John S. Matthews of New York, New York, the former owner of Global Arena Capital Corporation, was fined $25,000 and suspended for six months from association with any Financial Industry Regulatory Authority (FINRA) member after consenting to findings that he engaged in unauthorized private securities transactions. Letter of Acceptance, Waiver and Consent, No. 2013037235012 (Dec. 2, 2015).
According to the AWC, from March 24, 2011 and October 22, 2012, while Matthews was acting in the capacity of chief executive officer of Global Arena Holding, he sold approximately $1,800,000 in convertible promissory notes issued by Global Arena Holding to sixteen investors, some of whom were customers of Global Arena Capital. The AWC stated that Matthews had sold the promissory notes through Global Arena Holding, not Global Arena Capital. He reportedly received expense reimbursements from Global Arena Holding in connection with the promissory note sales, and some of his compensation was paid with the proceeds. The AWC further stated that while Matthews had discussed his efforts to make the sales with his supervisor, he failed to request or receive approval from his firm prior to participating in the sales.
The AWC further stated that after July 13, 2012, the time in which Global Arena Holding had completed its acquisition of Global Arena Capital, Matthews had sold promissory notes to eight of the investors, where the promissory notes were not registered with the Securities and Exchange Commission. Further, the investors were not qualified purchasers per Section 2(a)(51)(A) of the Investment Company Act, and the sales were not exempt from the requirement of FINRA Rule 5122.
Matthews reportedly failed to disclose to the aforementioned eight investors, via the offering documents, of his intended use of the proceeds, compensation, offering expenses, as required via FINRA Rule 5122. Further, Matthews and Global Arena Capital had failed to file with FINRA any offering documents concerning the sales.
According to FINRA Rule 3270, FINRA’s position is that no registered person like Matthews 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.
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.
Public disclosure records reveal that on August 24, 2005, VFinance Investments, Inc. discharged Matthews from his position as president of the firm amid allegations that Matthews distributed an unapproved private placement memorandum to brokers in his office in an attempt to raise money for his private corporation.
Until August 2014, Matthews was an officer, director, general securities principal of GACC and was also the primary shareholder and Chief Executive Office of Global Arena Holding Inc., through which Matthew gained control of GACC, formerly known as Equity Trading Corp. Matthews, a general securities principal, became initially registered with Stratton Oakmont, Inc., and within the last twenty years, he has been associated with eleven difference broker-dealers, ten of which have been expelled or were forced to withdraw from registration for the violation of the federal securities laws, self-regulatory rules, and the failure to pay fines, regulatory penalties or customer arbitration awards. In October 2014, Matthews received a Wells Notice that FINRA intends to bring an enforcement action against him for conduct arising during his association with GACC and the violation of Section 17(A)(2) of the Securities Act of 1933, and the violation of FINRA Conduct Rules, including the failure to supervise. Since that time, Matthews has not been associated with any member in any capacity.
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