Securities Lawyers Blog
The Financial Industry Regulatory Authority (FINRA) sanctioned broker Marylin T. Meyers (Myers) $20,000 and barred her for two years concerning allegations between September 2009, and February 2011, she participated in a series of private securities transactions totaling approximately $1,000,000 without notifying her firm, Allstate Financial Services, LLC (Allstate) or obtaining the firm’s written approval. FINRA alleged that Meyers recommended that five investors invest in On The Edge and she helped facilitate their purchases of On the Edge Notes. On The Edge is a California based company formed to be a supplier of consumer goods such as tents, folding chairs, wagons, and promotional items related to retailers. To date, On The Edge has failed to repay the principal and interest due to the investors.
Meyers first became registered with FINRA in 1986 with Merrill Lynch, Pierce, Fenncr & Smith Incorporated. In 2001, Meyers became associated with Metlife Securities Inc. Thereafter, in July 2004, Meyers joined Allstate until her termination on May 17, 2012.
The allegations against Meyers are typical of a “selling away” violation. A broker sells away from their brokerage firm when they solicit securities that were not approved by the broker’s affiliated firm or recorded on the firm’s books and records. NASD Rule 3040 requires an associated person to provide written notice to the firm prior to participating in any private securities transaction. An associated person is prohibited from participating in any manner in the private securities transaction without the Firm’s approval. Under FINRA Rule 3010, brokerage firms are required to supervise their brokers and implement supervisory procedures reasonably designed to detect and prevent violations of NASD Rule 3040.
The most common securities sold away from brokerage firms are private placements and promissory notes. Investor are rarely aware that the broker is acting outside of normal securities channels. According to FINRA, Meyers introduced customers to On the Edge by describing her own investment in the notes and advising them that the company had significant potential. Meyers also reviewed On The Edge sales literature and provided a copy of the sales materials to some clients. FINRA also found that Meyers prepared documents reflecting the terms of the notes and helped to effect the investors’ transactions by preparing wire transfer forms that On The Edge provided.
In the typical selling away case, the brokerage firm denies any knowledge of the transactions as a means of escaping liability for their agent’s acts. However, in many of these cases the brokerage firm’s only supervision over the broker’s outside business activities consists a few documents completed by the broker without independent verification. In addition, in many cases supervision consists of only per-announced visits to the broker’s office that allow the broker to clean up any signs of wrongdoing before inspection.
The attorneys at Gana Weinstein LLP are experienced in representing investors concerning claims involving selling away of promissory notes and brokerage firm failures to supervise their advisors. Our consultations are free of charge and the firm is only compensated if you recover.