Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor James and Lorraine Conaway (Conaway), formerly associated with USA Financial Securities Corporation (USA Financial) in Tustin, California was terminated by his firm concerning allegations of failure to comply with firm advertising and outside business activity (OBA) procedures, participating in financial transactions with securities clients, and failure to fully cooperate with a firm investigation.
In May 2018 FINRA sanctioned the Conaways and provided more details in their private securities transactions. FINRA alleged that Conaway failed to timely and completely disclose the scope of his real estate related outside business activities in referring clients to Tycon Properties among other business relationships. FINRA found that the Conaways established Tycon Properties to refer clients to investments in rental real estate properties. FINRA found that Conaway began a business relationship with a vendor of distressed rental properties in St. Louis, Missouri which was controlled by an individual who had pleaded guilty to unrelated federal charges for submitting false loan applications to banks and sentenced to 15 months imprisonment. FINRA determined that Conaway’s company received over $450,000 in referral fees from the individual’s vendor company and referred more than 35 investors who contracted to purchase one or more rental properties.
At this time it is unclear the extent of Conaways outside business activities or private securities transactions. However, Conaway disclosed a number of outside business activities including that he operates his securities business through a d/b/a C&C Wealth Advisory Group. Other OBAs include Lorcon Inc., Brancor Properties, LLC, and American Family Life Assurance Company of Columbus.
The allegations concern private securities transactions – a practice known in the industry as “selling away” – a serious violation of the securities laws.
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. When advisors convert or misappropriate funds they often created businesses or other vehicles to serve as a cover for the theft of funds. Firm attempt to disclaim liability for the theft of funds by their brokers by claiming ignorance of their advisor’s activities. However, federal securities laws and the FINRA rules require firms to 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.
Conaway entered the securities industry in 1989. From February 2011 until October 2015, Conaway was registered with J.P. Turner & Company, L.L.C. From October 2015 until May 2016, Conaway was associated with USA Financial out of the firm’s Tustin, California office location.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. Investors may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein 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.