Leonard V. Fox, Jr., of Marlton, New Jersey, a stockbroker with FSC Securities Corporation, was permanently barred from associating with any Financial Industry Regulatory Authority (FINRA) member after consenting to findings that he failed to cooperate in a FINRA investigation into allegations of his misappropriation of customer funds. Letter of Acceptance, Waiver and Consent, No. 2016050482101 (Aug 19, 2016).
According to the AWC, Fox was permitted to resign from FSC Securities Corporation on July 25, 2016, while he was under an internal investigation by his firm for misconduct. Shortly prior to his termination, FINRA began an investigation into whether Fox had misappropriated funds from a firm customer. On July 15, 2016, FINRA reportedly sent Fox a request to provide information and documentation, per FINRA Rule 8210, in furtherance of the investigation. Fox apparently failed to respond to FINRA’s request.
The AWC stated that on July 28, 2016, Fox was sent a second request from FINRA to provide the requested information and documentation. Subsequently, on August 4, 2016, FINRA personnel were notified by Fox’s counsel that Fox would not be cooperating with FINRA’s requests at any point. FINRA found Fox’s failure to comply as conduct violative of FINRA Rules 8210 and 2010, leading to his permanent bar.
This is not the first time that Fox has been subject to disciplinary action by FINRA. In May of 2012, Fox was fined $2,500.00 and suspended after being found to have borrowed funds from a firm customer in violation of the firm’s policies. Apparently, Fox did not provide notice to his firm regarding the borrowing arrangements. FINRA found Fox to be in violation of FINRA Rules 2110 and 2370. Fox subsequently was terminated from Morgan Stanley and became associated with FSC Securities Corporation.
Public disclosure records also reveal that Fox has been subject to four customer disputes totaling more than $900,000. On December 30, 2003, Fox settled a customer dispute for $20,000.00 after a customer alleged misrepresentations and unsuitable recommendations. On July 7, 2009, Fox settled a customer dispute for $125,000.00 amid allegations of failing to follow the customer’s instructions to sell her investment positions. On June 22, 2016, Fox became subject to a pending customer dispute, in which Fox is alleged to have misappropriated the customer’s funds.
FSC Securities Corporation is a registered broker-dealer with its principal place of business at 2300 Windy Ridge Parkway, Suite 1100, Atlanta, Georgia 30339. Until recently, FSC was part of the AIG Advisor Group, and purported to be “part of the largest truly independent broker-dealer network in the industry,” with more than “6,000 “independent” financial advisors operating from approximately 625 geographically dispersed “franchise” branch offices across the United States.
In substantial part, these offices are “franchise” offices wherein the broker pays all the expenses, in consideration for a higher commission pay-out. However, there is no on-site supervision at these geographically dispersed, remote locations. As such, FSC, is also substantially unable to directly supervise the sales practices or activities conducted at these “independent” offices, and since its inception, FSC has been subject to numerous regulatory actions for the failure to supervise, in addition to numerous customer initiated, investment related complaints, or arbitrations, alleging the failure to supervise and fraud in connection with the sale of securities.
FSC Securities Corportation is responsible for the supervision of Fox’s conduct and business activities, and the activities conducted at its “independent” branch offices to reasonably detect and prevent the misconduct complained of therein. Courts and securities arbitration panels, in identical circumstances, have long held brokerage firms responsible for the conduct of their registered representatives in “selling away” cases based upon the broker-dealer’s failure to supervise.
In addition to its liability for the failure to supervise, FSC Securities Corportation may also be liable for Fox’s conduct under common law agency principles, including respondeat superior, and as a “control person” pursuant to both Section 20(a) of the Exchange Act of 1934, 15 U.S.C. §78(t).
If Leonard V. Fox, Jr. misappropriated your funds, you should consult with counsel to determine your legal rights.
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