Outside Business Activity and Selling Away FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

January, 2012:

Richard Henry Elizondo (CRD #2953315, Registered Representative, Harlingen, Texas) 


submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Elizondo consented to the described sanction and to the entry of findings that he sold his customers note agreements offered by a company without his member firm’s permission and without holding the appropriate securities license. The findings stated that Elizondo entered into a written agreement with the company to sell the note agreements and to receive commission payments for those sales. Elizondo requested permission from his firm to sell the note agreements but his firm denied his request and instructed him to refrain from any further involvement with the company. Elizondo’s firm provided him with an article that detailed the high possibility of fraud associated with investment products such as the note agreements and noted on the rejected form that a Series 7 license would likely be needed to sell such products. Notwithstanding his firm’s instructions, and notwithstanding his lack of a Series 7 license, Elizondo eventually sold $562,107 worth of note agreements to customers and received $50,780 in total commissions. The findings also stated that the customers, many of whom were investing their retirement funds, were inexperienced investors who were seeking capital preservation. These customers invested in the note agreements solely based upon Elizondo’s recommendation. Elizondo represented that the products were safe, guaranteed a high return within five years, and were suitable for retirees seeking to preserve capital. The findings also included that Elizondo lacked any factual basis to make these claims because he did not have any experience with the products and failed to conduct the required due diligence. Elizondo had not been introduced to the company until 2008, had never before sold a promissory note purportedly funded by life settlements, and was unfamiliar with promissory notes in general. Yet, without any reasonable basis to do so, Elizondo recommended the note agreements to his customers as a safe investment suitable for retirement planning and capital preservation. FINRA found that while recommending the investments to his customer, Elizondo provided them with sales literature that contained several unwarranted and misleading statements, failed to disclose any risks involved in the investments, and guaranteed the products would succeed. Such statements helped form the basis of Elizondo’s recommendations to his customers, even though he did not verify the claims made by the company prior to recommending and selling the note agreements to his customers. (FINRA Case #2010023612302).