FINRA Bars Brian Smit Over Private Securities Transactions

shutterstock_20002264The investment lawyers of Gana LLP are investigating the regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against Brian Smit (Smit) formerly working out of the Sioux Falls, South Dakota office of LPL Financial LLC (LPL).  LPL terminated Smit in August 2015 stating that the broker engaged in unapproved investments.  Thereafter, in March 2016, FINRA barred Smit stating that Smit consented to the sanction and to the entry of findings that he refused to appear for on-the-record testimony requested by FINRA related to the alleged participation in unapproved private securities transaction.

The providing of loans or selling of promissory notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.  At this time it unclear the nature and scope of Smit’s outside business activities and private securities transactions.  However, according to Smit’s public records his outside business activities include Pinnacle Wealth Management and Smit Holdings, LLC – a rental real estate business.  Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, real estate agents, or insurance agents to clients of those side practices.

Smit entered the securities industry in 2010.  From Aprill 2010 until August 2015, Smit was associated with LPL.

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.