FINRA requires employees of FINRA-member firms to disclose all outside business-related activities, private transactions and all investments recommended to any customers to the member firm. The unlawful business practice of recommending investments outside of a financial advisor’s firm is often referred to as “selling away.” 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.
FINRA’s Department of Enforcement investigated Barranco and alleged he participated in almost 40 private securities transactions with three different issuers. In total, between November 2010 and February 2011, Barranco participated in 35 transactions through which 27 individuals, most of whom were LPL customers, invested at least $2,087,000 in the TMG notes. According to FINRA, some of the investors held the TMG notes in their LPL accounts. Nonetheless, FINRA states Barranco did not disclose these transactions to LPL and did not receive prior approval.
Based upon the foregoing misconduct, FINRA alleges Barranco violated NASD Conduct Rule 3040 and FINRA Rule 2010. 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. Here, Barranco did not disclose his participation in the sale of TMG investments to investors, and therefore, violated FINRA rules.
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 Barranco while he worked for LPL, 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 or complete our free case evaluator.