The Financial Industry Regulatory Authority (FINRA) recently filed a complaint against broker Chris Fulco (Fulco) concerning allegations that Fulco facilitated the sale of stock in US Coal Corporation, Inc. (US Coal), in numerous private securities transactions away from his firm, aslo known as “selling away” in the industry. FINRA alleged that Fulco received significant compensation for facilitating these transactions in the amount of $601,159. In addition, FINRA alleged that Fulco lied to FINRA about his involvement in these transactions by providing false sworn testimony that many of the wire transfers he received were not related to sales of US Coal shares but rather were payments for his role in transactions involving gold. Further, FINRA alleged that Fulco tried to encourage the primary seller of US Coal securities in the transactions, known by the initials “LF”, not to appear for his scheduled testimony or to testify falsely about the transactions in order to corroborate Fulco’s own false testimony. Finally, FINRA alleged that Fulco failed to timely disclose to FINRA a lien and civil judgment entered against him.
Fulco entered the securities industry in 1999. From June 2007 to June 2010, Fulco was registered with vFinance Investments, Inc. (vFinance). From July 2010 to February 2011, he was registered with Charles Morgan Securities, Inc. (Charles Morgan). Thereafter, from March 2011 to December 2011, he was registered with Caldwell International Securities, Inc. (Caldwell International). Finally, Fulco was registered with Chelsea Financial Services until November 8, 2013.
According to FINRA, in or around August 2009, LF engaged vFinance and another individual referred to as “PCA”, to help sell his shares in US Coal, a non-public company that produces coal in Appalachia. LF acquired US Coal shares through various entities in or around 2006 after helping found the company. In or around September 2009, FINRA alleged that vFinance approved Fulco facilitation of the sale of 300,000 shares of LF’s US Coal stock to a customer referred to by the initials “MM”, a vFinance customer.
After completing this one transaction through vFinance, FINRA alleged that Fulco began soliciting the sale of US Coal shares away from the firm. When a buyer was found, FINRA alleged that Fulco arranged the transaction with LF by offering a price for the shares to LF and acting as a middleman for the buyer. If the transaction was agreed upon, a stock purchase agreement would be entered into and the buyer then would wire the purchase money directly to an account owned by PCA or one of the LF entities. According to FINRA, PCA or one of the LF entities would then wire Fulco compensation directly to his account at JPMorgan Chase totaling $601,159.
Fulco was registered either with vFinance (transactions occurring between November 2009 and March 2010) or Caldwell International (transactions occurring between September 2011 and December 2011). According to FINRA, Fulco did not provide written notice to vFinance or Caldwell International of his proposed role in the transactions or the compensation he may receive.
In or about July 2014, US Coal entered bankruptcy. The allegations against Fulco 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. In cases of selling away the investor is unaware that the advisor’s investments are improper.
Investors who have suffered losses 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.