Selling Away Lawyers: Recover Losses from Unauthorized Investments
Did your financial advisor recommend an investment that was not approved by their brokerage firm? You may be the victim of “selling away,” a serious form of investment fraud that can lead to significant financial losses.
Investment Fraud Claims Against Brokers
At The White Law Group, our selling away lawyers represent investors nationwide in claims against brokers and brokerage firms who fail to follow industry rules and properly supervise their representatives.
What Is Selling Away?
“Selling away” occurs when a broker or financial advisor sells or recommends investments outside of their brokerage firm’s supervision and approval.
These investments often include:
- Private placements
- Promissory notes
- Real estate ventures
- Startups or closely held companies
In many cases, the broker has a personal financial interest in the investment, creating a conflict of interest that is not disclosed to the client.
Because these investments are not vetted or approved by the firm, they often carry higher risk and less transparency, leaving investors vulnerable to fraud or substantial losses.
Learn more about other common types of investment fraud that we see including Churning/excessive trading and Unsuitable investments.
Why Selling Away Is Illegal
Selling away violates industry rules designed to protect investors and ensure proper supervision.
FINRA Rule 3280 – Private Securities Transactions
This rule generally prohibits brokers from participating in private securities transactions unless they:
- Provide written notice to their firm
- Disclose whether they will receive compensation
- Obtain firm approval (in many cases)
Failure to comply is a clear violation and a common basis for investor claims.
FINRA Rule 3270 – Outside Business Activities
Under this rule, brokers must disclose any outside business activities to their firm.
This is critical because:
- Outside activities can create conflicts of interest
- Firms have a duty to review and supervise these activities
- Misclassifying an activity can help conceal selling away
SEC Rule 206(4)-7
This rule requires investment advisory firms to implement policies and procedures to prevent violations of securities laws.
Firms may be liable if they fail to:
- Detect red flags
- Supervise advisors adequately
- Prevent unauthorized investment activity
Related FINRA Violations
Investors harmed by selling away may also have claims involving:
Brokerage Firm Liability for Selling Away
Even if your advisor acted independently, the brokerage firm may still be liable for damages.
Firms have a legal duty to:
- Supervise their brokers
- Investigate red flags
- Enforce compliance procedures
A failure to do so may result in a failure to supervise claim, which is one of the most common legal theories in selling away cases.
Warning Signs of Selling Away
Investors should be cautious if a broker:
- Recommends investments not listed on account statements
- Requests payment made directly to a third party
- Encourages secrecy or urgency
- Uses personal email or phone communications
- Promises unusually high or “guaranteed” returns
If you notice any of these red flags, you should speak with a securities attorney immediately.
FINRA Arbitration for Selling Away Claims
Most disputes involving selling away are resolved through FINRA arbitration, not court litigation.
Through arbitration, investors may recover damages for:
- Investment losses
- Out-of-pocket costs
- Lost opportunity damages
- Interest and, in some cases, attorneys’ fees
There is generally a six-year eligibility window to file a claim, so timing is critical.
Potential Consequences for Brokers
Brokers involved in selling away may face:
- Industry suspension or permanent bar
- Significant monetary fines
- Termination from their firm
However, investor recovery typically depends on holding the brokerage firm accountable, not just the individual broker.
How a Selling Away Lawyer Can Help
An experienced securities attorney can:
- Investigate the investment and broker conduct
- Identify supervision failures by the firm
- File and pursue a FINRA arbitration claim
- Seek full financial recovery on your behalf
The White Law Group has handled hundreds of FINRA arbitration cases and represents investors on a contingency fee basis.
Contact a Selling Away Lawyer Today
If you believe your financial advisor recommended an unauthorized investment, you may be entitled to recover your losses.
Contact The White Law Group for a free consultation to discuss your potential claim. Call (888)637-5510.
Frequently Asked Questions
What is selling away in simple terms?
Selling away occurs when a broker sells investments that are not approved or supervised by their brokerage firm.
How is selling away different from normal investing?
How is selling away different from normal investing?
In a legitimate transaction, the brokerage firm:
- Reviews the investment
- Approves it for sale
- Supervises the broker
With selling away, none of these protections exist.
What types of investments are commonly involved?
Selling away often involves:
- Private placements
- Real estate deals
- Promissory notes
- Startup investments
Can I sue the brokerage firm?
Yes. In many cases, the firm can be held liable for failure to supervise, even if it claims it was unaware of the activity.
What rules are violated in selling away cases?
Common violations include:
- FINRA Rule 3280
- FINRA Rule 3270
- SEC Rule 206(4)-7