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gladden solicitationJ. Randall Gladden of El Cajon, California, a stockbroker with Securities Equity Group, was fined $15,000.00 and suspended for twelve months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity per an Office of Hearing Officers’ Order Accepting Offer of Settlement containing findings that Gladden had engaged in unauthorized private securities transactions, undisclosed outside business activities, and made material misrepresentations and omissions to Securities Equity Group regarding his conduct. Department of Enforcement v. J. Randall Gladden, No. 2014038996201 (July 19, 2016).
According to the Order, when Gladden was associated with Securities Equity Group, he concocted the idea and participated in creating Church Development Fund, LLC and its successor, Church Fund LLC, for the purpose of making loans to churches. The fund was seemingly designed primarily for refinancing customers’ real estate loans. The Order reported that Gladden had participated in the management of the Church Development Fund and Church Fund, while additionally serving as a governing member of the Funds’ managers, CDF Managing Partners, LLC and CF Manager.
The Order additionally stated that from May 2011 through September 2013, Gladden solicited seven customers to collectively invest more than $2,100,000.00 in the Funds via the purchase of securities. However, on Gladden’s 2011 and 2012 Compliance Certifications, he falsely stated to his firm that he had not engaged in any capital raising activities for any company, corporation, or business entity. FINRA found that Gladden ultimately failed to inform his Firm that he was the principal member of the Funds’ managers.
FINRA also found that Gladden’s participation in private securities transactions, done without providing written or other notice to his Firm and without receiving written approval, was violative of NASD Conduct Rule 3040 and FINRA Rule 2010. FINRA noted that Gladden failed to provide his firm with the requisite written notice of his participation in the Funds’ management – as such conduct occurred outside the scope of his relationship with the Firm.
FINRA further found that Gladden’s aforementioned conduct consisted of unauthorized outside business activities. Particularly, Gladden was found to be significantly involved in operations and management as a principal member of CDF and CF. Gladden purportedly approved private placement memorandums, analyzed borrowers’ financial status, facilitated meetings, and took part in setting borrowers’ rates and investor returns. Apparently, Gladden did not notify his firm in any manner regarding this activity which was outside of the scope of his employment. FINRA found Gladden’s conduct in this regard to be violative of FINRA Rules 3270, 2020, and NASD Rule 3030.
Public disclosure records reveal that Gladden has been subject to five disclosure incidents. On May 23, 1995, Gladden was subject to a customer dispute, where the customer was awarded $1,000.00 after alleging breach of fiduciary duty, churning, misrepresentation, non-disclosure and unauthorized trading. On December 19, 1996, Gladden settled a customer dispute for $10,000.00 after being alleged to have engaged in unauthorized discretion of the customer’s account.
On December 19, 1996, the United States Commodity Futures Trading Commission found that Gladden failed to comply with a final order of the CFTC that reparations be paid, which resulted in his suspension and prohibition from trading on any contract market and his registration being suspended pursuant to Section 14 of the Commodity Exchange Act. Gladden was subsequently subject to an additional Commodity Future Trading Commission suspension for his failure to pay reparations.
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