Securities Lawyers Blog
The investment attorneys of Gana Weinstein LLP are investigating a regulatory complaint filed (Disciplinary Proceedings No. 2014038996201) by The Financial Industry Regulatory Authority’s (FINRA) against broker J. Randall Gladden (Gladden). FINRA alleged in the complaint that Gladden was associated with Securities Equity Group and participated in creating Church Development Fund, LLC (Church Development Fund) and a successor fund, Church Fund LLC (Church Fund) for the purposes of making loans to churches for refinancing their existing real estate loans. According to FINRA, Gladden participated in the management of the Church Development Fund and Church Fund and served as a governing member of the funds’ respective managers, CDF Managing Partners, LLC (CDF Managing Partners) and CF Manager, LLC (CF Manager).
According to the complaint, from May 2011 through September 2013, Gladden solicited seven investors to invest more than $2.1 million in the funds. The fund represented that it would pay investors a 6% per annum “Priority Return” on their investment. CDF Managing Partners was also to receive a monthly “Operator Fee” based upon a percentage of the outstanding principal amount of the loan portfolio of the Fund and a “Loan Fee” based upon a percentage of the original principal amount of each loan.
The conduct allegedly engaged in by Gladden is also referred to as “selling away” in the industry. 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.