Yinyi Chen of Alhambra, California, a stockbroker with Fortune Securities, Inc., was fined $7,500.00 and suspended for thirty days from association with any Financial Industry Regulatory Authority (FINRA) member in any principal capacity after consenting to findings that she failed to supervise the investment-advisory activities of a Stockbroker’s private securities transactions. Letter of Acceptance, Waiver and Consent, No. 2011029405901 (Dec. 7, 2015).
According to the AWC, from January 2003 through October 2011, Chen and Fortune Securities, Inc. had permitted a firm Stockbroker, acting in the capacity of both a Stockbroker and investment advisor, to engage in investment-advisory activity away from the firm via his state-registered investment advisor. The AWC indicated that this individual, in his capacity as investment advisor representative, had caused securities transactions to be executed on behalf of his investment advisor clients away from the firm. The AWC reported that Chen was acting as the principal who was responsible for supervision of such individual.
FINRA found that the firm, via Chen, had failed to supervise the individual’s business in any manner due to Chen’s failure to recognize that the individual’s activities were considered private securities transactions. FINRA found that the firm and Chen’s conduct was violative of NASD Conduct Rules 3010 and 3040(c), NASD Conduct Rule 2110, and FINRA Rule 2010. FINRA also fined Fortune $7,500, which was joint and several with Chen.
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.
FINRA, via NASD Rule 3010(a), requires that firms and supervisory personnel establish and maintain a supervisory system that is reasonably designed to achieve compliance with applicable securities laws and regulations. Additionally, Rule 3010(b) requires that firms establish, maintain and enforce written procedures to supervise their business and Stockbrokers that are reasonably designed to achieve compliance with applicable securities. Securities brokerage firms have a duty to supervise their brokers and the sales practices of their brokers, and to review customer statements for, among other things, evidence of suitability, unauthorized trading, or excessive activity.
Guiliano Law Group
Our practice is limited to the representation of investors. 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
Yinyi Chen of Alhambra, California, a stockbroker with Fortune Securities, Inc., was fined $7,500.00 and suspended for thirty days from association with any Financial Industry Regulatory Authority (FINRA) member in any principal capacity after consenting to findings that she failed to supervise the investment-advisory activities of a Stockbroker’s private securities transactions. Letter of Acceptance, Waiver and Consent, No. 2011029405901 (Dec. 7, 2015).
According to the AWC, from January 2003 – October 2011, Chen and Fortune Securities, Inc. had permitted a firm Stockbroker, acting in the capacity of both a Stockbroker and investment advisor, to engage in investment-advisory activity away from the firm via his state-registered investment advisor. The AWC indicated that this individual, in his capacity as investment advisor representative, had caused securities transactions to be executed on behalf of his investment advisor clients away from the firm. The AWC reported that Chen was acting as the principal who was responsible for supervision of such individual.
FINRA found that the firm, via Chen, had failed to supervise the individual’s business in any manner due to Chen’s failure to recognize that the individual’s activities were considered private securities transactions. FINRA found that the firm and Chen’s conduct was violative of NASD Conduct Rules 3010 and 3040(c), NASD Conduct Rule 2110, and FINRA Rule 2010. FINRA also fined Fortune $7,500, which was joint and several with Chen.
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.
FINRA, via NASD Rule 3010(a), requires that firms and supervisory personnel establish and maintain a supervisory system that is reasonably designed to achieve compliance with applicable securities laws and regulations. Additionally, Rule 3010(b) requires that firms establish, maintain and enforce written procedures to supervise their business and Stockbrokers that are reasonably designed to achieve compliance with applicable securities. Securities brokerage firms have a duty to supervise their brokers and the sales practices of their brokers, and to review customer statements for, among other things, evidence of suitability, unauthorized trading, or excessive activity.
Guiliano Law Group
Our practice is limited to the representation of investors. 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
