The ban follows allegations of securities fraud, misusing customer funds and a breach of fiduciary duty.
The Financial Industry Regulatory Authority (FINRA) reports that it has expelled Phoenix-based Lawson Financial Corporation, Inc. (LFC), and has barred Robert Lawson, LFC’s CEO and president, from the securities industry on charges of committing securities fraud when Lawson “sold millions of dollars of municipal revenue bonds to LFC customers.”
The municipal revenue bonds Lawson sold were underwritten by LFC and “related to an Arizona charter school and two assisted living facilities in Alabama (which were the borrowers on the bonds),” FINRA says.
Lawson and LFC knew that “each borrower faced financial difficulties, and Lawson transferred millions of dollars to the borrowers and associated parties from a deceased customer’s trust account, in order to hide the borrowers’ financial condition and to hide the risks associated with the bonds,” according to FINRA.
The regulator also charges that, “when LFC customers purchased the bonds, LFC and Lawson hid the material fact that Lawson was improperly transferring millions of dollars from the trust account to various parties when the borrowers were not able to pay their operating expenses or required interest payments on the bonds.”
FINRA also avers that both Lawson and Pamela Lawson, his wife and LFC’s chief operating officer (COO), who were co-trustees of the trust account, “violated FINRA rules by breaching their fiduciary duties as trustees and engaging in self-dealing with the trust account. FINRA also determined that Robert Lawson misused customer funds.”
“Self-dealing,” as the name implies, is generally understood to occur when a trustee, an attorney, a financial advisor or some other individual with fiduciary responsibility acts in a way that would benefit her or him financially while knowingly harming a client’s interests.
In addition to the actions taken against LFC and Robert Lawson, FINRA “suspended Pamela Lawson from associating with any FINRA member firm for two years and fined her $30,000 to be paid prior to her return to the securities industry.”
The Lawsons “neither admitted nor denied the charges, but consented to the entry of FINRA’s findings,” thereby settling the May 2016 complaint.
In its previous coverage of the Lawsons, FTF News pointed out that Lawson Financial, which had been a FINRA member since 1984, had been fined on other occasions for other violations, which Lawson Financial also neither admitted nor denied.
In March 2012, for example, Lawson accepted a FINRA censure and agreed to pay a fine of $25,000. Then, in October 2012, Lawson again accepted a censure and agreed to pay a fine of $12,500. Of the two censures, it is the earlier one, in March 2012, that most resembles the accusations that led to the FINRA expulsion.
At that time, in March 2012, FINRA alleged that, in 21 transactions, Lawson Financial “purchased municipal securities for its own account from a customer and/or sold municipal securities for its own account to a customer at an aggregate price (including any mark-down or mark-up) that was not fair and reasonable.”
The transactions did not take into consideration all relevant factors, “including the best judgment of the broker, dealer or municipal securities dealer as to the fair market value of the securities at the time of the transaction and of any securities exchanged or traded in connection with the transaction,” the regulator says. The firm also allegedly ignored the expense involved in “effecting the transaction, the fact that the broker, dealer, or municipal securities dealer is entitled to a profit, and the total dollar amount of the transaction.”
The October censure and fine involved a period from March 2008 to August 2010, when Lawson, according to FINRA, “did not make timely amendments” to several U4 forms and a U5 form (a U4 is a uniform application for securities industry registration or transfer, and a U5 is a uniform termination notice for securities industry registration).
FINRA says the municipal revenue bonds specified in the 2016 complaint that led to the recent expulsion include a:
- “$10.5 million bond offering in October 2014 for bonds relating to an Arizona charter school as underwritten by LFC and sold to LFC customers, as well as subsequent sales of these bonds to LFC customers in the secondary market”;
- “secondary market bond sales to LFC customers in 2015 of earlier-issued municipal revenue bonds relating to the corporate predecessor of the same Arizona charter school”;
- And “secondary market sales to LFC customers between January 2013 and July 2015 of earlier-issued municipal revenue bonds concerning two different assisted living facilities in Alabama.”
FINRA further alleged in May 2016 that Robert Lawson and LFC were “aware of financial difficulties faced by the municipal revenue bond conduit borrowers (the charter school in Arizona and the two assisted living facilities in Alabama) and fraudulently hid from LFC customers who purchased the bonds the material facts that the charter school and the two assisted living facilities were under financial stress.”
As it did in May 2016, FTF News reached out to Lawson via email. Once again, there was no reply.
As it does customarily, FINRA points out investors can review information about, and the disciplinary record of, any FINRA-registered broker or firm by consulting FINRA’s BrokerCheck at http://www.finra.org/brokercheck or by calling (800) 289-9999.
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