John James Barred by FINRA Over Allegations of Outside Business Activity

shutterstock_128856874-300x200The securities attorneys at Gana Weinstein LLP are currently investigating previously registered broker John James (James). According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA), in March 2016, James was discharged  by his firm, Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) based on allegations that James was engaging in outside business activities, private investments, and borrowing money from clients without disclosing the activities to the firm.  Subsequently, in September 2016, James was also discharged from Stifel Nicolaus for providing inaccurate information on his employment application (U5) regarding the status of an internal inquiry at his prior firm, Merrill Lynch.

In December 2017, FINRA barred James from the industry after James failed to provide FINRA with requested documents and information regarding these allegations and activities.  FINRA sought documents concerning the circumstances surrounding Jones’s termination from his member firm and of certain outside business activities that James was involved in while registered with the firm. After James refused to show up to an on-the-record testimony regarding these allegations, he was barred from the industry for being in violation of F1NRA Rule 8210, James violates FINRA Rules 8210 and 2010.

In addition, James has been subject to one customer complaint. In May 2009, a customer alleged that James recommended unsuitable investments. The case was settled at $160,000 in damages.

At this time it is unclear the extent and scope of James’ outside business activities or if they involve private securities transactions.  Often times undisclosed outside business activities can lead to private securities transactions.  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”.

Selling away occurs when a broker engages customers to invest in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm.  Often times, brokerage firms claim ignorance of the outside business activities that the broker is engaging in. However, all member firms have the duty to supervise their advisors under FINRA rules. 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 can occur when firms fail to implement a reasonable supervisory system.

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.

James entered the securities industry in 2003 and was most recently registered with Stifel, Nicolaus & Company, Incorporated from March 2016 to September 2016. From June 2006 to March 2016, James was registered with Merrill Lynch. From January 2003 to June 2006, James was registered with Piper Jaffray & Co. James is currently not registered with any firm.

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.

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