Securities Lawyers Blog
The Financial Industry Regulatory Authority (FINRA) filed a complaint against broker Daniel McCourt (McCourt) concerning allegations McCourt participated in private securities transactions, also known as “selling away”, without providing prior written notice to his member firm. In addition, FINRA alleged that McCourt provided false information and falsified documents to a mortgage company for a client to help the client qualify for a home loan.
McCourt first entered the securities industry in 1984. In 1985 McCourt associated with FINRA firm Foothill Securities, Inc. (Foothill). McCourt remained registered with Foothill until he was permitted to resign on or about June 7, 2013, due to “possible violations of firm policies and procedures.”
FINRA alleged that at various times from May 2005 through May 2009, McCourt participated in private securities transactions without providing Foothill prior written notice of the transactions. FINRA alleged that in or around 1990, McCourt notified Foothill that he wanted to begin an outside business activity in a coffee business. According to McCourt’s brokercheck the coffee business is called Surf City Coffee Co., Inc. (Surf City). Foothill approved McCourt’s involvement with Surf City.
However, FINRA alleged that beginning around 2005 through 2009, McCourt’s Surf City business began accepting investments from investors in the form of long-term promissory notes. The promissory notes all had maturity dates in excess of nine months. FINRA found that McCourt, through the issuance of the promissory notes, raised at least $1,294,610.10 and that of that amount $1,102,032.18 was raised from eleven Foothill customers. FINRA also found that McCourt had repaid approximately $266,134.49 in principal to all note holders.
In addition, FINRA found that a customer’s of McCourt’s at Foothill in April 2009 invested approximately $63,500.00 in McCourt’s Surf City business through a long-term promissory note. Thereafter, in or around May 2009, FINRA alleged that the customer began looking to purchase a residence and at the time the customer was retired and did not earn any income through employment. According to FINRA the customer asked McCourt if he would provide information to a mortgage loan company indicating that the customer was employed by McCourt, even though she was retired. FINRA alleged that McCourt agreed to MLW’s request and in November 2010, McCourt filled out and signed a ”Request for Verification of Employment” form to the mortgage loan company stating that the customer had been employed by him at Foothill since October 2007 and made at least $35,000 a year.
The allegations against McCourt are consistent with a “selling away” securities violation. Selling away occurs when a financial advisor solicits investments in companies or promissory notes that were not approved by the broker’s affiliated firm. Under the FINRA rules, a brokerage firm owes a duty to properly monitor and supervise its employees. Selling away often occurs in environments where the brokerage firms either fails to put in place a reasonable supervisory system or fails to actually implement that system and meet supervisory requirements.
Investors who have suffered losses through McCourt’s outside business activities may be able recover their losses through arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors in cases of selling away, Ponzi schemes, and brokerage firms failure to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.