FINRA’s Department of Enforcement investigated Harkness’ alleged misconduct and found he improperly borrowed funds from a customer, engaged in outside business activities, and submitted false compliance questionnaires. First, according to FINRA, Harkness purchased a parcel of farmland from one of his UBS customers, and in connection with, executed a promissory note for $242,250 in favor of the customer. In addition, Harkness allegedly borrowed an additional $40,000 from the customer in order to build a riding area on the farmland.
FINRA also alleged Harkness engaged in two outside businesses. First, in connection with the farm and farmland discussed above, Harkness was actively involved in the management of the farm with his customer. According to FINRA, Harkness did not disclose his activities with regard to the farm to UBS or Stifel. Further, FINRA alleged Harkness was also named the President of a Minnesota limited liability company in 2014 that sells promotional products such as buttons, ribbons, key tags and other items. Harkness also failed to disclose this outside business activity to Stifel.
Finally, while Stifel employed Harkness as a general securities representative, Harkness submitted five annual compliance questionnaires. Specifically, Harkness was asked on these annual compliance questionnaires whether he had borrowed funds from a customer and whether he was engaged in any outside business activities. Harkness allegedly responded “no” to these questions on all of the annual compliance questionnaires, even though Harkness did in fact borrow funds from a customer and was engaged in at least two business activities.
Based upon the foregoing misconduct, FINRA alleged Harkness violated several FINRA rules and regulations, including NASD Rules 2370 and 3030, as well as FINRA Rules 2010, 3240, and 3270. For example, NASD Rule 3030 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 with Harkness through Stifel or UBS, 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.