Sheik F. Abida Khan of Murrieta, California, a registered representative with Ameritas Investment Corp., was suspended from associating with any Financial Industry Regulatory Authority (FINRA) broker-dealer in any capacity for a period of four months plus ten additional days for participation in outside business activities without notice to his firm, sending misleading and false statements to Ameritas customers, and participating in a private securities transaction. Letter of Acceptance, Waiver and Consent, No. 2015045211101 (Nov. 10, 2015).
According to the AWC, in the course of leaving the financial industry in mid 2013, Khan had arranged with a purchaser the sale of her list of customers in the securities and insurance business in exchange for ten percent commission on sales associated with the customers. The customers in her list were reportedly customers of Ameritas, where Khan did not notify Ameritas of her intention to sell the asset (containing the list of customers, customers’ net worth, and investment holdings).
The AWC stated that Khan did not give Ameritas prior written notice of her agreement with a business broker or of her sale of Ameritas customer information to the purchaser, preventing Ameritas from evaluating her outside business activity and determining whether to place conditions on or prohibit it. FINRA found Khan’s conduct to be in violation of Rules 3270 and 2010 in this regard.
Further, while registered with Ameritas, Khan was reportedly involved in the formation of two limited-liability companies. The AWC stated that in 2011, Khan had helped to form CDA Wealth Consulting, LLC, and in August 2013, Khan and her daughter formed Ashira Consulting, LLC. The AWC further stated that Khan was listed as the manager in both of these companies’ articles of incorporation.
FINRA found that Khan failed to provide Ameritas with prior written notice of her involvement with either of the outside entities, preventing Ameritas from evaluating them to determine whether to place restrictions on or prohibit it. FINRA found Khan’s conduct to be in violation of Rules 3270 and 2010.
FINRA further found that in connection with Khan’s sale of her Asset in August 2013, she communicated with customers in a misleading and false fashion. Specifically, the AWC stated that Khan’s letter indicated to customers that Khan had joined the purchaser (of her Asset) and that she would be able to convert her customers’ existing portfolios into shorter term, higher yield, targeted growth vehicles with greater security. Khan’s statements, according to FINRA, were untrue as Khan was not employed by the purchaser and would not be servicing the customers’ brokerage accounts who left Ameritas.
The AWC further indicated that Khan’s letter indicated that the purchaser had the ability to pay 10% on convertible bonds, yet failed to disclose risk factors or other characteristics. The letter, according to FINRA, was not considered fair and balanced, and lacked sufficient information to customers to evaluate pertinent facts. FINRA found Khan to have violated FINRA Rules 2210(d) and 2010 in this regard.
Even further, FINRA found that Khan had violated NASD Conduct Rule 3040 and FINRA Rule 2010 in connection with failing to disclose a private securities transaction, where Khan had a signed stock purchase agreement and acted as power of attorney for her daughter in the purchase of 100,000 shares of stock without providing Ameritas notice of the transaction. Khan was also deemed to have failed to disclose an outside brokerage account, in violation of NASD Conduct Rule 3050(c) and FINRA Rule 2010.
According to FINRA Rule 3270, FINRA’s position is that no registered person like Khan may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his/her member firm, unless he/she is provided prior written notice to the member. Selling away, also known as private securities transactions or undisclosed outside business activities, occurs when a stockbroker engages or participates in the sale of securities to investors outside of the formal approval of the securities firm with whom they are associated.
Selling away, also known as private securities transactions or undisclosed outside business activities, occurs when a stockbroker engages or participates in the sale of securities to investors outside of the formal approval of the securities firm with whom they are associated.
As a general matter, stockbrokers are only permitted to engage in the solicitation or sale of investments and investment related products approved by their firm. However, quite frequently, stockbrokers solicit, participate, or directly engage in the sale of typically unregistered securities or investments without the approval and outside of the auspices of their firm. These investments may take on many forms, and may include the recommendation of an outside money manager, or a hedge fund, which may sometimes turn out to be a Ponzi scheme. Sometimes these outside investments may include off-shore securities, insurance trusts, stocks or ownership interests in small businesses, startup ventures, corporate debentures, mortgage notes, private placements, promissory notes, oil & gas interests, real estate partnerships, pre-IPO shares, and a variety of other investments.
Guiliano Law Group
Our practice is limited to the representation of investors in claims, for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost to unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.
