Vicki Smith, a Stockbrokerwith Country Capital Management Corp, was permanently barred in all capacities with any Financial Industry Regulatory Authority (FINRA) firm after consenting to findings that she engaged in undisclosed outside business activities and converted funds from a customer. Letter of Acceptance, Waiver, and Consent, No. 2013037426001 (June 5, 2015). Smith is barred from acting as a broker or otherwise associating with firms that sell securities to the public, according to FINRA.
According to the AWC, Smith became the owner and director of a company, Ten Forty, which provided accounting services which she disclosed to her firm as an outside business activity. The AWC indicated that the company approved it based on Smith’s representations that the firm would be providing accounting services to clients. Smith reportedly failed to disclose information concerning her position as secretary with IIAAC, a firm developed by two of Ten Forty’s clients in a company until the Firm received a customer complaint. In addition to her role at IIAC, Smith was reported to have also failed to disclose that she was executor and successor trustee for a firm customer. FINRA found that by engaging in the outside business activities, Smith had violated FINRA Rules 2010 and Rules 3270 and 3030.
According to FINRA Rule 3270, FINRA’s position is that no registered person like Smith 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.
The AWC further indicated that Smith had deposited client Mueller’s $50,000 check into an IIAAC bank account that Smith was in control of. The purpose of the $50,000 check was for investment in a 2010 Note, which was primarily for purchasing equipment and furniture for resale. The AWC noted that once the money was deposited, Smith had used some of the funds for personal use and without MM’s knowledge or authorization. In one occasion, FINRA found that she utilized MM’s funds to purchase an airplane ticket for her personal use. FINRA found Smith’s conduct in this regard to be in violation of FINRA Rules 2010 and 2330.
Firms and individuals, not surprisingly, are prohibited from unauthorized use of customer funds, borrowing of a customer’s securities or funds, forgery, non-disclosures or misstatements of material facts, and various deceptions and manipulations. Such conduct can also be found to violate criminal and other civil laws, and be subject to sanction from the federal and state government bodies.
Guiliano Law Group
If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esquire, and The Guiliano Law Group, P.C., 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 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.
