Securities Lawyers Blog
Broker Donald R. Dahn (Dahn) has been barred by the Financial Industry Regulatory Authority (FINRA) concerning allegations that he privately borrowed money from at least two customers, an act constituting securities fraud, while being a registered representative of Mutual Service Corporation (MSC) and LPL Financial LLC (LPL).
Dahn entered the securities industry in September 1991, as an Investment Company and Variable Contracts Products Representative (Series 6) license holder. A Series 6 license allows a broker to recommend only a limited number of securities including variable annuities and open-end mutual funds. From 1998 through 2009, Dahn was associated with MSC. In 2009, MSC was acquired by LPL and Dahn became registered with LPL until his termination in April 2013. On April 29, 2013, LPL submitted a Form U5 for Dahn.
Dahn has a long history of customer disputes and FINRA regulatory actions. On December 5, 2012, FINRA found that Dahn violated FINRA rules by borrowing a total of $240,000 from three customers while he was employed with MSC and failing to obtain approval from his member firm for the loans. At that time Dahn was suspended from the industry for six months. In addition, there have been six customer disputes filed against Dahn. The majority of the complaints involve allegations that clients loaned Dahn funds to keep his business operating. At least one complaint alleges that Dahn made unsuitable variable annuity switches.
FINRA alleged that on or about August 27, 2009, Dahn borrowed $15,100 from a customer after telling the customer that the loan would be used for operating expenses for a company run by Dahn and his brother. According to FINRA, in June 2010, Dahn borrowed another $12,000 from another customer to be used for operating expenses for the company Dahn ran. FINRA found that Dahn did not disclose the loans to MSC or LPL. In addition, the firms’ written supervisory procedures prohibited borrowing money from customers.
According to FINRA, Dahn has failed to repay either of the loans and concluded that Dahn misappropriated the funds by failing to repay either loan and by borrowing customer funds without the ability to repay the loans. The allegations brought against Dahn constitute “selling away” misconduct. Selling away occurs when a broker solicits securities, promissory notes, or investment opportunities that are not approved or reviewed by the brokerage firm. Many investors do not learn that the broker’s private financial arrangements are wrongful securities business activities until the promised return is not paid or the broker is sanctioned by regulatory authorities.
Brokerage firms usually deny liability for selling away claims by claiming that the firm ignorant to the transactions taking place. However, ignorance does not exonerate a brokerage firm’s failure to supervise their employees. The attorneys at Gana Weinstein LLP are experienced in investigating claims concerning private loans and securities dealings. Our consultations are free of charge and the firm is only compensated if you recover.