John Vincent Ballard of Memphis, Tennessee, a stockbroker with International Finance Solutions, Inc., was barred by Financial Industry Regulatory Authority (FINRA) per a National Adjudicatory Council Decision affirming findings that Ballard had engaged in undisclosed outside business activities, failed to provide documents in response to FINRA’s request for documents, and failed to appear for on-the-record testimony. Department of Enforcement v. Ballard, No. 2010025181001 (Dec. 17, 2015).
According to the Decision, in November 2010, IFS discharged Ballard and transmitted a Uniform Termination Notice for Securities Industry Registration (Form U5) to FINRA explaining that the firm terminated Ballard for exceeding the limit of his corporate credit card, while also stating that Ballard owed IFS $33,000 in advances when he was fired. While FINRA was investigating Ballard in December 2010, he obtained employment with G&C as a stockbroker to assist municipal governments with their money management practices and solicit municipalities to enter into trading relationships with G&C.
The Decision indicated that FINRA made multiple requests for Ballard to provide documents and information, but that Ballard would repeatedly fail to comply. During the investigation of Ballard’s conduct at IFS, a FINRA examiner had learned of Ballard’s employment with G4S and contacted the firm’s chief compliance officer, Mark Guzman, to confirm Ballard’s employment status. At this time, the firm learned that an email and letter purporting to be notifications of Ballard’s outside business activities was fabricated, and the firm terminated Ballard on July 14, 2011. G&C reportedly terminated Ballard because he obtained employment with G4S without the firm’s prior approval and sent Mark Guzman a fraudulent email intended to mask his failure to request permission for outside employment.
The Decision indicated that FINRA had made numerous requests for information and documentation with Ballard concerning his employment with G4S. After requests continued not to be complied with, on May 28, 2013, FINRA’s Department of Enforcement lodged a three cause Complaint against Ballard, alleging that he engaged in outside business activities, in violation of Rules 3270 and 2010; failed to provide documents in response to FINRA’s requests for such, in violation of Rules 8210 and 2010; and failed to appear for on-the-record testimony in violation of Rules 8210 and 2010. National Adjudicatory Council affirmed FINRA’s Hearing Panel’s findings.
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 stockbrokers like Ballard who do not cooperate with FINRA’s investigations often face a permanent bar from practicing in the securities industry as such lack of cooperation violates FINRA’s Rule 8210 – requiring that no member or person shall fail to provide information or testimony or permit an inspection and copying of books, records, or accounts pursuant to the rule. FINRA typically accompanies a Rule 8210 violation with a Rule 2010 violation when individuals, according to FINRA, do not appear to observe high standards for commercial honor and just and equitable principles of trade.
Public disclosure records reveal that Ballard has been subject to four disclosure incidents. On September 26, 2005, the NASD had suspended Ballard and assessed civil and administrative penalties/fines amid allegations that Ballard failed to pay an arbitration award rendered in NASD Arbitration No. 03-03389. On October 10, 2014, NFP Securities, Inc. discharged Ballard for failure to disclose pending regulatory proceedings on Form U4 during the registration process. On November 16, 2010, Ballard was discharged by International Financial Solutions, Inc., amid allegations that Ballard owed the firm $33,000 in advances; failed to honor and went over his credit card limits; and made promises he could not keep regarding the business to be done.
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