FINRA Bars Triad Advisors, Douglas Miller and Gary Rathbun, Selling Away

According to FINRA, Douglas Miller (CRD #1946240, Bowling Green, Ohio) and Gary Rathbun (CRD #1084721, Wauseon, Ohio)  submitted an AWC in which they were both barred from association with any FINRA member in any capacity.

Miller and Rathbun reportedly consented to the sanctions. According to FINRA, Miller and Rathbun allegedly participated in the sale of investments in limited liability companies to 187 clients of their registered investment adviser firm. The clients reportedly collectively invested approximately $25.5 million in the limited liability companies. Miller and Rathbun allegedly failed to provide written notice of their participation to their member firm, as required by FINRA rules.

The investors in the limited liability company included 25 people who were also clients of Miller and Rathbun’s FINRA member firm.  The findings stated that Miller and Rathbun reportedly failed disclose to their firm that they collectively received more than $600,000 in compensation from some of the limited liability companies for advising the companies regarding the companies’ business activities, and failed to appropriately disclose investments they made personally or on behalf of family members in the limited liability companies to their firm.

According to their FINRA BrokerCheck reports, Miller was registered with Triad Advisors in Toledo, Ohio, from 08/2005 – 07/2014 and Rathbun was registered with Triad Advisors from 10/2009 – 07/2014.

For FINRA’s full findings, see FINRA Case #2014041919401.

Selling Away and FINRA Rule 3280

“Selling away” refers to the practice in which a broker encourages a client to purchase securities that are not part of the offerings provided by their brokerage firm. Typically, brokerage firms maintain lists of approved products that their brokers can recommend to clients. These approved products undergo thorough due diligence screenings and are deemed solid by the firm’s screening personnel.  

When a broker sells securities that are not on the approved list, they are taking the risk of offering products for which due diligence has not been conducted. In most cases, such actions violate securities regulations. 

FINRA Rule 3280 expressly prohibits a registered representative or associated person from selling any security “away” from their member firm unless the firm has granted specific authorization for the sale.  Rule 3280 requires that registered individuals must formally notify their firm in writing about the proposed transaction before making the sale. 

Selling away is widely regarded as a breach of both internal company policies and broader securities regulations. Although it may lead to increased commissions for the broker, it also involves a heightened level of risk since these products have not been vetted or approved for sale by the broker’s employer. 

Class Action vs. Individual FINRA Arbitration Lawsuit 

You may wonder whether a large class action lawsuit is a better litigation option than an individual FINRA arbitration case.  The answer depends on many factors, but typically if the loss sustained is large (say larger than $100,000), an individual arbitration claim is likely a better option.  Class actions as a recovery option are more appropriate for grouping large numbers of individuals who have small claims – too small to generally pursue individually. 

Free Consultation

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington.

If you have suffered losses investing with Douglas Miller and Gary Rathbun, you may have recovery options. For a free consultation with a securities attorney, please call the firm at 1-888-637-5510.