South Florida Selling Away, Approved, Unapproved Outside Business Activity and Negligent Supervision FINRA Arbitration and Litigation Attorney:
The Financial Industry Regulatory Authority, Inc. (FINRA) is a self-regulatory authority assigned the responsibility, by the Securities and Exchange Commission, to license, regulate and discipline securities broker/dealers and their employees, including account executives. In the event that FINRA elects to institute and enforcement action, firms and licensed individuals have the responsibility to reflect such action of their U-4 and/or U-5 filings, which can be viewed on the FINRA website under the broker-check section of the site or by viewing the monthly disciplinary information also provided on the FINRA site.
The monthly disciplinary information is referenced on the site generally in alphabetical order. This post relates to the following company or individuals. If the reader would like to review the entire FINRA release or the broker-check information concerning this matter, you can follow these highlighted links:
August 2013 Disciplinary and Other FINRA Actions:
G. Research, Inc. f/k/a Gabelli & Company, Inc. (CRD #7353, Rye New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $1,000,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that its Supervisory Procedures were not reasonably designed to achieve compliance with applicable securities laws and regulations, and NASD and FINRA rules with respect to private partnerships formed by the firms’ registered representatives, and the firm did not adequately supervise the private partnerships. FINRA Case No. 2009017326901. To view a complete copy of the FINRA release relative to this matter, please follow one of the above links.
In order for an account executive, to become involved in an outside business activity, he or she must get approval from their broker/dealer to engage in such activity, who then has the responsibility to reasonably monitor the outside activity. In order to establish guidelines relating to the approval process and its continuing supervisory responsibilities, the broker-dealers must establish and implement a reasonable written supervisory system to safeguard customer assets.
Thus, the broker – dealer is charged with initially performing due diligence (investigating) the proposed outside business activity to, among other things, make sure that all material information is contained in the offering documents, relating such things as the identity and prior performance of the promoters of the investment or of the investment itself, potential conflicts of interest, the financial condition of the entity, the risks associated with the investment, the viability of the proposed business of the venture and its liquidity (is there a reasonable exit strategy) and thereafter supervising the performance of the investment. For example, many private offerings (“alternative investments”) contain requirements that each year, the business must provide the investors with a certified final statement prepared in accordance with generally accepted accounting principles. If for any reason this financial statement is not delivered timely, immediate contact with the broker – dealer should be made.
Depending upon the factual pattern associated with customer losses associated with unapproved or failed outside business, investors may be able to seek redress from the broker – dealer for failure to supervise. However, each fact pattern is unique. Consequently, it is important that you consult with qualified counsel.
With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.
At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.