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 Matthews and found he participated in several private securities transactions. Specifically, FINRA alleged Matthews solicited investors to purchase $1.8 million in convertible promissory notes away from Global Arena Capital through a separate entity called Global Arena Holding.
To make matters worse, Matthews’ sale of the convertible promissory notes violated several federal securities laws. First, the promissory notes were not registered with the Securities and Exchange Commission. Second, a handful of the investors were not qualified purchasers, as defined in Section 2(a)(51)(A) of the Investment Company Act, and the sales to those investors were not otherwise exempt from the requirements of FINRA Rule 5122. Finally, Matthews did not disclose to investors the intended use of proceeds, the offering expenses, and the selling compensation he would receive, as required by FINRA Rule 5122.
Based upon the foregoing misconduct, FINRA alleges Matthews violated NASD Conduct Rule 3040, as well as FINRA Rules 2010 and 5122. 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 Matthews while he worked for Global Arena Capital, 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.