Former Cetera Advisors Broker, Scott Kozak, Suspended By FINRA For Two Years, For Allegedly Engaging In Private Securities Transactions
Scott Kozak (CRD # 1272583) was a Financial Advisor at Cetera Advisors in Highlands Ranch, Colorado. Scott Kozak has been in the securities industry since 1989 and previously worked for Financial West Group.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on March 18, 2020, FINRA sanctioned Scott Kozak, suspending him from associating with any brokerage firm based on allegations that he engaged in unauthorized private securities transactions. According to the FINRA Sanction:
“Without admitting or denying the findings, Kozak consented to the sanctions and to the entry of findings that he participated in three sets of private securities transactions without providing prior written notice to his member firm, collectively soliciting firm customers and registered representatives to invest $1,166,000 in the securities of two companies. The findings stated that Kozak also invested his own funds in both of the companies. During an audit, Kozak falsely advised the auditor, and later falsely told the firm’s chief compliance officer, that no firm customers had invested in the company that was the subject of the second and third private securities transactions. The findings also stated that Kozak engaged in an outside business activity without notifying his firm, by forming a company through which he purchased the assets of, and operated, the company that was the subject of the second and third private securities transactions. The findings also included that Kozak falsely stated in annual firm compliance questionnaires that he had complied with the firm’s outside business activity policy and that he had not engaged in any private securities transactions.”
Often times, Financial Advisors who participate in private securities transactions are said to be “selling away.” FINRA strictly prohibits financial advisors from “selling away” or selling securities and investments to clients that are not offered by the brokerage firm with which they are employed. For example, it is illegal and a violation of industry rules for a financial advisor to recommend or even suggest that a client invest in the financial advisor’s own business or a business operated by his or her friends or family. It is not necessary that the financial advisor earn any compensation for recommending an outside investment.
The purpose behind this prohibition is to ensure that a financial advisor only offers to sell securities that have been vetted by his or her employer brokerage firm through a rigorous due diligence process. Most brokerage firms have an approved list of investments, products, and research that can be provided or made available to clients. Any deviation by the financial advisor from the approved product list may constitute selling away.
In the case of Scott Kozak, according to FINRA’s investigative findings, he solicited customers of Cetera Advisors to invest in his private securities transactions in violation of firm and industry rules.
For a copy of the FINRA Sanction, click https://www.finra.org/sites/default/files/fda_documents/2017053017203%20Scott%20Patrick%20Kozak%20CRD%201272583%20AWC%20sl.pdf
In addition, Scott Kozak was terminated by Cetera Advisors in July 2018 for “violating firm policy prohibited private securities transactions.” Scott Kozak also has four customer complaint disclosures reflected on his CRD, including the following:
• December 2018—”CLIENTS REQUESTED RE0P LIQUIDATE POSITIONS FROM A NON-QUALIFIED ACCOUNT IN ORDER TO FUND CLOSING COSTS AND A DOWN PAYMENT ON A HOUSE. THEY ALLEGE REPRESENTATIVE DID NOT FOLLOW INSTRUCTIONS AND INSTEAD LIQUIDATED POSITIONS IN A QUALIFIED ACCOUNT WHICH RESULTED IN TAX CONSEQUENCES OF $75,161.00.” The matter was settled for $27,500.
• October 2018—”MISREPRESENTATION & FAILURE TO FOLLOW INSTRUCTIONS TO PLACE TRADES.” An arbitration award was entered, granting the customers damages of $51,750.
For a copy of Scott Kozak’s CRD, click https://brokercheck.finra.org/individual/summary/1272583#disclosuresSection
Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.
The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at 800.931.8452 or by email at firstname.lastname@example.org.