Michael J. Barranco, of Montgomery, Alabama, a stockbroker with LPL Financial, LLC, was fined $20,000.00 and suspended for two years from associating with any Financial Industry Regulatory Authority (FINRA) member firm in any capacity after consenting to findings that he engaged in the unauthorized participation of private securities transactions. Letter of Acceptance, Waiver and Consent, No. 2015048273301 (Aug 1, 2016).
According to the AWC, from 2010 through 2015, while Barranco was associated with LPL Financial, LLC, he had participated in nearly forty private securities transactions that involved three separate issuers, all while not providing the proper notification to LPL Financial.
The AWC stated that in 2010, LPL did receive a request from Barranco and resulting permission to consult with a company, TMG, for purposes of providing business planning. TMG was reportedly created through two of Barranco’s clients. Yet, Barranco took matters a step further by participating via soliciting or facilitating prospective LPL Financial clients to purchase TMG’s debt instruments, in which TMG offered to pay thirteen percent interest on senior notes. FINRA found that Barranco’s conduct in this regard was done outside the auspices of his firm.
The AWC reported that from November of 2010 and February of 2011, twenty-seven investors, many of who were LPL Financial clients, purchased investments in the course of thirty-five transactions. These purchases, which were reportedly done through Barranco’s participation, resulted in the investment in a minimum of $2,087,000.00 in TMG’s senior notes. The AWC reported that several of the customers held TMG senior notes in their respective LPL Financial accounts.
The AWC further stated that in 2014, TMG’s founders had purchased IBH, a real estate development in distress, and subsequently issued additional senior notes paying twelve percent interest in connection with such. Apparently, customers received recommendations from Barranco to purchase the senior notes, resulting in at least two customers handing over $750,000.00 in connection with the notes purchases.
Barranco reportedly engaged in the participation of additional transactions involving customers’ conversion of IBH Notes into investments in the parent company of IBH. FINRA found that the aforementioned investments were all outside of the firm’s auspices.
FINRA found that as a result of Barranco’s failure to adequately notify his firm concerning his aforementioned involvement in the private securities transactions, he had violated FINRA Rule 2010 and NASD Rule 3040. Prior to FINRA’s disciplinary action against Barranco, he was discharged by LPL Financial LLC on November 17, 2015, in connection with allegations of his misconduct being violative of the firm’s policies.
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