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 Capuano and alleged he offered and sold approximately $1.1 million in Woodbridge Mortgage Investment Funds notes to nine of his Royal Alliance customers between December 2014 and March 2015. FINRA alleged all of the investors in the Woodbridge Mortgage Investment Funds notes were his close friends and family. According to FINRA, Capuano did not disclose these transactions to St. Bernard and did not receive prior approval.
Based upon the foregoing misconduct, FINRA alleges Capuano 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, Capuano did not disclose his participation in the sale of Woodbridge Mortgage Investment Funds notes 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 Capuano while he worked for Royal Alliance, 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.