Our firm is investigating claims made by LPL Financial LLC (LPL) when the firm terminated broker David Garces (Garces). According to the firm, Garces was discharged in July 2016 after allegation were made that Garces engaged in an outside business activity without prior notification to the firm.
According to Garces brokercheck records Garces has disclosed only one outside business activity called TMS Merchant Solutions which Garces is the president of and is involved in selling credit card terminals. It is unclear if other business activities are involved in LPL’s allegations. However, often times undisclosed outside business activities are used by brokers to provide loans or sell of notes and other investments to clients outside of a brokerage firm. These types of transactions constitute impermissible private securities transactions – a practice known in the industry as “selling away”. Often times brokers who engage in this practice use outside businesses in order to market their securities. At this time it is unknown and has not been alleged that Garces engaged in selling away.
Garces entered the securities industry in 2012. From March 2012 through April 2013 Garces was associated with Metlife Securities Inc. Thereafter, from February 2015 until August 2016, Garces was registered with LPL out of the firm’s Brooklyn, New York office location.
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.
The investment fraud attorneys at Gana LLP have represented hundreds of investors in securities related disputes including 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.