The investment lawyers of Gana LLP are investigating the WaveCrest Securities LLC’s (WaveCrest) termination of former broker Charles Constant (Constant) working out of the New York, New York office. WaveCrest terminated Constant in December 2016. According to the firm’s Financial Industry Regulatory Authority (FINRA) BrokerCheck filing the firm stated that Constant “violated both firm policies and FINRA Rules 3270 & 3280.” These rules have to do with disclosures of outside business activities and private securities transactions. No other disclosure concerning the extent and nature of the activity is disclosed.
However, Constant has disclosed several outside business activities including his d/b/a Constant Capital, LLC. Constant has also disclosed entities including PKS Insurance, Truth Data Insights, SMU Associate Board, and Constant 66 Films, LLC. Constant 66 Films is disclosed as a film production company. It is unclear at this time if Constant’s activities involve any of these disclosed entities.
The providing of loans, selling of promissory notes, or recommending investments outside of the firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”. 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.
Constant entered the securities industry in 1992. From August 2010 until July 2011, Constant was associated with Merrill Lynch, Pierce, Fenner & Smith Incorporated. Then, from September 2011 until February 2014 Constant was associated with M Holdings Securities, Inc. Finally, from February 2015 until December 2016 Constant was associated with firm WaveCrest out of the firm’s New York, 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. A brokerage firm’s claim of ignorance of their advisor’s activities is not a proper defense to their agent’s activities. Brokerage firms are obligated under the FINRA rules to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments away from the firm and respond to red flags of potential misconduct. 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.