred by FINRA.

The allegations against Retzke are consistent with “selling away” securities violation. In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. However, even though the brokerage firm claim ignorance of their advisor’s activities, under the FINRA rules, a brokerage firm owes a duty to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away often occurs in brokerage firm that either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.

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