“Selling Away” a Concern for Regulators, Investors and Brokerage Firms

According to the investmentnews.com, “Stockbrokers who sell products that promise high returns without the approval of their broker-dealers once again have become a leading concern for state securities regulators.”

Discussion about “selling away” has come to the forefront of the investor protection and securities fraud community recently. Just last week The White Law Group blogged about two former Edward Jones brokers who are currently being investigated for their alleged “selling away” to clients a Ponzi scheme associated with Gibraltar Partners, Inc.

The investmentnews.com indicated that regulators are also growing increasingly concerned with the practice of “selling away.” Matt Kitzi, who is the “Missouri securities commissioner and head of the enforcement section for the North American Securities Administrators Association Inc., which represents state securities regulators” stated that, “There’s been an increase in selling away.”

Kitzi further gave an indication as to why he believes “selling away” is on the rise, “When the financial crisis hit, brokers and agents were left with clients who weren’t happy with the investment options they were offered. Some brokers, also looking to supplement their income, went outside the traditional market, trying to find other products to push.”

In addition to Edward Jones, “Raymond James Financial Services Inc. and Woodbury Financial Services Inc., have had former brokers investigated by states this year for their roles in alleged selling-away schemes” according to the investmentnews.com.

Earlier this year the SEC charged Thomas K. (Kevin) Keough, formerly of Raymond James Financial Services, Inc., “with illegally selling unregistered promissory notes for a subprime auto lender in a scheme that raised $110 million from hundreds of investors.” In the case involving Woodbury Financial, Inc. a former broker, Joshua Gould, was sentenced to prison this year for “a variety of actions, including selling unregistered securities in private businesses.”

“Selling Away” is difficult for these types of firms to supervise because the brokers “typically operate in one- or two-man offices and have no branch manager looking over their shoulders on a day-to-day basis.”  If a registered broker “sells away” from his firm, the firm may still be liable for negligent supervision of their broker agent. This is why “selling away” is a concern for investors, securities regulators and brokerage firms.

If you have invested with any of the individuals mentioned in this article or are otherwise concerned that your broker has been “selling away” from his firm and you would like to speak to a securities attorney, please call our Chicago office at 312/238-9650.

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 Boca Raton, Florida.

For more information on The White Law Group, please visit our website at https://whitesecuritieslaw.com.