FINRA’s Department of Enforcement investigated Melzer and alleged he solicited four customers to invest $2,000,000 in an outside investment contract that was not approved by Wells Fargo. FINRA alleges Melzer received at least $27,000 plus a 2.5% member interest in the investment contracts. During the relevant time period, Wells Fargo’s policies and procedures prohibited firm employees from engaging in outside business activities without prior written notice and approval. According to FINRA, Melzer never disclosed these outside business services to Wells Fargo.
To make matters worse, Wells Fargo became aware in May 2011 that Melzer had requested that the registered representative code on certain accounts be altered. According to FINRA, by changing the code in 2011, Melzer caused commissions that should have been paid to one of Melzer’s partners to be attributed to Melzer. As a result, FINRA alleges between 2011 and 2012, Melzer caused Wells Fargo to pay him more than $9,500 in commissions that should have been paid to his partners.
Based upon the foregoing misconduct, FINRA alleges Melzer violated NASD Conduct Rule 3040 and FINRA Rule 2010. Specifically, 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 lost money investing with Melzer while Wells Fargo or Park Avenue Securities employed him as a general securities representative, 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.