INVESTOR UPDATE—Broker, Gary Pevey, Previously Discharged By Mutual Securities For Allegedly Selling Away, Has Been Suspended By FINRA For Twelve Months
The Wolper Law Firm is currently investigating claims against Gary Pevey, a former Financial Adviser at Mutual Securities in Sacramento, California. Gary Pevey has been in the securities industry since the 1990s and previously worked at NFP Advisor Services.
to publicly available records released by the Financial Industry Regulatory
Authority (FINRA), on February 3, 2018, Gary Pevey was “discharged” by Mutual
“Violation of FINRA Rule 3280, Private Securities Transaction of an Associated Person.” This conduct is referred to in the industry as selling away. The Financial Industry Regulatory Authority (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.
Following his termination, Gary Pevey was the subject of a customer complaint, alleging “sales of high-risk and fraudulent investments and inadequate supervision.” The alleged damages are $171,000 and the matter remains pending.
For a full copy of Gary Pevey’s CRD, click https://brokercheck.finra.org/individual/summary/2129469#disclosuresSection.
On January 10, 2019, Gary Pevey was sanctioned by FINRA, suspending from associating with a broker dealer for a period of twelve months and also fining him $10,000. The basis of the sanction was Gary Pevey allegedly selling unregistered promissory notes issued by Woodbridge Wealth, in unapproved outside private securities transactions.
For a copy of the FINRA sanction, click http://www.finra.org/sites/default/files/fda_documents/2018057586601%20Gary%20L.%20Pevey%20CRD%202129469%20AWC%20va.pdf
For years, the Woodbridge Group of Companies, operated a ponzi scheme in which it sold (through outside financial professionals) promissory notes allegedly backed by mortgages. The investment program turned out to be a $1.2 billion ponzi scheme and Woodbridge’s principal, Robert Shapiro is currently under criminal indictment.
According to the SEC’s complaint filed against Woodbridge, the Woodbridge business model was to borrow money from investors in exchange for promissory notes, maturing usually in 12 or 18 months. The notes had an annual interest rate of 5% to 8% payable monthly. The investors’ money was supposed to be issued to lenders in the form of securitized mortgages, but rarely was, according to the SEC. Gary Pevey is allegedly one of the outside financial professionals that sold the fraudulent notes to unsuspecting customers.
In December 2017, Woodbridge declared bankruptcy. Woodbridge and its principal, Robert Shapiro, have since settled with the SEC for $120 million.
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. Part of the suitability analysis requires that the trades are quantitatively suitable, meaning that the broker cannot execute excessive trades or engage in churning.
The Wolper Law Firm is interested in speaking with clients of Gary Pevey as part of its investigation. We can be reached at 800.931.8452 or by email at email@example.com. 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.
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