Articles Tagged with FINRA Rule 3040

The Financial Industry Regulatory Authority (FINRA) recently barred broker Stephen Michael Brown (Brown) for failing to comply with FINRA’s requests for information concerning allegations that Brown engaged in the unlawful sale of securities.  Specifically, at least two customers had brought complaints against Brown alleging that Brown had solicited them to invest in private real estate investments in violation of industry rules.

Brown was formerly registered with FINRA firm LPL Financial Corporation (LPL Financial) from 1989 through May 2009.  Thereafter, Brown became associated with Brewer Financial Services, LLC until November 2010.  Finally, from November 2010, until May 2011, Brown was an associated person of Best Direct Securities, LLC (Best Direct) a currently inactive FINRA firm.  Brown’s public disclosures list Brown as the owner of Steve Brown Ent., a company engaged in real estate business.

The accusations made against Brown are consistent with a “selling away” securities violation.  Brokers are required to have their firms approve all securities transactions they participate in, even private financial transactions.  Thus, when a broker fails to notify the firm of securities activities he or she “sells away” from the firm.  Selling away is prohibited under FINRA Rule 3040, as well as other securities laws. The most common securities products solicited in selling away schemes are private placements and promissory note.