James Otis Conaway of Tustin California a stockbroker formerly employed by USA Financial Securities Corporation has been fined $10,000.00 and suspended for nine months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon consenting to findings that he engaged in unapproved outside business activities and failed to be forthcoming when questioned by the firm. Letter of Acceptance Waiver and Consent No. 2016048484001 (May 2, 2018).
According to the AWC, in 2012, Conaway reportedly engaged in an outside business activity, Tycon Properties – a business that Conaway created to connect individuals to real estate vendors so that those individuals could buy investment rental properties. The AWC stated that a portion of the individuals that Conaway referred to vendors consisted of the customers of the brokerage firms that Conaway was associated with at the time. Apparently, Tycon Properties procured referral fees totaling $450,000.00 by referring thirty five individuals to vendors.
The AWC revealed that at one of the vendors that Conaway recommended was controlled by GK – an individual who pled guilty to furnishing fake loan applications to banks and was imprisoned. The AWC stated that from 2013 to 2015, one third of all referrals involved GK’s program of purchasing and selling distressed properties located in Saint Louis, Missouri. Evidently, some of the rental properties that customers purchased from GK underperformed or had not performed at all, resulting in grievances having been filed by customers about GK’s real estate program.
The AWC stated that Conaway made inaccurate and incomplete representations to his brokerage firm employers in connection with his activities. For instance, on April 12, 2016, Conaway was asked by USA Financial Securities Corporation to reference all of the transactions involving customers or prospective customers that had been referred by Conaway; however, Conaway failed to disclose five of those transactions – two of which involved underperforming or nonperforming rental properties. In another instance, Conaway failed to disclose that his two other companies, Ten Vest and STL100, involved buying or attempting to buy customers’ existing rental properties. FINRA concluded that Conaway’s conduct was violative of FINRA Rule 2010 and 3270.
FINRA Public Disclosure confirms that Conaway has been identified in three more customer initiated investment related disputes containing accusations of Conaway’s misconduct while employed by Ameritas Investment Corp and JP Turner & Company LLC. Specifically, on October 2, 2006, a customer initiated investment related complaint that pertained to Conaway’s conduct was settled to resolve allegations that Conaway placed an inappropriate withdrawal from an insurance policy and failed to inform the customer about the surrender penalties associated with liquidating a variable universal life insurance contract.
On April 30, 2013, another customer filed an investment related complaint involving Conaway’s conduct in which the customer sought more than $5,000.00 in estimated damages supported by accusations including suitability, misrepresentation and unauthorized transactions relating to a variable annuity and charitable annuity.
Then, a customer initiated investment related arbitration claim involving Conaway’s activities was resolved for $32,826.87 in damages based upon allegations that unsuitable investment recommendations had been made to the customer concerning a real estate security. FINRA Arbitration No. 12-02918 (June 17, 2014).
On May 9, 2016, Conaway was terminated from USA Financial Securities Corporation based upon accusations that he neglected to cooperate with the procedures of the firm regarding outside business activities and advertising; failed to abide by the firm’s rules proscribing securities transactions with customers of the firm; and failed to be fully cooperative with the firm in an investigation into his activities.
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