FINRA requires employees of FINRA-member firms to disclose all outside business-related activities and all investments recommended to customers to the member firm. The unlawful business practice of recommending investments outside of a financial advisor’s firm is referred to as “selling away.” FINRA’s Department of Enforcement investigated Morgan and found he referred approximately 20 people, including six Uhlmann Price customers, to an investment in promissory notes in a private trading and financial services company. In total, the aforementioned customers purchased approximately $1.8 million of the trading company’s promissory notes. According to FINRA, Morgan did not disclose these private transactions to Uhlmann Price and its supervisors.
In addition to soliciting his customers to invest in the private trading and financial services company, Morgan also allegedly made material misrepresentations and omissions to the customers. Specifically, Morgan forwarded a document created by the company to potential investors, that contained multiple misrepresentations, including (1) falsely stating that the company had completed four deals; (2) overstating its revenue; and (3) inaccurately projecting a high return with low risk.
Finally, FINRA’s Department of Enforcement initiated an investigation into Morgan’s alleged misconduct. In connection with this investigation, FINRA sent Morgan a request to provide documents and information pursuant to FINRA Rule 8210. According to FINRA, Morgan acknowledged receipt of FINRA’s Rule 8210 requests; yet he failed to cooperate with FINRA’s investigation.
Based upon the foregoing misconduct, FINRA alleged Morgan violated numerous FINRA rules and regulations, including but not limited to NASD Conduct Rule 3040, as well as FINRA Rules 2010, 3270 and 8210. 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 Morgan in the aforementioned promissory notes, 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.