According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor James Merkel (Merkel), in August 2017, was terminated by his employer Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) after the firm alleged that Merkel violated firm policy relating to selling away.
Prior to the firm’s termination, in June 2016 a customer filed a complaint alleging unsuitable investment recommendations and misrepresentation and omission of material facts involving options. The customer alleged $1,000,000 in damages and the claim is currently pending.
At this time it is unclear the extent and scope of Merkel’s securities violations and outside business activites. Merkel’s CRD lists that he operates an outside business activity concerning real property. Merkel also lists an entity called Merkel’s Lfan LLC that is a business that produces adironack chairs and other items. At this time it is unknown the exact nature of the firm’s allegations concerning private securities transactions – a practice known in the industry as “selling away”.
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.
Merkel entered the securities industry in 1984. From 1984 until Setpember 2017 Merkel was associated with Merrill Lynch out of the firm’s Frederick, Maryland office location.
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.