FINRA requires employees of FINRA-member firms to disclose all outside business-related activities and all investments recommended to customers to the member firm. FINRA’s Department of Enforcement investigated Gladden and found he participated in an unapproved outside business activity. Specifically, FINRA alleged Gladden established Church Development Fund, a Washington state based limited liability company to make loans to churches for the acquisition, construction, improvement and/or refinancing of real estate. According to FINRA, the Fund represented to investors that it would pay a 6% per annum “Priority Return” on their “Unreturned Capital Contributions.”
From May 2011 through August 2011, FINRA alleged Gladden solicited three investors to collectively invest about $650,000 in Church Development Fund (“Fund”). Then from May 2011 through September 2013, Gladden solicited and raised more than $2.1 million from seven investors through sales of the Fund. It is unclear whether any of these investors ever received their initial investments back from the Fund.
In addition to participating in undisclosed business activities, Gladden also falsely represented to Securities Equity Group that he was not participating in any outside business activities. For example, in 2011, Gladden was asked on a Security Equity Group annual compliance questionnaire, “Are you currently acting as a principal officer, director, or trustee of any corporation, trust or other similar entity?” Gladden responded no. According to FINRA, Gladden also concealed his outside business activities on a 2012 Security Equity Group annual compliance questionnaire.
Based upon the foregoing misconduct, FINRA alleges Gladden violated NASD Conduct Rules 3040 as well as FINRA Rules 2010 and 3270. For example, NASD Rule 3040 states no FINRA registered person may be an employee or receive compensation for outside business transactions unless he or she has provided prior written notice to their employer. Outside business transactions and selling away are prohibited activities because they serve to undercut the supervisory system implemented by FINRA-member firms and FINRA itself to protect the investing public.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you suffered investment damages investing with Gladden while he worked for Securities Equity Group, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please contact one of our attorneys at (800) 627-2179 to schedule a free consultation.