Securities Lawyers Blog
The investment fraud lawyers of Gana Weinstein LLP are investigating the regulatory investigation filed by The Financial Industry Regulatory Authority (FINRA) against broker Scott Muirhead (Muirhead). According to BrokerCheck records Muirhead is subject to one bankruptcy filing in 2013 and one criminal matter. The FINRA regulatory matter concerns the agencies attempt to investigate the circumstances surrounding alleged sales of private securities transactions. (FINRA No. 2015044785301). When Muirhead refused to cooperate with the investigation, FINRA automatically barred Muirhead from the industry.
According to FINRA, Muirhead consented the entry of findings that he failed to respond to FINRA’s requests for documents during its investigation into allegations that Muirhead engaged in unapproved private securities transactions and misused customer funds. The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”. At this time it unclear the nature and scope of Muirhead’s outside business activities and private securities transactions. Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, or insurance to clients of those side practices.
Muirhead entered the securities industry in 2006. From April 2008 until September 2010 Muirhead was registered with Princor Financial Services Corporation. From September 2010 until March 2011 Muirhead was associated with Bright Trading, LLC. Thereafter from June 2011 until June 2012 Muirhead was registered with Signator Investors, Inc. Then from June 2012 until November 2012, Muirhead was associated with Multi-Financial Securities Corporation. Finally, from March 2014 until December 2014, Muirhead was associated with Merrill Lynch, Pierce, Fenner & Smith Incorporated out of the firm’s Jacksonville, Florida office location.
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.
Investors who have suffered losses 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.