Securities Lawyers Blog
Our firm is investigating claims made by Arkansas Securities Commissioner against brokers Raymond Adcock (Adcock) and Charles Bailey Ferrill, Jr. (Ferrill) concerning their raising of funds for a business plan to operate a hedge fund through two companies – Talon LLC created in February 2011 and Talon LP created in February 2012 (Talon Entities). (See In re Raymond Dickie Adcock, Case No. S-14-0008). Both brokers were registered with The Financial Industry Regulatory Authority (FINRA) at the time.
Both Ferrill and Adcock were most recently registered with broker-dealer Regal Securities, Inc. (Regal), an Arkansas registered broker-dealer firm based in Glenview, Illinois. According to the State of Arkansas, while employed by Regal, Ferrill worked in the Regal office supervised by Adcock.
According to the consent order, Talon LLC served as the general partner and investment manager of Talon LP and no individuals other than Adcock and Ferrill had control over the Talon Entities at any point in time. Further, Ferrill managed the Talon Entities out of Regal’s branch location and used the same telephone and facsimile numbers as the Regal branch office to conduct Talon business. However, the Talon entities never registered with the State of Arkansas.
The order found that The Talon Entities sold unregistered securities in two separate offerings to eight Arkansas investors and six Mississippi investors to individuals who were either clients of Regal or persons with whom the brokers maintained personal relationships. The two offerings raised a combined total of $540,000.00 in investor funds.
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”.
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.
The investment fraud attorneys at Gana Weinstein LLP have represented hundreds of investors in securities related disputes including 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.