Securities Lawyers Blog
The Financial Industry Regulatory Authority (FINRA) recently sanctioned broker Michael James Blake (Blake) over allegations that Blake engaged in the unlawful sale of securities including, upon information and belief, securities linked to Longest Drive, LLC and Grace Communities, LLC. According to FINRA, Blake participated in private securities transactions involving the investment of more than $3.2 million by approximately 28 investors in 3 investment contracts without providing prior written notice to his firms of his proposed roles in the transactions. FINRA imposed a $10,000 fine and banned Blake from association with any broker-dealer for one year.
The allegations against Blake are consistent with a “selling away” violation. Selling away occurs when a securities broker solicits securities that were not approved by the broker’s affiliated firm. Selling away is a violation of FINRA Rule 3040. The most common securities sold away from brokerage firms involve private placements and promissory notes. Investors are often completed unaware that the broker’s sales activity is improper. In addition, the investor does not learn that the broker’s activities were wrongful until the investment scheme is publicized, the broker is sanctioned, or the broker stops returning client calls.
FINRA’s order states that between approximately February 2006 and June 2007, Blake recommended to customers to invest $3,200,000 in real estate properties being developed by entity “GC”, which is believed to stand for Grace Communities. The invested funds were provided by 28 investors. According to FINRA, 6 persons invested $250,000 in Development 1 between August and November 2006, 3 persons invested $200,000 in Development 2 in October and November 2006, and 23 persons invested approximately $2,755,000 in Development 3 between February 2006 and June 2008. According to FINRA, as of September 9, 2013, investors in Blake’s real estate investments have not received a return of their principal or any interest or other payments.
Form February 1990 through November 2002, Blake was registered as a representative with AXA Advisors, LLC. From November 1, 2002, through June 2006, Blake became registered with FINRA member firm Carillon Investments, Inc. (Carillon). Thereafter, Blake became a representative of Ameritas Investment Corp. (Ameritas) until April 2013. On March 28, 2013, Blake’s registration with Ameritas was terminated by means of a Form U5 stating the reason for termination as “other” and explaining that Blake had retired from the Ameritas. Finally, from May 2013, through October 2013, Blake was associated with Mid Atlantic Capital Corporation.
Brokerage firm’s confronted by selling away claims typically respond to complaints by claiming ignorance. However, under FINRA Rule 3010, firms have an obligation to supervise their employees. The attorneys at Gana Weinstein LLP are experienced in investigating claims concerning failure to supervise outside business activities. Our attorneys can help you detect and uncover suspicious activity in your accounts. Our consultations are free of charge and the firm is only compensated if you recover.