FINRA Bars Nicholas Stovall for Engaging in Undisclosed Private Securities Transactions

Nicholas Stovall, a former General Securities Representative with CRD No. 5581487, violated FINRA Rules 3280 and 2010 by engaging in private securities transactions without providing prior written notice to his firm, Gradient Securities, LLC. According to FINRA, Stovall participated in the sale of approximately $1.4 million in promissory notes issued by entities later alleged to be part of a fraudulent scheme. FINRA permanently barred Stovall from associating with any FINRA member in any capacity.

Stovall began his career in the securities industry in 2009 with Gradient Securities, LLC. He held multiple registrations, including General Securities Representative, Financial and Operations Principal, and Operations Professional. On July 21, 2023, Gradient terminated Stovall after conducting an internal review concerning his involvement in the solicitation of unregistered promissory notes outside the firm. Although he is no longer registered, Stovall remains subject to FINRA’s jurisdiction under its By-Laws.

FINRA Rule 3280 requires registered representatives to notify their firms in writing before participating in private securities transactions, including details of the transaction and any compensation expected. This rule ensures that firms can supervise outside activities and protect customers. FINRA Rule 2010, a broader rule, requires all associated persons to observe high standards of commercial honor. For example, a representative must disclose to their firm any planned activity involving investments outside of their official employment. Similarly, promoting or selling unapproved securities products to clients without firm approval is strictly prohibited.

Between March 2018 and August 2021, Stovall participated in 11 promissory note transactions totaling $1,401,690. He personally invested $300,000 and solicited six customers to invest $1.1 million in notes issued by entities claiming to finance construction companies. He explained the investment terms, helped complete documents, and facilitated transfers of funds to the issuers.

However, he never disclosed this activity to Gradient Securities, nor did he seek the firm’s approval as required. In October 2022, the issuers defaulted, and regulators later accused them of fraud—though Stovall was not named in those proceedings. Nonetheless, his failure to report and gain approval for these private transactions constituted a serious breach of FINRA rules, leading to a full industry bar.

Lufrano Law, LLC is a national investment litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. Please contact us at (800) 627-2179 for more information if you have been the victim of investment negligence or fraud.

The content on this site reflects personal opinions and does not constitute statements of fact. No findings have been made against the firms or individuals mentioned. This blog is intended solely for educational purposes, drawing on publicly available information to provide general insights and a basic understanding of the law. It is not a substitute for legal advice.