Sylvester King Jr., a Stockbroker with Morgan Stanley Smith Barney LLC, was suspended from association with any Financial Industry Regulatory Authority (FINRA) member in any and all capacities for eighteen months and fined $35,000 after consenting to findings that he circumvented his firm’s policies and procedures, made an unauthorized loan to a customer, and engaged in private securities transactions. Letter of Acceptance, Waiver, and Consent, No. 2013036262101 (Mar. 30, 2015).
According to the AWC, from November 14, 2011 – January 23, 2013, at a time when King was employed with Wells Fargo, King had assisted his partner and fellow Wells Fargo representative AP in loaning roughly $399,500 to three athletes in the NBA and NFL who happened to be customers of King and AP at King’s firm. In order to conceal the loans, the funds were first wired to an entity owned by King’s and AP’s family members. King, according to the AWC, controlled BPKG and was in sole possession of the security access to effect loans from BPKG’s customers. The AWC found that King knew that AP transferred funds through BPKG in order to circumvent Wells Fargo’s rules. FINRA found King’s conduct to be violative of Rule 2010.
The AWC further reported that from May, 2012 – November 5, 2012, King loaned $25,000 to a friend who also happened to be a customer of the firm. King reportedly loaned funds at a time when his firm’s procedures prohibited loans to a firm customer unless the customer was an immediate family member of the representative. Since King loaned the funds to someone he wasn’t related to and never notified his firm, he was found to have violated Rules 2010 and 3240.
The AWC stated that from July, 2009 – February, 2012 – King also engaged in a private securities transaction concerning an internet branding company called GVC. King reportedly facilitated transactions by sending PowerPoint presentations and other information concerning GVC to potential investors while forwarding and retrieving the required information to and from the investors. FINRA found King’s and AP’s customers’ investments to be outside the scope of King’s employment with Morgan Stanley and Wells Fargo, causing him to violate FINRA Rule 2010 and NASD Conduct Rule 3040.
Public disclosure records via FINRA’s BrokerCheck reveal that Sylvester King, Jr. has been subject to six disclosure events. On April 27, 2015, he voluntarily resigned from Wells Fargo Advisors, LLC, after his suspension from the aforementioned conduct. On May 14, 2015, King became subject to a customer dispute (pending), where a customer is requesting $700,000.00 after alleging that King recommended investments that were not authorized by his firm.
On June 19, 2015, Maryland Division of Securities issued an order revoking King’s registration in the state. On June 30, 2015, King became subject to another customer complaint (pending), where a customer has alleged that outside investment recommendations made from 2011-2015 were misrepresented and unsuitable. On July 28, 2015, FINRA also issued a revocation to King based on allegations that King failed to pay his $35,000 fee in the aforementioned action.
FINRA, pursuant to FINRA Rule 3240 and NASD Rule 2370, has indicated that a Stockbrokermay not borrow funds from his or her customer except in certain circumstances, and only then with the consent of the registered representative’s FINRA-regulated broker-dealer employer. Additionally, pursuant to FINRA Rule 3270 and NASD Rule 3040, registered representatives are prohibited from engaging in any business activity outside the scope of his or her employment without providing written notice to his or her FINRA-regulated broker-dealer employer.
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.
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.
