Conrad Tambalo Bautista (Bautista) resolved charges brought by the Financial Industry Regulatory Authority (FINRA) concerning the sale of private securities and possible involvement in a fraudulent investment scheme by accepting a bar from the securities industry.
Bautista has been associated with seven FINRA member firms including his most recent employer, CUSO Financial Services, L.P. (CUSO) from January 2010 to March 2013. Prior to CUSO, Bautista was associated with SWBC Investment Services, LLC, Financial Network Investment Corporation, and Wells Fargo Investments, LLC. Bautista obtained Series 6, 7, and 63 securities licenses.
Bautista’s public records do not disclose any businesses, other than CUSO, that Bautista was involved in. However, in February 2013, a customer allegedly filed a complaint against Bautista involving potential securities related misconduct. Subsequently, FINRA sent Bautista requests for information concerning the substance of the customer complaint. The FINRA letter sought information into whether Bautista may have engaged in fraudulent investment schemes. In addition, FINRA had information that suggested that Bautista may have been involved in undisclosed outside business activities and private securities transactions that may have involved borrowing money from customers.
The accusations made against Bautista are consistent with a “selling away” violation. Selling away occurs when a securities broker solicits securities that are not approved by the broker’s affiliated firm. Selling away is prohibited under FINRA Rule 3040, as well as other securities laws. The most common securities products solicited in selling away schemes are private placements and promissory notes.
In the typical selling away investment scheme the investor is not aware that the broker is acting outside of the normal securities channels. The investor is often provided with false account statements or confirmations that contain values that the broker can manipulate and control. In other cases, the broker will have the investor open a self-directed account that helps the broker cloak the illegitimacy of the investment by having a third-party prepare statements and distribute income payments. However, these account statements are also misleading to investors because the broker has complete discretion to stop or alter payments and values.
On March 26, 2013, and April 22, 2013, Bautista, through his attorney, informed FINRA that he would not cooperate with the investigation and refused to provide documents and information to the agency.
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