- April 7, 2019
- LPL Financial
Scott Klor is a former Financial Advisor at LPL Financial, Inc. in Fort Mill, South Carolina. Scott Klor has been in the securities industry since 1994 and previously worked at Uvest Financial Services Group.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on April 4, 2019, Skott Klor was sanctioned by FINRA, suspending him from associating with a brokerage firm for fourteen months. Scott Klor was also fined.
According to the sanction entered into between Scott Klor and FINRA, Scott Klor allegedly sold $1.4 million of viatical settlements to an elderly customer in violation of firm policy and FINRA rules.
“Without admitting or denying the findings, Klor consented to the sanctions and to the entry of findings that he solicited investors, including his member firm customers, to purchase a variable life insurance policy on the life of an elderly individual, however, the firm’s policies prohibited registered representatives from participating in the offering of life or viatical settlements and Klor did not notify the firm of his involvement in the viatical settlement. The findings stated that the transaction was structured as a viatical settlement, in which investors purchased the life insurance policy for an amount that exceeded the policy’s surrender value but was less than the expected death benefit. With Klor’s assistance, the investors formed a limited liability company (LLC) to purchase the policy for approximately $1.4 million. In furtherance of this transaction, Klor communicated with potential investors regarding the policy, assisted in making sales presentations regarding the proposed viatical settlement, and consulted with professionals regarding the formation of the LLC. For his efforts in facilitating the transaction, Klor received a four percent interest in the LLC, which he requested be placed in his wife’s name. The findings also stated that Klor provided inaccurate responses on the firm’s annual compliance questionnaires in which he answered no when asked whether he had ever participated in a viatical settlement or a joint venture involving the pooling of investor funds for a common purpose.”
The FINRA sanction followed Scott Klor’s termination from LPL Financial in April 2017 for “violation of firm policy regarding private securities transactions.” This is also referred to as “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.
For a copy of the FINRA sanction, click https://www.finra.org/sites/default/files/fda_documents/2017054221601%20Scott%20P.%20Klor%20CRD%202493369%20AWC%20va.pdf
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 email@example.com.