Bradley Claus of Greenwood Village, CO, a former securities broker with Transamerica Financial Advisors, Inc., was permanently barred from association with any FINRA-registered firm in all capacities after FINRA found that Claus had made material misrepresentations via his securities sales efforts, along with participating in private securities transactions not approved by his former firm, in violation of FINRA Rule 2010 and NASD Rule 3040. FINRA Department of Enforcement v. Bradley Claus, No. 2012033520801 (May 18, 2015).
According to the FINRA Office of Hearing Officers Amended Default Decision, FINRA’s Department of Enforcement had investigated Bradley Claus after his former employer, TTransamerica Financial Advisors, reported that it had fired Claus on August 2, 2012, for engaging in the solicitation of sales that were not approved, while additionally reporting that Claus was subject to a customer complaint in March of 2013.
According to the Decision
Between September of 2010 and August of 2012, Bradley Claus had solicited 3 clients (2 of which were Transamerica Financial Advisors clients) to invest in a private securities transaction referred to as RJ Oil and Gas Co. LLC. FINRA determined that RJ Oil and Gas were in fact “securities.”
JM and MM, both Transamerica clients, indicated to Bradley Claus their interest in investing in products which could generate tax deductions in excess of what was possible via a typical individual retirement account (“IRA”). Claus, according to the Decision, positioned the two individuals for the investment in RJ Oil and Gas with the promise of tax deductions and dividend payments. JM and MM received only $2,000 back of the $15,000 invested, while the other non-Transamerica client, DM, lost his entire $9,000 investment. DM, according to the Decision, had never invested in a security prior to his arrangement with Claus.
According to the Decision, Bradley Claus had participated in the sales of the RJ Oil and Gas based on the referring the aforementioned clients and recommending the investments, all while not providing his former employer with any advanced notice of his actions. Transamerica had not listed the RJ Oil and Gas investment as an approved security. Claus, according to FINRA, had violated FINRA Rule 2010 and NASD Rule 3040 by his engagement in such transactions without notifying Transamerica.
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.
Stockbrokers Soliciting Without Firms’ Consent
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.
Additionally, the Decision noted that Bradley Claus had induced another customer by the name of JB to purchase Southern Hospitality promissory notes, where Claus made material misrepresentations in the process. Specifically, the Order found that Claus falsely and egregiously represented to JB that JB was guaranteed a 5% return, that celebrities Ryan Tedder and Justin Timberlake had invested, and that Claus invested his own money in the company. FINRA found Claus to have violated FINRA Rule 2010 in this regard.
False Statements Are Lies
However, false statements also often include guarantees, or the mischaracterization of potential risks and returns for any particular security or investment product. Fraud may also take the form of omission by failing to disclose, among other things, the brokerage firm’s financial relationship with the issuer, the lack of liquidity or a secondary market for the investment, the lack of due diligence by the recommending securities firm or broker.
While the falsity of any particular statement may be easy to prove, it may be difficult to prove that the misstatement or omission was knowingly false at the time it was made with either the state of mind embracing the intent to deceive or defraud or scienter, or was made in reckless disregard for the truth. Mere negligence, at least under the federal securities laws, is insufficient.
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, Esq., 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.