The Financial Industry Regulatory Authority (FINRA) sanctioned and barred broker David Lavine (Lavine) concerning allegations that Lavine engage in private securities transactions also known as “selling away.” FINRA Rule 8210 authorizes the regulator to require persons associated with a FINRA member to provide information with respect to any matter involved in the investigation.
In October 2014, FINRA alleged that it pursued an investigation into allegations that Lavine (i) exceeded the scope of an approved outside business activity and potentially engaged in an unapproved private securities transaction; and (ii) failed to timely disclose several reportable financial events. FINRA requested that Lavine provide documents and information on or before November 14, 2014. On December 2, 2014, FINRA stated that Lavine, through his counsel, requested an extension of time to respond but ultimately failed to provide the responsive documents and information and informed FINRA that he would not provide information at any time.
According to Lavine’s brokercheck his disclosed outside business activities include Angel Flight South Central and LAKAP, LLC. It is unclear at this time if FINRA’s investigation concerned Lavine’s participation in these enterprises.
Lavine first became registered with FINRA through his association with a member firm in 2005 through A.G. Edwards & Sons, Inc. From July 2007 through October 2011, Lavine was associated with Morgan Stanley. Finally from October 2011 through October 2014, Lavine was associated with UBS Financial Services, Inc. (UBS). On October 13, 2014, UBS filed a Form U5 terminating Lavine’s association with the firm.
The allegations against Lavine are consistent with a potential “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 claims to be unaware of these 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 such products. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each registered representative. Selling away often occurs in environments where the brokerage firms either fails to put in place a reasonable supervisory system or fails to actually implement that system and meet supervisory requirements.
In selling away cases, investors are unaware that the advisor’s investments are either not registered or not real. Typically investors will not learn that the broker’s activities were wrongful until after the investment scheme is publicized or the broker simply shuts down shop and stops returning client calls.
Investors who have suffered losses through Lavine’s investment recommendations may be able recover their losses through securities arbitration. The attorneys at Gana LLP are experienced in representing investors in cases of selling away and brokerage firms failure to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.