Grygo is the chief content officer for FTF and FTF News.
It’s the start of a new year and many investors will be reviewing their financial portfolios. Some of them may soon be reaching for antacids or for lower-shelf martinis.
Given the volatility of global financial markets, investors at all levels will have to be forgiven if they’re a little vulnerable to the power of suggestion especially if they are told that they could get in on the ground floor of the next big thing.
If investors are tempted, then they should just let it be a daydream and walk away. And, as the Wolper Law Firm, based in Plantation, Fla., part of the Ft. Lauderdale section of the Sunshine State, reminds us to be on our guard as there are individuals at firms that may be engaging in prohibited “selling away” practices.
“Selling away has been a problem in the securities industry for many years. Unscrupulous financial advisors will seek to sell clients products or securities that are neither offered nor approved by their brokerage firm,” according to a recent warning notice from Wolper. “This constitutes a violation of the rules set forth by the Financial Industry Regulatory Authority (FINRA). It also violates the internal compliance policies and procedures of FINRA member brokerage firms.”
The law firm notes that “brokerages have a predefined list of products or investments that they can sell to clients. These products are vetted and examined by high-ranking officials at the brokerage firm to ensure that they are suitable. The purpose of this vetting process is to ensure that investors are protected from being sold fraudulent or high-risk securities.”
But, as we have seen over the years, human beings working too closely to the flow of other people’s money can be tempted to cross several lines and many Rubicons.
“When selling away occurs, more often than not, it involves investment into a business opportunity in which the financial advisor has a personal interest. Brokerage firms are required to monitor their employees’ outside business activities to ensure that this does not occur. Unfortunately, selling away is occurring more often in the industry and many financial advisors each year are suspended or barred from the industry for this unlawful practice,” the law firm points out.
Some of the trademark signs of selling away are “when the investment opportunity does not appear on the brokerage firm account statements, the client does not receive any documentation from the brokerage firm about the outside investment opportunity, and the money invested is transferred to/from accounts outside of the brokerage firm,” according to the warning from Wolper.
“Selling away is a prohibited practice in the securities industry. Brokers are not permitted to sell products or investments that are neither offered nor approved by their employing brokerage firm,” says Matthew Wolper, lead attorney for the firm, in a prepared statement.
Matthew Wolper
In his online bio, Matthew Wolper reports that he has previously served as a partner for a national law firm, “representing the largest Wall Street banks and brokerage firms in large dollar securities matters. This experience provided him with a deep understanding of the securities industry and how brokerage firms evaluate cases.”
He also reports that he “has handled and tried cases involving complex financial products and strategies ranging from traditional stocks and bonds to options, margin and other securities-based lending products, closed/open-end mutual funds, structured products, hedge funds, and penny stocks.”
We hope that investors of all stripes can avoid complex trials caused by “selling away” schemes. We also hope that investors can sidestep despair amid volatile markets leading to big disappointments because that’s when they are most susceptible to scams.
Just remember that if an out-of-the-blue investment opportunity sounds too good to be true, then it probably is.
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