Broker David Charles Kauffman (Kauffman) was recently barred by The Financial Industry Regulatory Authority (FINRA) over his failure to respond to FINRA’s investigation over allegations that he engaged in personal private securities transactions, used unapproved email addresses, and introduced clients to individuals associated with non-approved investment opportunities.
Kauffman began his career in the securities industry in 1993 and has been registered with 13 FINRA member firms. From March 2006 through September 2010, Kauffman was registered with FINRA as a General Securities Principal and a General Securities Representative at First Allied Securities, Inc. (First Allied). First Allied terminated Kauffman for violating firm policies pertaining to his personal private securities transactions, used unapproved email addresses, and introduced clients to individuals associated with non-approved investment opportunities. Thereafter, Kauffman was registered with MCL Financial Group, Inc. through December 2011. Kauffman’s BrokerCheck discloses that Kauffman was also employed by David Kauffman Insurance Services, One-Less Putt, MCS Golf, 928 LLC, and EDT Property Services.
In September 2010, First Allied made two filings with FINRA disclosing it had terminated Kauffman for conduct including engagement in private securities transactions in connection with several private placement offerings without providing written notice to the firm. FINRA alleged that one of the offerings Kauffman was involved in was entity named Gulf Coast Oil & Rig, LLC (Gulf Coast). Thereafter, FINRA staff sought information, documents, and testimony from Kauffman to determine, among other things, his role and compensation in connection with the private securities transactions, as well as the status of Gulf Coast’s business. Initially, Kauffman cooperated with the examination by providing some information and documents. However, FINRA alleged that Kauffman failed to respond properly to further requests.
The allegations against Kauffman are consistent with allegations concerning outside business activities and a “selling away” violation. Selling away occurs when a securities broker solicits securities that were not first approved by the advisor’s firm. Selling away violates a number of securities laws including FINRA Rule 3040. The most common securities sold away from brokerage firms involve private placements, including oil and gas ventures, real estate related investments, and promissory notes. Investors are often unaware that the broker’s sales of these investments is improper and a violation of the securities laws. In addition, investors do not learn that the broker’s activities are wrongful until the investment scheme is either publicized, the broker is sanctioned, the investment stops paying interest, or the broker stops returning client calls.
Brokerage firm’s confronted by selling away claims typically respond to complaints by claiming ignorance to the broker’s wrongful actions. However, under FINRA Rule 3010, firms have an obligation to supervise their employees. The attorneys at Gana LLP are experienced in investigating claims concerning failure to supervise outside business activities. Our attorneys can help you detect and uncover suspicious activity in your accounts. Our consultations are free of charge and the firm is only compensated if you recover.