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 Nixon and found he participated in several private securities transactions. Specifically, FINRA alleged that between May 2, 2013 and August 23, 2013, Nixon sold $600,000 of BRT promissory notes to three accredited investors in five transactions. In total, Nixon allegedly solicited approximately 40 investors to invest in the promissory notes. According to FINRA, Nixon did not disclose the engagement letter to Bridge Capital or provide Bridge Capital with detailed written notice of his BRT transactions until after his sales were completed.
To make matters worse, Nixon’s sale of the convertible promissory notes violated several FINRA rules regarding communications with the public. For example, the investor presentations were devoid of any cautionary language specific to BRT or the promissory notes. Additionally, according to FINRA, many versions of the investor presentation, contained a legend on each slide that read: “investors should not rely in whole or in part on this presentation” and that “an offering can only be made with delivery of a private placement memorandum,” even though Nixon did not present any of the investors with a private placement memorandum.
Based upon the foregoing misconduct, FINRA alleges Nixon violated NASD Conduct Rule 3040, as well as FINRA Rules 2010, 2210(d)(1) and 2210(d)(3). 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 in convertible promissory notes with Nixon, 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.