Justin Hoyt, of Gilbert Arizona, a stockbroker formerly registered with Ameriprise Financial Services, resigned from his firm, while purportedly under review, for the violation of the FINRA Rules and the Ameriprise Financial Services’ “Selling Away” policy.”
“Selling away,” also known as “private securities transactions” occur when a registered stockbroker sells securities or other investments, outside of the auspices, and without the express written consent of the securities broker-dealer or brokerage firm. These unapproved securities could range from Index Option Annuities, to promoter influenced, often defective, private placements, to Ponzi-like schemes, and even businesses sometimes controlled by the offending stockbroker, or where the stockbroker receives undisclosed compensation outside of the member firm.
“Selling away” is probably one of the top five problems for investors. We have seen horror stories. Stockbrokers soliciting customers to invest in fake investments, often owned or controlled by the stockbroker. Stockbrokers fabricating customer statements to conceal the sale of otherwise worthless investments. Some of the largest and most pervasive scams, and Ponzi schemes over the last twenty years have included Woodbridge Funding and Bernard Madoff.
Many of these “issuers,” or investments are not “investment related,” and may range from the timber business to the dry cleaning business. These scams have one thing in common. They are all the product of unapproved investments being sold to public customers outside of the auspices of the member firm.
Securities broker-dealers, and stockbrokers, have a duty to conduct due diligence in connection with any recommendation. Securities or investments not subject to professional due diligence by the member firm are more likely to become problem investments.
In addition to firm written supervisory procedures, FINRA Rule 3280 also prohibits stockbrokers or registered representatives from selling away or engaging in private securities transactions without the express written consent of the broker-dealer. Violators are most often sanctioned by FINRA, and in many cases, instead of admitting or creating a record of their wrongful conduct, stockbroker will refuse to cooperate with FINRA’s inquiry or investigation, and will accept a permanent bar from FINRA, and the association with any member in any capacity, based upon Rule 8210 for the “failure to cooperate,” rather than the underlying conduct.
Securities broker-dealers or brokerage firms, having installed these persons in a position of trust and confidence, not only have civil liability based upon traditional agent-principal, or respondeat superior liability, but also may be found responsible as “control persons” of the offending broker, and for the failure to supervise the broker’s investment related activities.
Investors that have suffered losses based upon the recommendation and sale, or even referral, of unapproved securities, should consult with qualified counsel to determine their rights and responsibilities.
The Guiliano Law Group, P.C.
For more than thirty years, our practice is limited to the representation of investors. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you. There is never any charge for a consultation or a confidential evaluation of your claim. For more information, contact us at (877) SEC-ATTY.
If you believe that you have been the victim of misconduct or fraud, contact us for a free consultation. We handle all cases on a contingency fee basis meaning that there is no cost or obligation, unless we are able to make a recovery for you.
