Xavier R. Endress of Bloomfield Hills, Michigan, a registered representative with Merrill Lynch, Pierce, Fenner & Smith, Inc., was permanently barred from association with any Financial Industry Regulatory Authority (FINRA) registered firm in all capacities after consenting to findings that he engaged in undisclosed outside business activities and provided false information to his employer in connection with the opening of a brokerage account in which he had a beneficial interest. Letter of Acceptance, Waiver and Consent, No. 2013039046302 (Nov. 3, 2015).
According to the AWC, in November 2012, Endress had created E&H Consulting, LLC. Endress was reportedly the only individual who owned and controlled E&H Consulting. In December 2012, Endress had opened and funded a brokerage account at Merrill in the name of E&H Consulting, which Endress was in sole control of. The AWC stated that as part of the account opening process for his consulting firm, he had completed required account opening documents, which included a Merrill Working Capital Management Account Application, Merrill Business Account Beneficial Owner Form, and other account documents.
The AWC stated that in completing the E&G documents, Endress had falsified information such as establishing the consulting account under another registered representative’s number; signing the registered representative’s name to the Beneficial Owner Form without the registered representative’s knowledge or consent; and failing to identify himself as the beneficial owner of that account. Endress reportedly placed more than sixty securities transactions in the E&G account using the strategy he designed between January 8, 2013 through March 19, 2013.
According to the AWC, Endress had failed to provide written notification to his firm of his ownership and business activities through his consulting firm, conduct violative of FINRA Rules 3270 and 2010. Further, FINRA found that as a result of falsifying the consulting firm account documents and failing to notify Merrill Lynch of his beneficial ownership in the E&H Consulting account in accordance with his company policies, Endress had violated FINRA Rules 4511 and 2010. This led to Endress’ permanent bar.
According to FINRA Rule 3270, FINRA’s position is that no registered person like Endress may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his/her member firm, unless he/she is provided prior written notice to the member. Selling away, also known as private securities transactions or undisclosed outside business activities, occurs when a stockbroker engages or participates in the sale of securities to investors outside of the formal approval of the securities firm with whom they are associated.
Selling away, also known as private securities transactions or undisclosed outside business activities, occurs when a stockbroker engages or participates in the sale of securities to investors outside of the formal approval of the securities firm with whom they are associated.
As a general matter, stockbrokers are only permitted to engage in the solicitation or sale of investments and investment related products approved by their firm. However, quite frequently, stockbrokers solicit, participate, or directly engage in the sale of typically unregistered securities or investments without the approval and outside of the auspices of their firm. These investments may take on many forms, and may include the recommendation of an outside money manager, or a hedge fund, which may sometimes turn out to be a Ponzi scheme. Sometimes these outside investments may include off-shore securities, insurance trusts, stocks or ownership interests in small businesses, startup ventures, corporate debentures, mortgage notes, private placements, promissory notes, oil & gas interests, real estate partnerships, pre-IPO shares, and a variety of other investments.
Firms and individuals, quite obviously, are prohibited from unauthorized use or borrowing of a customer’s funds or securities, forgery, non-disclosure or misstatement of material facts, and manipulations and various deceptions. These activities are also subject to the civil and criminal laws and sanctions of federal and state governments.
Guiliano Law Group
If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esquire, and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.