In August 2016, FINRA brought a regulatory action and barred Fox from the industry. (FINRA No. 2016050482101). FINRA alleged that Fox consented to the sanctions and findings that he failed to respond to FINRA’s requests for documents and information related to an investigation into allegations that he had borrowed and misappropriated funds from a firm customer. This was not the first time FINRA accused Fox of borrowing customer funds. In May 2012, FINRA brought a separate action against Fox alleging that Fox borrowed $10,000 from a client and suspended him for 10 days. The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.
At this time it is unclear the nature and scope of Fox private securities transactions. However, according to brokercheck records, Fox has disclosed OBAs listed as including Fox Wealth Management Group, LLC. Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, real estate brokers, or insurance agents to clients of those side practices.
Fox entered the securities industry in 1982. From April 2007 until January 2013, Fox was associated with Morgan Stanley. Thereafter, from April 2013 until August 2016 Fox was registered with FSC.
In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. However, even though when these incidents occur the brokerage firm claims ignorance of their advisor’s activities the firm is obligated under the FINRA rules to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away misconduct often occurs where brokerage firms either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.
In cases of selling away the investor is unaware that the advisor’s investments are improper. In many of these cases the investor will not learn that the broker’s activities were wrongful until after the investment scheme is publicized, the broker is fired or charged by law enforcement, or stops returning client calls altogether.
Investors who have suffered losses may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors in cases of selling away and brokerage firms failure to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.