Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Patrick Hudson (Hudson), in June 2015, was terminated by his then employer RBC Capital Markets (RBC). RBC stated that Hudson was terminated due to undisclosed outside business activities and the sale of unapproved products.
Thereafter, in August 2017, FINRA brought action against Hudson finding that Hudson participated in private securities transactions in the form of promissory notes, without providing written notice or seeking written from RBC. FINRA found that Hudson’s outside real estate business entered into a series of promissory notes away from the firm totaling $490,000. In addition, Hudson participated in multiple outside businesses without providing prior written notice to the firm. FINRA determined that on at least 21 occasions Hudson sent letters on firm letterhead to various third-parties for the purpose of verifying the assets of firm customers but that Hudson failed to submit these letters to the firm’s operations support department for supervisory review.
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.
Hudson entered the securities industry in 1990. From 2002 until July 2015 Hudson was associated with RBC out of the firm’s Baltimore, Maryland office location.
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.