Rudy Anguiano, of Red Bank, New Jersey, a stockbroker formerly associated with LPL Financial was terminated for engaging in unapproved outside business activities, and because he engaged in “selling away,” by directing customers to invest in unapproved private investments.
FINRA Rule 3280 provides that stockbrokers or registered represenatives are prohibited from participating in private securities transactions outside the regular course or scope of an associated person’s employment with a 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.
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.
Whether a brokerage firm has expressly authorized its stockbrokers to sell or participate in these activities is generally irrelevant. Brokerage firms can be held responsible for the conduct of their registered representatives in “selling away” cases based upon the broker-dealer’s failure to supervise all the activities of their registered representatives. Liability will also attach to the brokerage firm for these outside or unapproved activities where the stockbroker acted with apparent authority, or the investor reasonably believed that these activities were approved or part of the stockbroker’s activities or services.
Victims of “selling away,” should contact a lawyer to determine their rights and obligations.
The Guiliano Law Group, P.C.
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