Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Joseph Pratte (Pratte), formerly associated with Signator Investors, Inc. (Signator Investors) in Riverside, California was terminated by his firm concerning allegations he engaged in prohibited outside business activity (OBA) and failed to submit the activity to the firm for approval as required.
Thereafter, in May 2018 FINRA sought to question Pratte concerning his OBA. FINRA found that Pratte failed to cooperate with the investigation. Accordingly, FINRA determined that Pratte consented to the sanction and to the entry of findings that he refused to provide information in response to FINRA requests made to review Pratte’s outside business activities.
At this time it is unclear the extent of Pratte’s outside business activities or if private securities transactions were involved. However, Pratte disclosed that he was engaged in a rental property business.
The allegations may involve private securities transactions – a practice known in the industry as “selling away” – a serious violation of the securities laws.
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. When advisors convert or misappropriate funds they often created businesses or other vehicles to serve as a cover for the theft of funds. Firms attempt to disclaim liability for the theft of funds by their brokers or their unregistered investment activity by claiming ignorance of their advisor’s activities. However, federal securities laws and the FINRA rules require firms to 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.
Pratte entered the securities industry in 1982. From 1982 until December 2017 Pratte was registered with Signator Investors out of the firm’s Riverside, California office location.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. Investors 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.