Michael Babyak Jr., of Mine Hill, New Jersey, a stockbroker formerly registered with LPL Financial LLC, was permanently barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity after consenting to findings that he effected unauthorized private securities transactions or selling away. Letter of Acceptance, Waiver and Consent, No. 2015048141701 (Nov. 7, 2016).
According to the AWC, Babyak was asked by a customer in 2011 to help an executive with refinancing of real estate based debt. Apparently, Babyak spent several weeks aiding the executive in the form of restructuring the executive’s debt, and even targeting LPL customers to lend funds to the executive. The AWC revealed that $4,250,000.00 in monies were raised for the executive by way of four customers who agreed to lending arrangements. Babyak’s activities in this regard were not reported to LPL Financial.
The AWC stated that Babyak set up an LLC to pool funds from investors, in which Babyak was deemed the authorized representative and registered agent. Babyak also reportedly facilitated the transactions by setting up the LLC’s tax identification number, hiring counsel for the LLC, signing the agreement for funds to be lent by customers, and helping the customers with the wiring funds totaling $4,250,000.00.
The AWC further stated that the LLC was able to retrieve $2,900,000.00 in funds by November 2014, in which funds were provided to the customers. Babyak then recommended that the LLC’s initial customers allow for future repayments to be provided to additional borrowers. Apparently, in March and October of 2015, the LLC lent $1,045,862.48 to another borrower; and $984,804.22 to a third borrower in May and August of 2015.
The AWC stated that Babyak never informed LPL Financial of his engagement in the private securities transactions, as required per the firm’s policies. LPL terminated Babyak on November 17, 2015, based upon allegations that Babyak engaged in solicitation of customers concerning investments that were not approved by LPL; and that Babyak facilitated loans to customers while lacking firm approval. FINRA found that Babyak’s conduct in this regard was violative of FINRA Rules 2010, 3280, and NASD Rule 3040.
FINRA Public Disclosure reveals that on January 15, 2009, a customer initiated an investment related arbitration claim involving Babyak’s conduct, in which the customer requested $130,000.00 in damages based upon allegations that Babyak sold a customer’s mutual funds despite lacking the customer’s consent. The customer further alleged that Babyak negligently managed the customer’s account.
On April 7, 2009, a customer initiated an investment related arbitration claim for $160,000.00 in damages based upon allegations that Babyak did not follow the customer’s investment based instructions, which caused the customer to suffer financial loss.
Following Babyak’s termination from LPL Financial LLC in December 2015, Babyak became registered with Leigh Baldwin & Co., LLC from December of 2015 to September of 2016.
Guiliano Law Group
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