Securities Regulator Suspends Lucas Hales for Private Securities Transactions
The Financial Industry Regulatory Authority (FINRA) has reportedly suspended broker Lucas Hales (CRD #6254897) from the securities industry for 12 months and issued a fine of $10,0000 as of on January 18, 2024. Hales allegedly participated in private securities transactions totaling $3 million without providing any notice to his firm. Through this conduct, Hales allegedly violated FINRA Rules 3280 and 2010.
In March 2021, Hales, along with two other individuals, reportedly established a limited liability company with the purpose of serving as an investment vehicle for a technology company. Hales purportedly assumed the role of the sole manager for this entity. $3 million was reportedly invested in the company by twenty-one investors, including Hales. Hales reportedly actively participated in these transactions by overseeing investors’ subscription documents and acting as the designated point of contact for investor interactions.
Additionally, Hales allegedly managed accounts and executed documents on behalf of the entity’s investment in the technology company. Following the closure of the technology company investment, the entity was purportedly entitled to collect carried interest as selling compensation and Hales allegedly received a portion of this carried interest.
FINRA Rule 3280
FINRA has rules in place to protect investors. FINRA Rule 3280(b) mandates that an associated person must notify their affiliated member in writing before engaging in any private securities transaction. This notification should provide comprehensive details about the proposed transaction, outlining the associated person’s intended role and specifying whether they anticipate receiving selling compensation for their involvement.
A private securities transaction, as defined by FINRA Rule 3280(e), pertains to any securities transaction conducted outside the regular course or scope of an associated person’s employment with a member firm. If the associated person expects to receive selling compensation, FINRA Rule 3280(c) requires the member firm to render written approval or disapproval of their participation in the proposed private securities transaction.
Violating Rule 3280 is considered a breach of FINRA Rule 2010, emphasizing the obligation for members and their associated persons to uphold high standards of commercial honor and adhere to just and equitable principles of trade in their business activities.
The Problem with Private Securities Transactions
Brokers engaging in private securities transactions without proper disclosure and approval pose several potential problems for customers:
Conflict of Interest: Brokers have a duty to prioritize the interests of their clients. Engaging in private securities transactions without proper disclosure may create a conflict of interest, as the broker may be driven by personal financial gains rather than the best interests of the customer.
Lack of Oversight: Brokerage firms are responsible for supervising the activities of their associated persons to ensure compliance with regulations and ethical standards. Without disclosure and approval, these private transactions may occur without the necessary oversight, exposing customers to potential risks.
Insufficient Information: Customers rely on their brokers to provide them with accurate and relevant information about investment opportunities. If a broker engages in private transactions without proper disclosure, customers may not have access to crucial details about the associated risks and rewards.
Regulatory Violations: Failure to comply with regulatory requirements, such as those outlined in FINRA Rule 3280, can lead to disciplinary actions against both the broker and the brokerage firm. This can result in fines, sanctions, and damage to the reputation of the broker and the firm.
Financial Losses: Private securities transactions can be inherently risky, and customers may suffer financial losses if the broker’s personal investments turn out to be unsuccessful. The lack of proper oversight and disclosure makes it harder for customers to make informed decisions about their investments.
Lucas Hales – FINRA BrokerCheck Profile
The FINRA BrokerCheck tool is a free online tool that allows investors to research and verify the background and credentials of financial brokers, brokerage firms, and investment advisors registered with FINRA.
BrokerCheck provides investors with detailed information about the professional history, qualifications, and regulatory actions of brokers and brokerage firms. Investors can use the tool to verify if a broker or brokerage firm is registered with FINRA, review their employment history, licensing status, and any regulatory actions or complaints filed against them.
According to his FINRA BrokerCheck profile, Hales was affiliated with the following firms:
B, 09/26/2018 – 03/07/2022, VIRTU AMERICAS LLC (CRD#:149823), Austin, TX B, 05/11/2016 – 04/09/2020, VIRTU FINANCIAL BD LLC (CRD#:148390), AUSTIN, TX B, 05/11/2016 – 12/24/2018, VIRTU FINANCIAL CAPITAL MARKETS LLC (CRD#:45986), NEW YORK, NY
If you have suffered losses investing with Lucas Hales, the securities attorneys at the White Law Group may be able to help you. For a free consultation with a securities attorney, please call (888) 637-5510.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.
Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.
For more information, please visit our website, whitesecuritieslaw.com.
