We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Industry News

Categories

  • Industry Articles (21,155)
  • Industry Conferences (2)
  • Industry Job Openings (35)
  • Moore on the Market (414)
  • Negative Media (144)
  • Positive Media (73)
  • Sheryl's Articles (800)
  • Wink's Articles (353)
  • Wink's Inside Story (274)
  • Wink's Press Releases (123)
  • Blog Archives

  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • September 2008
  • May 2008
  • February 2008
  • August 2006
  • Regulators cracking down on advisers' outside business deals

    May 15, 2010 by Dan Jamieson

    By Dan Jamieson

    May 14, 2010 3:33 pm ET

    The brokerage industry is facing a crackdown on the practice of selling away, as firms and regulators — still fearful of undetected frauds — dig deeper into the outside business activities of registered representatives.

    The increased scrutiny could spill over into the independent advisory firms run by many reps, according to some observers.

    Selling away involves brokers who engage in private-securities transactions and other business dealings away from the supervision of their broker-dealer firms. Brokers must have written pre-approval from their firms for such transactions.

    Many firms allow outside activities, including securities transactions, to accommodate brokers involved in other businesses, such as tax planning or advisory work.

    The number of private-securities cases has been growing, and the trend has continued into this year, according to a review of Financial Industry Regulatory Authority Inc. disciplinary actions.

    Through April, Finra had announced actions against 21 individuals. Over the first four months of 2008 and 2009, by comparison, Finra cited 17 and 15 individuals, respectively.

    For all of 2008, Finra took action against 45 individuals in such cases. Last year, that number rose to 56. Last fall, Finra fined The Bear Stearns Cos. Inc. $500,000 over the sale of private-hedge-fund offerings and hit up MetLife Securities Inc. for $1.2 million, in part for failure to oversee private-securities transactions.

    “We’re definitely see more [selling- away] cases,” said Jim Shorris, Finra’s executive director of enforcement.

    Brokers are tempted by the low-interest rate environment to look at outside offers such as promissory notes, he said.

    “People trying to live on that yield are particularly vulnerable” to the promise of a high return, Mr. Shorris said.

    Concerns about reps’ outside work, of course, have intensified in the wake of the Bernard Madoff fraud and the Stanford Financial Group case.

    “Finra is taking a much closer look at firms and their outside business activity,” said Amy Lynch, founder and president of FrontLine Compliance LLC. “We’re seeing it with our [broker-dealer] clients … because of everything that’s happened with various types of schemes.”

    As a result, “I think we’ll see an increase in these types of cases, the fines will continue, and individuals will continue to get barred,” Ms. Lynch said.

    “Regulators are actively sifting for Ponzi schemes,” said David Rosedahl, of counsel at Briggs & Morgan PA. “That [scrutiny] will generate more selling-away cases.”

    Some hard-hit brokers have also sold away in an attempt to make back money that they lost during the market crash, said Sam Edgerton, a partner at Edgerton & Weaver LLP.

    “Our caseload went up at least 100% last year from [defending] selling-away cases,” he said.

    In 2009, Mr. Edgerton had about five such cases. Now he is defending at least 10, which include several of his biggest.

    Selling away has always been a supervisory challenge for brokerage firms, observers said.

    “If you’re not really proactive about looking for it, you have no way of knowing about it,” Ms. Lynch said.

    Even honest brokers aren’t always diligent about informing firms about outside activities, and sometimes they don’t understand how non-financial business opportunities can still be considered securities, observers said.

    The independent model, with its remote offices and entrepreneurial representatives, is most at risk, Ms. Lynch said.

    Mr. Edgerton and others said that dually licensed advisers who run their own registered investment advisory firms on the side could come under particular attention from an increased focus on outside activities.

    “With an independent RIA, that’s where you see [selling-away problems] the most,” he said. “I see that time and time again.”

    Ms. Lynch said that her broker-dealer clients are looking more closely at their reps’ RIA businesses during audits.

    “When they go into a branch audit, they’re looking at the [adviser’s Form] ADV, looking at the trade blotters and the compliance manuals, and seeing what [a broker is] doing” on the advisory side, she said.

    If outside deals go awry, lawyers said, the investor victims always sue the brokerage firm, whether or not the firm knew anything about them.

    “One selling-away case can bring down your firm,” Mr. Edgerton said.

    That is why securities attorney Robert Bramnik, a partner at Duane Morris LLP, recently recommended that a broker-dealer client get indemnified by a futures firm for business a registered rep wanted to do at the futures merchant.

    “We are putting a much higher level of attention on selling-away situations,” he said, even when the outside business is clearly being done aboveboard and according to the rules.

    Another risk is that errors-and-omissions insurance coverage may not always pay for selling-away claims.

    “Basically, [E&O carriers] resist it,” Mr. Rosedahl said. “They might say that the selling away is not in the scope of your normal business,” and so it isn’t covered by the policy.

    In addition, Finra will always pursue brokers and firms for any selling-away violation that it finds, said Joel Beck, founder of The Beck Law Firm LLC.

    Selling-away problems “always result in formal disciplinary action,” he said.

    Originally Posted at Investment News on May 14, 2010 by Dan Jamieson.

    Categories: Industry Articles
    currency