South Florida Arbitration & Litigation Lawyer Blog
FINRA Negligent Supervision and Selling Away Arbitration Attorney, Russell L. Forkey, Esq.
August, 2011:
Scott Thomas Brandt (CRD #1211417, Registered Representative, Woodland Hills, California) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $67,909.21, which includes a $57,909.21 disgorgement of commissions received, and suspended from association with any FINRA member in any capacity for 18 months. The fine must be paid either immediately upon Brandt’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Brandt consented to the described sanctions and to the entry of findings that he provided written notice to his firm that he was engaged in sales of secured real estate notes outside the regular course and scope of his employment with the firm. The findings stated that at that time, the firm failed to recognize that the notes were securities and allowed Brandt to continue selling them without further supervision. The findings also stated that Brandt again disclosed his sales of the notes on his annual Outside Business Questionnaire (OBQ) form, following which the firm determined that the notes were actually securities and ordered him to stop selling the notes and remove any mention of note sales from his OBQ; Brandt subsequently submitted a new OBQ devoid of any mention of note sales. The findings also included that Brandt sold a note to a customer and received a commission of $3,459.21 for the sale although he failed to obtain the firm’s prior written approval to sell the note.
FINRA found that Brandt sold additional notes to other customers without receiving any compensation for those sales and obtaining the firm’s prior approval. FINRA also found that the total value of the notes Brandt sold, after submitting the new OBQ devoid of any mention of note sales, was $637,293.21. In addition, FINRA determined that Brandt recommended and sold notes totaling $805,000 to other customers who were referred to him without having reasonable grounds for believing that his recommendations were suitable for these customers. Moreover, FINRA found that Brandt failed to obtain information about these customers’ investment objectives, risk tolerances, financial circumstances or other information upon which he could reasonably base a suitability determination. Furthermore, FINRA found that Brandt relied upon representations from the referring individuals that they had analyzed the customers’ profiles and determined the notes to be suitable for the customers. The findings also stated that Brandt received at least $54,450.00 in commissions for these sales.The suspension is in effect from June 20, 2011, through December 19, 2012. (FINRA Case #2009017603801).