John Jude Butler of Ocala, Florida, a stockbroker previously registered with Pruco Securities LLC, has been fined $5,000.00 and suspended for three months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity because Butler engaged in outside business activities and failed to report related compensation from a Prudential customer. Letter of Acceptance, Waiver, and Consent, No. 2022073944702 (March 19, 2024).
According to the AWC, the origin of FINRA’s regulatory action traces back to Pruco Securities LLC’s filing of a Uniform Termination Notice for Securities Industry Registration (Form U5) on May 24, 2022. In this document, Pruco reported the termination of Butler’s employment. The reason provided for this termination was Butler’s involvement in an undisclosed and unapproved outside business activity, alongside a failure to disclose compensation he received from a Prudential customer based on that outside business activity.
FINRA’s scrutiny into Butler’s conduct began following the review of the Form U5 filed by Pruco. The regulator noted that under Rule 3270, stockbrokers are prohibited from serving as an employee, independent contractor, officer, sole proprietor, partner, or director of another entity, or from being compensated, or having expectations of compensation, from any business activity outside the scope of their relationship with their employer, unless prior written notice has been provided to them.
Pruco’s written supervisory procedures required that stockbrokers disclose and obtain the securities broker dealer’s prior written approval before engaging in any outside business activities, and update any disclosures with changes to any of those activities.
Upon associating with Pruco in January 2018, Butler owned and operated an insurance business, Butler Insurance Group LLC, which specialized in selling property and casualty insurance. These insurance-related activities were disclosed to and approved by Pruco. However, between February 2018 and June 2019, Butler engaged in additional outside business activities through Butler Insurance Group LLC, which were neither disclosed in writing nor approved by Pruco.
In addition, Butler offered consulting services where he assisted a Pruco customer in selling portions of the customer’s civil money judgment to a third party. For these unapproved consulting services, the customer compensated Butler with over $538,000.00. Also, Butler falsely affirmed on three compliance questionnaires that he had accurately and fully disclosed his outside business activities to Pruco. Therefore, he violated FINRA Rules 3270 and 2010.
FINRA Public Disclosure also shows that on October 28, 2022, a customer filed an investment related FINRA securities arbitration claim involving Butler’s conduct in which the customer requested $200,000.00 in damages based upon allegations that Butler made misrepresentations of material fact and made unsuitable investment recommendations. The claim also alleged fraud and negligence by Butler when he was associated with Pruco. FINRA Arbitration No. 22-02333.
Butler was associated with Pruco Securities LLC in Ocala, Florida from January 19, 2018, to May 24, 2022.
