Lori A. Hermanson of Greenwood Village, Colorado, a registered representative with TransAmerica Financial Advisors, was permanently barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity after consenting to findings that Hermanson had converted funds and engaged in unauthorized outside business activities. Letter of Acceptance, Waiver and Consent, No. 2015047979601 (Dec. 9, 2015).
According to the AWC, from January 2012 through November 2015, without providing prior written notice to TransAmerica, Hermanson had acted as treasurer of a non-profit Foundation. The AWC stated that while Hermanson was treasurer of the Foundation, she had issued sixteen checks which totaled $20,000 and made five cash withdrawals which totaled $6,000 from the Foundation’s checking account – ultimately using the funds for personal expenses without permission.
FINRA found that by improperly withdrawing cash and writing checks from the Foundation’s checking account for her personal use, Hermanson had converted funds from the Foundation in violation of FINRA Rule 2010. Further, FINRA found that Hermanson’s failure to provide written notice to her member firm, TransAmerica, of her participation in the Foundation was violative of FINRA Rules 3270 and 2010. This led to Hermanson’s permanent bar.
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.
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.
Public disclosure records via FINRA’s BrokerCheck reveal that on November 16, 2015, TransAmerica had discharged Hermanson amid allegations that Hermanson had embezzled and misappropriated funds from a non-profit organization for which she was providing bookkeeping services. TransAmerica additionally indicated that Hermanson was not provided approval to engage in the aforementioned outside business activity.
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