The Financial Industry Regulatory Authority (FINRA) recently sanctioned and barred broker Paul Godlewski (Godlewski) concerning allegations Godlewski refused cooperate with requests made by FINRA in connection with an investigation into possible outside business activities. Such activities may, under certain circumstances also involve investment transactions referred to as “selling away” in the industry. According to FINRA BrokerCheck records Godlewski has disclosed outside business activities include Preferred Systems, Inc., PA Tags & Notary, and certain rental property real estate interests. It is unclear whether FINRA’s investigation concerns these particular outside business activities.
Godlewski entered the securities industry in 2004, when he became associated with Allstate Financial Services, LLC (Allstate). Godlewski held a Series 6 license which is for an Investment Company and Variable Contracts Products Representative. On January 12, 2015, Allstate filed a termination notice (known as a Form U5) with FINRA disclosing that Godlewski was discharged from the firm.
According to FINRA, in March 2015, the agency began investigating whether Godlewski had engaged in outside business activities and failure to follow Allstate’s procedures concerning televised public appearances. As part of its investigation, on March 12, 2015, FINRA sent a request to Godlewski for certain documents and information. According to FINRA, Godlewski stated on a call with FINRA staff on March 16, 2015, that he will not cooperate with the investigation. Consequently, Godlewski was barred by FINRA.
The conduct alleged against Godlewski may lead to “selling away” securities violations. 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.
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.
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.