Selling Away

FINRA Bars Douglas Melzer Concerning Aquatic Synthesis Unlimited Investments

March 15, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned and barred broker Douglas Melzer (Melzer) concerning allegations that Melzer participated in four private securities transactions when four of his Wells Fargo Advisors, LLC (Wells Fargo) customers invested $2,000,000 in a company called Aquatic Synthesis Unlimited (Aquatic Synthesis) through investment contracts that were not approved by Wells Fargo. According to FINRA, Melzer received at least $27,000 plus a 2.5% member interest in the investment as compensation for the recommendations. FINRA found that Melzer failed to provide written notice to the firm or receive approval prior to participating in the private securities transactions also known as “selling away” in the industry.

Aquatic Synthesis is a gas drilling waste water treatment facility located in Indiana County. According to news sources , in or about August 2013, after several spills and at least four violation orders, state environmental regulators have shut down the company’s operations. The state Department of Environmental Protection revoked Aquatic Synthesis’ permit and started to use the company’s $1 million bond to begin cleaning up the site.

In addition, FINRA found that in May 2011, the firm became aware that Melzer had requested that the broker codes on certain accounts be altered. These codes are used by Wells Fargo to determine the appropriate split of commissions between Melzer and his partners. By changing the code, Melzer caused commissions that should have been paid to one of Melzer’s partners to be attributed to Melzer without the partner’s knowledge.

LPL Financial Terminates Charles Fackrell Over Securities Fraud Claims

March 12, 2015 | by Staff Attorney

LPL Financial LLC (LPL) has terminated its former broker Charles Fackrell (Fackrell), registered with The Financial Industry Regulatory Authority (FINRA), alleging that the broker engaged in unapproved private securities transactions (known in the industry as “selling away”) and also due to a felony arrest for obtaining property under false pretenses.

Fackrell entered the securities industry in 2007 and was registered with Morgan Stanley & Co., Incorporated. From July 2008 until December 2009, Fackrell was registered with SunTrust Investment Services, Inc. Thereafter, from December 2009, until June 2010, Fackrell was a broker with Wells Fargo Advisors, LLC.

According to news sources, Fackrell was arrested in January and faces charges of fraud that police now allege involve more than $500,000. In February Fackrell was served warrants and his bond was set at $2.2 million. News reports state that the victims were unsuspecting investors in Yadkinville and surrounding counties.

FINRA Bars Broker Gregg Beemer Concerning Private Securities

March 5, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned and barred broker Gregg Beemer (Beemer) concerning allegations that Beemer engage in outside business activities including the sales of private securities. When outside business activities also include the recommendation of investments the activity is referred to in the industry as “selling away.”

FINRA Rule 8210 authorizes the regulator to require persons associated with a FINRA member to provide information with respect to any matter involved in the investigation. In December 2014, FINRA alleged that it pursued an investigation into allegations that Beemer engaged in undisclosed outside business activities. FINRA requested that Beemer appear and provide testimony. FINRA stated that Beemer emailed the regulator and stated that he would not provide information or cooperate in the investigation. Consequently, he was barred from the industry

According to Beemer’s brokercheck he has disclosed outside business activities including his insurance business called Associated Insurance Consultants, Inc. It is unclear at this time what organization or product that Beemer was involved with that FINRA was investigating.

FINRA Files Complaint Against Daniel McCourt Concerning Promissory Notes

February 27, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) filed a complaint against broker Daniel McCourt (McCourt) concerning allegations McCourt participated in private securities transactions, also known as “selling away”, without providing prior written notice to his member firm. In addition, FINRA alleged that McCourt provided false information and falsified documents to a mortgage company for a client to help the client qualify for a home loan.

McCourt first entered the securities industry in 1984. In 1985 McCourt associated with FINRA firm Foothill Securities, Inc. (Foothill). McCourt remained registered with Foothill until he was permitted to resign on or about June 7, 2013, due to “possible violations of firm policies and procedures.”

FINRA alleged that at various times from May 2005 through May 2009, McCourt participated in private securities transactions without providing Foothill prior written notice of the transactions. FINRA alleged that in or around 1990, McCourt notified Foothill that he wanted to begin an outside business activity in a coffee business. According to McCourt’s brokercheck the coffee business is called Surf City Coffee Co., Inc. (Surf City). Foothill approved McCourt’s involvement with Surf City.

Broker Marc Evans Sanctioned Concerning Selling Away Global Safety Labs and Real Estate Investments

February 26, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned broker Marc Evans (Evans) concerning allegations that between October 2006 and October 2012, Evans participated in private securities transactions, also referred to as “selling away”, without prior approval of his brokerage firm. In addition, FINRA found that Evans did not disclose his membership on the board of directors of a corporation.

Marc W. Evans entered the securities industry in 1978. From November 2005 through December 2012, Evans was registered with brokerage firm Sanders Morris Harris, Inc. (Sanders Morris). Thereafter, Evans became associated with Wunderlich Securities, Inc.

FINRA alleged that between October 2006 and October 2007, Evans introduced 11 of his brokerage clients to invest in a company called Global Safety Labs, Inc. (GSL), a Tulsa, Oklahoma company. GSL develops and manufactures fire-retardant products. FINRA found that the eleven clients ultimately invested a combined total of $3,430,000 in GSL stock shares. FINRA found that Evans received commissions totaling $79,500 from GSL from these sales.

FINRA Sanctions Former LPL Financial Broker Marc Baldinger Over Private CMO I/O Strip Sales

February 13, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently sanctioned former LPL Financial LLC (LPL) broker Marc Baldinger (Baldinger) concerning allegations that between August 2010 and November 2012, Baldinger participated in private securities transactions (a/k/a “selling away”) without prior approval of LPL. In addition, FINRA alleged that in connection with these private securities transactions Baldinger failed to disclose his position as a managing partner of two limited liability companies.

Baldinger entered the securities industry on in 1989. Thereafter, from 2001 onward Baldinger was associated with LPL until Baldinger’s employment with LPL ended on November 24, 2012. On December 13, 2012, LPI, filed a Form U5 terminating Baldinger’s registration.

The FINRA rules require that all brokers report securities transactions to their employer. However, FINRA alleged that between August 19, 2010 and November 24, 2012, Baldinger introduced 20 customers to brokerage firms by the initials “RS” and “AFS” and purchased inverse strips of Government National Mortgage Association Interest Only bonds (GNMA I/Os). According to FINRA, the 20 clients invested a combined total of at least $12 million in GNMA I/Os. FINRA found that Baldinger received compensation for these investment recommendations of approximately $233,427.

FINRA Bars Broker David Lavine Concerning Allegations of Outside Business Activities

February 12, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned and barred broker David Lavine (Lavine) concerning allegations that Lavine engage in private securities transactions also known as “selling away.” FINRA Rule 8210 authorizes the regulator to require persons associated with a FINRA member to provide information with respect to any matter involved in the investigation.

In October 2014, FINRA alleged that it pursued an investigation into allegations that Lavine (i) exceeded the scope of an approved outside business activity and potentially engaged in an unapproved private securities transaction; and (ii) failed to timely disclose several reportable financial events. FINRA requested that Lavine provide documents and information on or before November 14, 2014. On December 2, 2014, FINRA stated that Lavine, through his counsel, requested an extension of time to respond but ultimately failed to provide the responsive documents and information and informed FINRA that he would not provide information at any time.

According to Lavine’s brokercheck his disclosed outside business activities include Angel Flight South Central and LAKAP, LLC. It is unclear at this time if FINRA’s investigation concerned Lavine’s participation in these enterprises.

FINRA Bars Broker Michael Evangelista Over Real Estate Securities Sales

January 30, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently barred broker Michael Evangelista (Evangelista) concerning allegations that between 2006 and 2011, Evangelista referred approximately six of his firm customers to invest in real estate securities issued by ABC Corp. (ABC), an entity that purportedly invested in real estate in Pennsylvania and neighboring states. FINRA alleged that the customer investments totaled over $3 million while Evangelista received at least $50,000 in compensation in connection with these referrals. FINRA found that Evangelista did not disclose to his brokerage firms that these customers were purchasing securities away from the firm, a practice known as “selling away”, or that he was being compensated in connection with his referrals.

Evangelista entered the securities industry in 1993. From 1994 to December 2012, he was registered with the following FINRA firms: (1) Capital Analysts, Inc. until to December 2007; (2) Cambridge Investment Research, Inc. from January 2008 to May 2012; and (3) Comprehensive Asset Management and Servicing, Inc. (Comprehensive) from May 2012 to December 2012. Comprehensive filed a Form U5 on December 20, 2012, stating that Evangelista was terminated because he became the subject of a customer complaint.

FINRA alleged that starting in 2006, Evangelista participated in meetings with certain of his brokerage clients the president of ABC to have the clients invest with ABC. The investments were for the development of specific parcels of property. When client’s invested in ABC they acquired either promissory notes issued or limited partnership agreements. The promissory notes allegedly provided for a repayment of principal plus interest. Investments in the form of limited partnership agreements had clients receiving a percentage interest in the partnership that would yield a minimum return in the form of interest paid on a per annum basis and a return of principal.

FINRA Bars Broker Chase Casson For Failing to Respond to Inquiries Over Private Transactions

January 23, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently barred broker Chase Casson (Casson) alleging that Casson failed to provide documents and information to FINRA in response to demands made to investigate the broker’s activities. On various dates in August and September 2014, FINRA sent Casson a request for documents concerning allegations that he participated in a private securities transactions. The details concerning the exact nature of the alleged transaction and Casson’s role are not yet fully known.

The allegations against Casson are consistent with a potential “selling away” securities violation. 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. Under the FINRA rules, a brokerage firm owes a duty to properly monitor and supervise its employees in order to detect and prevent brokers from offering such products. In order to properly supervise their brokers each firm is required to establish and maintain written supervisory procedures and implement such policies in order to monitor the activities of each registered representative. Selling away often occurs in environments where the brokerage firms either fails to put in place a reasonable supervisory system or fails to actually implement that system and meet supervisory requirements.

In selling away cases, investors are unaware that the advisor’s investments are either not registered or not real. Typically investors will not learn that the broker’s activities were wrongful until after the investment scheme is publicized or the broker simply shuts down shop and stops returning client calls.

Aegis Capital Corp. Broker Malcom Segal Barred From Industry Over Allegations of Outside Business Activities

January 6, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently barred former Aegis Capital Corp. (Aegis) broker Malcom Segal (Segal) alleging that Segal may have engaged in unauthorized transfers of funds from customer accounts to an outside business activities (a/k/a “selling away”).

According to Segal’s BrokerCheck, Segal was registered with Cumberland Brokerage Corporation from 1989 until April 2011. Thereafter, Segal was a broker for Aegis until July 2014 where he was terminated on allegations of by the firm violations of the firm that Segal failed to cooperate with an internal investigation into a customer complaint he made unauthorized wire transfers from a customer’s account. Segal’s disclosures also reveal that he is listed as a partner of J & M Financial and President of National C.D. Sales.

Upon information and belief, it is in connection with National C.D. Sales that customer have filed complaints against Segal concerning. While details concerning Segal’s activities are still pending, the allegations against Cox are consistent with a “selling away” securities violation. Selling away occurs when a financial advisor solicits investments in companies or promissory notes that were not approved by the broker’s affiliated firm. In many cases the broker transfers funds or liquidates investments at his registered firm in order to make the investment in the outside business.