The Financial Industry Regulatory Authority (FINRA) brought and enforcement action against broker Jeffrey Mohlman (Mohlman) (FINRA No. 2015044734401) resulting in a bar from the securities industry alleging that Mohlman failed to provide FINRA staff with information and documents requested. The failure to provide those documents and information to FINRA resulted in an automatic bar from the industry. FINRA’s document requests related to the regulators investigation into claims the Mohlman engaged in unapproved and undisclosed private securities transactions – also referred to in the industry as “selling away.”
FINRA’s investigation appears to stem from Mohlman’s termination from Questar Capital Corporation (Questar Capital) in February 2015. At that time Questar Capital filed a Form U5 termination notice with FINRA stating in part that the firm permitted Mohlman to resign under circumstances where there was allegations that Mohlman was under internal review for failure to follow firm policies and procedures regarding participation in private securities transactions. It is unclear the nature of the outside business activities from publicly available information at this time. However, Mohlman’s brokercheck disclosures reveal several outside business activities including being a co-owner of NexGen Vapors – a vapor needs business – and Ann Arbor Annuity Exchange where Mohlman discloses that he works as an insurance agent.
Mohlman entered the securities industry in 2001. From October 2002 until March 2009, Mohlman was associated with MetLife Securities Inc. Thereafter, from June 2009 until May 2011, Mohlman was associated as a registered representative with Investacorp, Inc. Finally, from June 2012 until March 2015, Mohlman was associated with Questar Capital.
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 when these incidents occur the brokerage firm claims ignorance of their advisor’s activities the firm is obligated under the FINRA rules 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 misconduct often occurs where brokerage firms 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.