Selling Away

Gana LLP Broker Investigation: Patric Baccam (a/k/a Khanh Sengpraseuth) Promissory Note Sales

April 3, 2015 | by Staff Attorney

The law offices of Gana Weinstein LLP are investigating customer complaints concerning Patric Baccam (Baccam) (a/k/a Khanh Sengpraseuth) sale of promissory notes in securities transactions that appear to have been away from the firm (also referred to as “selling away”). According to The Financial Industry Regulatory Authority (FINRA) BrokerCheck records Baccam was registered with brokerage firm Centaurus Financial, Inc. (Centaurus) from February 2002 until December 2011. According to the records Baccam’s outside business activities include flipping real estate, vending machine leasing, and health and life insurance.

Baccam has also been subject to at least five customer complaints. Some of these complaints allege that Baccam solicited clients to invest in promissory notes through The Moret Group LLC, The PR Group, and The Precision Research Group, LLC. The complaints allege fraud, fraudulent misrepresentation, negligence, breach of fiduciary duty, and violation of California securities laws.

The allegations against Baccam are consistent with “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. However, even though the brokerage firm claim ignorance of their advisor’s activities, 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 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 often occurs in brokerage firm that 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.

FINRA Bars Former Legend Equities Principal Jerry Chancy Concerning Outside Business Activities

March 26, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned and barred broker Jerry Chancy (Chancy) concerning allegations that Chancy potentially engage in outside business activities and/or the sales of private securities. When a broker’s outside business activities also include the recommendation of investments the activity is referred to in the industry as “selling away.”

FINRA Rule 8210 authorizes FINRA 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 Chancy engaged in undisclosed outside business activities. On January 29, 2015, FINRA requested that Chancy appear and provide testimony. FINRA stated that Chancy told the regulator that he would not provide information or cooperate in the investigation. Consequently, he was barred from the industry It is unclear what organization or product Chancy was involved with or selling that FINRA was investigating.

Chancy first became registered with FINRA through his association with a member firm in 1988. From November 2006 through January 2015, Cadwallader was associated with Legend Equities Corporation.

FINRA Bars Former Ameriprise Broker Ted Cadwallader Concerning Private Securities

March 24, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned and barred broker Ted Cadwallader (Cadwallader) concerning allegations that Cadwallader 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 FINRA to require persons associated with a FINRA member to provide information with respect to any matter involved in the investigation. In August 2014, FINRA alleged that it pursued an investigation into allegations that Cadwallader engaged in undisclosed outside business activities. On November 21, 2014, FINRA requested that Cadwallader appear and provide testimony. FINRA stated that Cadwallader told the regulator that he would not provide information or cooperate in the investigation. Consequently, he was barred from the industry

According to Cadwallader’s brokercheck he has disclosed outside business activities including ownership of The Faith Based Coach. Cadwallader is also on the board of directors of Pacer BioScience and a board member of EarthEnergy Technologies LLC. It is unclear at this time what organization or product Cadwallader was involved with or selling that FINRA was investigating.

FINRA Files Complaint Against Chris Fulco Over US Coal Corporation Transactions

March 15, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently filed a complaint against broker Chris Fulco (Fulco) concerning allegations that Fulco facilitated the sale of stock in US Coal Corporation, Inc. (US Coal), in numerous private securities transactions away from his firm, aslo known as “selling away” in the industry. FINRA alleged that Fulco received significant compensation for facilitating these transactions in the amount of $601,159. In addition, FINRA alleged that Fulco lied to FINRA about his involvement in these transactions by providing false sworn testimony that many of the wire transfers he received were not related to sales of US Coal shares but rather were payments for his role in transactions involving gold. Further, FINRA alleged that Fulco tried to encourage the primary seller of US Coal securities in the transactions, known by the initials “LF”, not to appear for his scheduled testimony or to testify falsely about the transactions in order to corroborate Fulco’s own false testimony. Finally, FINRA alleged that Fulco failed to timely disclose to FINRA a lien and civil judgment entered against him.

Fulco entered the securities industry in 1999. From June 2007 to June 2010, Fulco was registered with vFinance Investments, Inc. (vFinance). From July 2010 to February 2011, he was registered with Charles Morgan Securities, Inc. (Charles Morgan). Thereafter, from March 2011 to December 2011, he was registered with Caldwell International Securities, Inc. (Caldwell International). Finally, Fulco was registered with Chelsea Financial Services until November 8, 2013.

According to FINRA, in or around August 2009, LF engaged vFinance and another individual referred to as “PCA”, to help sell his shares in US Coal, a non-public company that produces coal in Appalachia. LF acquired US Coal shares through various entities in or around 2006 after helping found the company. In or around September 2009, FINRA alleged that vFinance approved Fulco facilitation of the sale of 300,000 shares of LF’s US Coal stock to a customer referred to by the initials “MM”, a vFinance customer.

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.