Articles Tagged with Investacorp

shutterstock_99315272-300x300According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) former Newbridge Securities Corporation (Newbridge Securities) broker Edward Klug (Klug) left the securities industry in May 2018 after disclosing several large tax liens in the prior years.  Klug has made seven financial related disclosures and lists four customer complaints.  The customer complaints against Klug allege churning or excessive trading.

In March 2018 Klug disclosed a $141,711 tax lien against him.  In May 2017, Klug disclosed a $482,714 tax lien against him.  Prior to that, in April 2016 Klug disclosed a $44,229 tax lien against him.  Such disclosures on a broker’s record can reveal a financial incentive for the broker to recommend high commission products or services.  FINRA discloses information concerning a broker’s financial condition because a broker’s inability to handle their own personal finances has also been found to be material information in helping investors determine if they should allow the broker to handle their finances.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time.  Often times the account will completely “turnover” every month with different securities.  This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades.  Churning is considered a species of securities fraud.  The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions.  A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements.  Certain commonly used measures and ratios used to determine churning help evaluate a churning claim.  These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

shutterstock_20354401-300x200According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Michael McTigue (McTigue), in August 2017, was terminated by his employer ProEquities after the firm alleged that during a recent branch inspection of the firm discovered issues relating to (1) use of unapproved email address; (2) use of unapproved performance report; (3) customer signature discrepancies on firm paperwork; (4) frequent trading of mutual fund A shares; (5) breakpoint sales of mutual funds; (6) unapproved marketing materials; (7) undisclosed outside business activities (OBA); and (8) text messaging a customer.  When the firm presented these issues to McTigue and requested an explanation he resigned prior to submitting explanation to all of the issues.

At this time it is unclear the extent and scope of McTigue’s securities violations and outside business activities.  McTigue’s CRD lists that he operates a d/b/a called South Coast Financial as an outside business activity.  In addition, McTigue lists Realty South as a real estate business.  While at this time it is unknown if McTigue used these businesses and unapproved communications methods to sell investments, 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”.

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.  However, even though when these incidents occur the brokerage firm claims ignorance of their advisor’s activities the firm is obligated under the FINRA rules to properly 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.

shutterstock_138129767The Financial Industry Regulatory Authority (FINRA) brought and enforcement action against broker Jeffrey Mohlman (Mohlman) (FINRA No. 2015044734401) resulting in a bar from the securities industry alleging that Mohlman failed to provide FINRA staff with information and documents requested. The failure to provide those documents and information to FINRA resulted in an automatic bar from the industry. FINRA’s document requests related to the regulators investigation into claims the Mohlman engaged in unapproved and undisclosed private securities transactions – also referred to in the industry as “selling away.”

FINRA’s investigation appears to stem from Mohlman’s termination from Questar Capital Corporation (Questar Capital) in February 2015. At that time Questar Capital filed a Form U5 termination notice with FINRA stating in part that the firm permitted Mohlman to resign under circumstances where there was allegations that Mohlman was under internal review for failure to follow firm policies and procedures regarding participation in private securities transactions. It is unclear the nature of the outside business activities from publicly available information at this time. However, Mohlman’s brokercheck disclosures reveal several outside business activities including being a co-owner of NexGen Vapors – a vapor needs business – and Ann Arbor Annuity Exchange where Mohlman discloses that he works as an insurance agent.

Mohlman entered the securities industry in 2001. From October 2002 until March 2009, Mohlman was associated with MetLife Securities Inc. Thereafter, from June 2009 until May 2011, Mohlman was associated as a registered representative with Investacorp, Inc. Finally, from June 2012 until March 2015, Mohlman was associated with Questar Capital.