Thomas R. Fortino, a former broker with First Allied Securities Inc., was fined and suspended by the Financial Industry Regulatory Authority (FINRA) after he engaged in business outside his firm, often called selling away, and misled his firm about these activities.
Fortino submitted a Letter of Acceptance, Waiver and Consent (AWC) that resolved the FINRA disciplinary action without admitting or denying the findings contained therein. FINRA accepted the AWC on April 3.
According to the AWC
Between January 2007 and July 2010, Fortino sold equity-indexed annuities and whole-life insurance products away from First Allied without informing the firm.
When First Allied learned in July 2010 of Fortino’s failing to disclose these outside business activities and referrals related to insurance sales, he was permitted to resign, the AWC said. Fortino has not been associated with a FINRA member firm since that time.
The “selling away” violated National Association of Securities Dealers (NASD) Rule 3030 on outside business activities of an associated person and NASD Rule 2110 and FINRA Rule 2010 concerning standards of commercial honor and principles of trade. NASD was a FINRA predecessor.
Fortino Was Fined & Suspended
As a result of the violations, Fortino was fined $15,000 and suspended from associating with any FINRA member firm in any capacity for 10 months per the terms of the AWC. The fine was payable either immediately or at the end of then suspension, before Fortino could once again associate with a member firm.
Fortino first registered with FINRA in 1995. Between 1995 and the time of his suspension, Fortino worked at several firms. He was employed by Oakbrook Terrace, Ill.-based First Allied three separate times, including at all times during the improper outside business activity, the AWC said.
Fortino’s History of Selling Away
Between January 2007 and July 2010, Fortino sold equity-indexed annuities and whole-life insurance products even though First Allied’s policies prohibited outside annuity sales and required brokers to obtain pre-authorization for any outside insurance sale.
Over this period, Fortino earned almost $335,000 from these transactions, the AWC said. About $70,000 came from the sales of annuities. Fortino sold insurance and annuities – without approval — to at least 16 people, three of whom were First Allied customers. Two of the firm’s customers purchased whole-life insurance, and one customer purchased an equity-indexed annuity.
Also during this period, Fortino sold these products away from the without informing First Allied of his activities at all. As such, he ignored the firm’s explicit and repeated statements concerning compliance with its outside insurance and equity-indexed annuities sales policy.
In April 2009, Fortino’s supervisor learned that he had made an unapproved annuity sale to a person who was not a First Allied customer. The supervisor issued a letter warning Fortino to cease making unapproved sales. The letter also reminded him that all sales of equity indexed annuities had to be submitted to the supervisor for review and approval.
Fortino ignored these directives and sold at least three more equity indexed annuities after he received the letter, still without the firm’s approval.
In addition, Fortino misled First Allied by first, failing to complete an Outside Business Activities Questionnaire when he was require to do so, and later, completing the questionnaire with false information.
First Allied required its representatives to complete and submit the questionnaire before engaging in any outside business. Fortino submitted such a questionnaire in October 2006, identifying two outside business activities that were unrelated to the insurance and annuity sales that are the subject of the AWC.
Between 2007 and 2009, during which Fortino was actively selling insurance and annutities away from the firm, he did not submit an Outside Business Activities Questionnaire at all, the AWC said.
In April 2010, Fortino finally submitted a new questionnaire, but he reported selling insurance through a company owned by his supervisor that was not affiliated with First Allied. The problem was, none of the sales covered by the AWC occurred through this company.
Moreover, Fortino misled his firm with this questionnaire by reporting that he did not earn any compensation from selling insurance-related products away from First Allied even though he did have earnings from outside sales that he failed to report to the firm from the beginning of 2010 until he was permitted to resign in July of that year, the AWC said.
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