Adam Denny Estes, of Bloomington, Indiana, a stockbroker with J.J.B. Hilliard, W.L. Lyons, LLC, was fined $15,000.00 and suspended for fifteen months from associating with any Financial Industry Regulatory Authority (FINRA) member firm in any capacity after consenting to findings that he engaged in private securities transactions and outside business activities, and made misstatements to his firm in connection with such. Letter of Acceptance, Waiver and Consent, No. 20140406335-01 (Aug. 16, 2016).
According to the AWC, between May 2012 and March 2014, Estes made personal investments in AL, PE, and QU (all of which were LLCs), and DQ (a corporation), which were Indiana based entities. Particularly, in 2013 and 2014, Estes invested $251,000.00 in AL, an entity formed in 2012 which was in the business of selling and owning real state. Estes reportedly owned half of the company in connection with his investment.
In 2013, Estes made a $100,000.00 investment in return for a twenty percent stake in DQ, which was created in 2013 and in the business of selling healthcare emergency preparation services, as well as products used in hazardous substance decontamination. The AWC stated that in 2012, Estes made a contribution in a retail food establishment, PE, in which he received a thirty percent stake in the company in return for a $51,060.00 investment. Estes, in 2013, reportedly made a $250,000.00 investment in QU, an LLC in the management consulting business, in return for a seven percent ownership interest.
The AWC also stated that Estes had solicited firm customers to purchase ownership interests in PE. In one case, Estes prompted investor LO to receive an eighteen percent interest in the entity in 2013 by contributing $40,000.00. The AWC further stated that in 2013 through 2014, Estes had convinced JI Investments, a private equity firm, as well as JL, the equity firm’s manager, to make investments in companies DQ and HR.
The AWC further stated that Estes’ private securities transactions amounted to $1,229,060.00 in funds being utilized, where $577,000.00 was contributed by customers, LO, JL, and JI Investments. FINRA noted that such investments, which FINRA deemed securities interests, were made outside the auspices of his firm and not within Estes’ scope of business. Estes reportedly failed to gain the requisite written approval from his firm prior to engaging in the private securities transactions, and never provided his firm with written notice. As such, FINRA found that Estes’ conduct was violative of FINRA Rules 2010 and NASD Rule 3040.
FINRA additionally found that Estes engaged in outside business activities from 2009 through 2014. Specifically, with regard to the aforementioned LLCs, Estes was involved with arranging space and leases, dealing with issues pertaining to equipment purchases, and hiring of personnel. Estes, according to the AWC, also worked in the capacity of a director for DQ since 2013. Estes was reportedly involved in the creation and management of a company, BT, as well as BB, which provided transportation services.
FIRNA found that Estes’ aforementioned activities were not within the scope of his role at J.J.B. Hilliard, W.L. Lyons, LLC, and Estes apparently did not provide his firm with notice of his activities as he was required to do. As such, FINRA found that Estes violated FINRA Rules 3270 and 2010, as well as NASD Rule 3030.
FINRA further found that Estes made misrepresentations in eleven of his firm’s compliance documents from 2010 through November of 2014. FINRA particularly took issue with Estes’ failure to reflect to his firm the true nature of his private securities transactions and outside business activities at the times when Estes had made compliance attestations and certifications.
In one case, Estes represented to his firm that he was merely a passive investor in PE, when FINRA found this statement to be false based on Estes’ activeness in the lease work, equipment purchases, hiring, among other tasks. Further, Estes claimed to his firm that he was merely an investor in DQ, when he was actually serving as a director according to FINRA. As such, FINRA found that Estes’ omissions and misrepresentations in this regard were violative of FINRA Rule 2010.
Public disclosure records reveal that Estes was named in a customer dispute on October 4, 2011, in which a client alleged mishaps made by Estes regarding the liquidation of the client’s assets.
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