We all want to become involved in ground-floor opportunities that let us invest in something like the next Google or Amazon. The problem with many of these investments is that they are unregistered and have to be fully investigated by the broker-dealer or investment advisory firm.
The situation becomes more complicated when your stock broker or financial advisor recommends these opportunities to you but they are outside the scrutiny of their firm. This is a practice known as selling away.
Selling away is banned by the Financial Industry Regulatory Authority (FINRA). FINRA is the regulator that governs the financial services industry. It sets standards that registered investment professionals and their firms must follow.
“Outside Business Activities” and “Outside Securities Activities” are closely monitored by brokerage firms and regulators to ensure that financial advisors do not involve customers in investment opportunities that are not approved by the financial advisor’s employing brokerage firm. This practice is known as “selling away,” which is strictly prohibited by FINRA and every financial services firm. Brokerages and financial advisors are routinely sanctioned or barred from the industry for this unlawful practice.
The purpose behind this prohibition is to ensure that a financial advisor offers to sell only securities that have been vetted by his or her brokerage firm after there has been 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.
The most classic form of selling away occurs when a financial advisor offers a client the opportunity to invest in a business he or she created. If this has happened to you, a dedicated stock broker misconduct lawyer can help.
Why Choose Wolper Law Firm?
Our team of selling away lawyers knows the law and can find out what is happening. We have five-star reviews from our clients for identifying broker or financial advisor malfeasance and will hold them accountable. Click here to see what our clients are saying about us.
Our firm was founded by Matt Wolper to help investors with these types of situations. He worked as an attorney for the big Wall Street brokerage and advisory firms for 14 years. Matt saw what was happening to ordinary investors from not knowing all the rules and regulations that govern the industry. He started the Wolper Law Firm to level the playing field.
Matt is an experienced trial and securities attorney with decades of experience. He has worked on many different cases and knows what to do to get results for you.
You now have the selling away attorneys that can identify what happened and know the law. We use our knowledge to get you back the money you lost plus any commissions and punitive damages.
The big Wall Street firms have deep pockets, and they are hiring some of the best lawyers that money can buy. You need someone on your side who has the experience and knowledge to level the playing field.
The Wolper Law Firm has a 99% success rate for our clients. We will evaluate your case for free and let you know what options are available. Contact us today at 800.931.8452 and see why we are selling away violation lawyers you can trust. We offer a free no-obligation consultation.
What Do The FINRA Rules Say About Selling Away?
FINRA has codified the rules applicable to selling away. FINRA Rule 3270, titled “Outside Business Activities of Registered Persons,” provides:
No registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member, in such form as specified by the member. Passive investments and activities subject to the requirements of Rule 3280 shall be exempted from this requirement.
In addition, FINRA Rule 3280 provides:
No person associated with a member shall participate in any manner in a private securities transaction except in accordance with the requirements of this Rule.
Prior to participating in any private securities transaction, an associated person shall provide written notice to the member with which he is associated describing in detail the proposed transaction and the person’s proposed role therein and stating whether he has received or may receive selling compensation in connection with the transaction; provided however that, in the case of a series of related transactions in which no selling compensation has been or will be received, an associated person may provide a single written notice.
(c) Transactions for Compensation
(1) In the case of a transaction in which an associated person has received or may receive selling compensation, a member which has received notice pursuant to paragraph (b) shall advise the associated person in writing stating whether the member:
(A) approves the person’s participation in the proposed transaction; or
(B) disapproves the person’s participation in the proposed transaction.
(2) If the member approves a person’s participation in a transaction pursuant to paragraph (c)(1), the transaction shall be recorded on the books and records of the member and the member shall supervise the person’s participation in the transaction as if the transaction were executed on behalf of the member.
(3) If the member disapproves a person’s participation pursuant to paragraph (c)(1), the person shall not participate in the transaction in any manner, directly or indirectly.
(d) Transactions Not for Compensation
In the case of a transaction or a series of related transactions in which an associated person has not and will not receive any selling compensation, a member which has received notice pursuant to paragraph (b) shall provide the associated person prompt written acknowledgment of said notice and may, at its discretion, require the person to adhere to specified conditions in connection with his participation in the transaction.
Why do Brokers and Financial Advisors Engage in Selling Away?
When your broker or financial advisor is selling securities through their firm everything has been vetted. This means that the firm will look at the security to ensure it follows all the different rules of the securities industry.
An unregistered security that has not been approved is a risky situation for investors. These investments are not subject to oversight, and anything can be happening behind the scenes.
Some brokers or financial advisors like these situations for many different reasons, including:
- No oversight or reporting of these activities to their firms and regulators.
- They are partners with the officers and owners of these investments and don’t have to disclose this relationship to you.
- They charge higher commissions and can hide the fees from you.
- They can use the money for their benefit and don’t need to justify anything.
These benefits make selling away advantageous to brokers or financial advisors. They are trying to hide something to receive a bigger payout with unregistered securities.
FINRA requires the proper notifications under rule 3280. It states that due diligence, compensation, and oversight are necessary to prevent possible fraud. Many Ponzi schemes operate like this, where you will get in on a ground-floor opportunity but there is no oversight or disclosure.
How Can You Tell if Your Broker is Selling Away?
The best way to check for selling away is to look at your statement and trade confirmations. Every single investment you make requires that the information be sent to you in the mail. The confirmations notify you of the trade and the statement lets you see the current market value of these investments.
A classic case of selling away occurred recently with respect to the Horizon Private Equity Fund, III. The Horizon Fund was a private offering sold by an Oppenheimer & Co. registered financial advisor to customers of the firm. The financial advisor represented to clients that the Horizon Fund was sponsored by Oppenheimer when, in reality, it was a vessel through which the financial advisor enriched himself.
The Horizon Fund was not a legitimate investment opportunity. It was a $150 million Ponzi Scheme that impacted hundreds of investors, who were solicited by the Oppenheimer broker to invest with the promise of monthly dividend payments. In 2021, the Securities and Exchange Commission filed an enforcement action against the broker for securities fraud.
If your statement does not show this and you didn’t receive a confirmation, the investment is more than likely an unregistered security. The best approach is to contact the selling away violation lawyer at 800.931.8452. We look at what happened and let you know what is going on with this situation.
FAQs to Ask a Selling Away Violation Lawyer
Your broker comes to you with a new investment opportunity that is not registered. You have the chance of getting involved in something that will give you above-average returns. You never receive or see anything on the confirmations or your statement covering this investment. These are typically touted as ground-floor opportunities by your broker or financial advisor.
Your brokerage or financial advisory firms are responsible and must monitor these activities.
Contact us immediately at 800.931.8452 and set up a free consultation.
FINRA is responsible for disciplining the broker, advisor, and their firm. They could be suspended, fined, and ordered to pay compensation to you.
If you have any additional questions, please contact us now at 800.931.8452 and get your free consultation. We have a 99% success rate and are experienced selling away attorneys.
Contact a Selling Away Violation Lawyer at Wolper Law Firm Today
You may be entitled to compensation from the firm for failing to supervise the broker or financial advisor plus the losses and fees.
Selling away is illegal and you want to contact the selling away attorneys at the Wolper Law Firm now at 800.931.8452. The longer you wait, the more losses and damage that will occur.
”Matthew Wolper assisted me with a suit against a former investment company. The entire experience was great from the first call to the end, which was a complete success. Matt was attentive, helpful and responsive. I never had to hunt him down for anything. His explanations were transparent and concise. I highly recommend him.” – Maria McCouch (Google Review)