The Financial Industry Regulatory Authority (FINRA) recently filed a complaint against former Source Capital Group, Inc. (Source Capital) broker Joseph Hooper (Hooper) alleging that Hooper was serving as the Director of Investor Relations for a company called the iPractice Group, Inc. (iPractice) and that in such capacity, Hooper participated in the sale of iPractice stock and was compensated for that participation without notifying Source Capital of these activities. FINRA alleged that Hooper participated in 53 private securities transactions involving 41 investors or investor groups and a total of $3,400,648 worth of iPractice stock. In return, FINRA alleged that Hooper received $425,081 and more than 21,000 shares of iPractice stock as compensation for his activities.
This is not the first time our firm has written about supervisory and disclosure issues at Source Capital. Our firm has previously written concerning FINRA’s action against Source Capital concerning the agency’s findings that certain Source Capital brokers failed to adequately disclose material facts and made sales through misstatements in oil and gas partnership interests in Blue Ridge Securities (Blue Ridge) and Argyle Securities. (Argyle).
In FINRA’s recent action, when Hooper became associated with Source Capital in May 2012, he was also the Director of Investor Relations for iPractice, a medical technology company. FINRA alleged that Hooper remained the Director of Investor Relations for iPractice throughout the time he was associated with Source. iPractice raised funds for its operations by selling stock in the company through exempt private placement securities offerings. FINRA alleged that Hooper participated in the solicitation and sale of iPractice stock to investors. In addition, Hooper was listed by iPractice as a promoter on an amended Form D filed with the SEC on May 18, 2012.
FINRA alleged that Hooper received a 12.5% cash commission for each sale of iPractice stock and was also granted iPractice stock valued at 2.5% of the sale. FINRA found that between May 18, 2012, and January 3, 2013, while he was associated with Source Capital, Hooper participated in 53 sales of iPractice stock, involving 41 investors totaling $3,400,648.
Source Capital terminated Hooper’s registration and association by filing a Form U5 on January 3, 2013. On January 28, 2013, iPractice filed for bankruptcy. Shortly thereafter, the company shut down operations completely. FINRA alleged that Hooper provided written descriptions to Source Capital regarding his role at iPractice omitting any reference to participation in stock sales but describing his duties as “communications” with investors and his compensation as “salary and bonus.”
The allegations against Hooper are consistent with a “selling away” securities violation. Selling away occurs when a financial advisor solicits investments in companies that were not approved by the broker’s firm. However, investors have remedies for their investment losses in selling away cases. Brokerage firms owe a duty to properly monitor and supervise its employees to prevent such transactions from taking place. The attorneys at Gana Weinstein LLP are experienced in representing investors in selling away cases. Our consultations are free of charge and the firm is only compensated if you recover.