FINRA requires employees of FINRA-member firms to disclose all outside business-related activities and all investments recommended to any customers to the member firm. FINRA’s Department of Enforcement investigated Merritt and alleged recommended that three of his customers invested a total of $115,000 in a company called SavvyPhone. According to FINRA, one of the customers was 91 years old.
The unlawful business practice of recommending investments outside of a financial advisor’s firm is often referred to as “selling away.” FINRA alleged Merritt the investments to at least three of his clients, without disclosing the aforementioned investments to Wells Fargo.
Based upon the foregoing misconduct, FINRA alleges Merritt 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. 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 Merritt while he worked for Wells Fargo, 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.