Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor James Knee (Knee), formerly associated with Voya Financial Advisors, Inc. (Voya) and Ameriprise Financial Services, Inc. (Ameriprise) in Concord, New Hampshire was terminated for cause by Voya concerning allegations that Knee failed to cooperate in an internal investigation relating to potential receipt by the representative of a cash gift from a customer. Thereafter, in May 2018, FINRA barred him from the financial industry after Knee consented to the sanction due to his refusal to appear for testimony requested by FINRA in connection with their investigation into allegations that he misappropriated customer funds.
At the same time a Merrimack County grand jury returned 11 indictments against Knee relating to conduct between 2014 and 2017. Knee was charged with theft by misapplication, theft by deception, financial exploitation of the elderly, and investment adviser fraud. He allegedly stole over $490,397 for personal expenses. In addition, Knee was also indicted on perjury charges in connection with statements he made to the Bureau of Securities Regulation while it was investigating him in 2016 and witness-tampering.
Knee disclosed a number of outside business activities including Sterling Financial Services, LLC which appears to be his d/b/a through which Knee operated. In addition, Knee also disclosed involvement with Opulencia Dressage, certain real estate rental properties, and an insurance agency.
The allegations concerning conversion are often accompanied by claims of engaging in outside business activities and private securities transactions – a practice known in the industry as “selling away” – a serious violation of the securities laws.
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. When advisors convert or misappropriate funds they often created businesses or other vehicles to serve as a cover for the theft of funds. Firm attempt to disclaim liability for the theft of funds by their brokers by claiming ignorance of their advisor’s activities. However, federal securities laws and the FINRA rules require firms to 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.
Knee entered the securities industry in 1988. From August 2012 until November 2015 Knee was associated with Ameriprise. From November 2015 until August 2016, Knee was associated with Voya out of the firm’s Concord, New Hampshire office location.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. Investors 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.