Forrest Nolan Jackson, a former broker with Carpinteria, California based PlanMember Securities Corporation, submitted an Offer of Settlement in which he consented to the entry of the Financial Industry Regulatory Authority's findings that, acting outside the normal course and scope of his employment with PlanMember Securities, he participated in private securities transactions from which he received compensation without providing prior written notice to his firm of his proposed role or the selling compensation that he might receive from the transactions. FINRA found that Mr. Jackson never received PlanMember Securities' written approval to participate in private securities transactions. Mr. Jackson, of Austin, Texas, was barred from association with any FINRA member in any capacity.
Selling away is the inappropriate practice of an investment professional who sells or solicits securities or investments not held, approved, or authorized by the brokerage firm with which the professional is associated. Under NASD and FINRA rules, brokerage firms must approve investments offered by their investment professionals and supervise its sales.
FINRA found that through Mr. Jackson's firm, Your Platinum Distributors Insurance Marketing, Inc., Mr. Jackson and his associates participated in the sale of at least $60 million of securities in the form of Diversified Lending Group (DLG) notes, which were sold away from PlanMember Securities. Applied Equities, Inc. was a wholly owned subsidiary of DLG, which purportedly functioned as DLG's investment servicing division, contracted with agents and other entities, and offered and sold DLG notes in exchange for various sales commissions. Your Platinum generated at least $6 million in gross revenues from the sales, and Mr. Jackson received at least $400,000 of those gross commission revenues. FINRA also found that in connection with the marketing and distribution of notes, Mr. Jackson attended several meetings at the offerer's offices and attended sales training sessions that the offerer required for all individuals and other entities involved in the sale of notes. Moreover, FINRA said that Mr. Jackson participated in the sales of the notes by investing $76,000 of his own funds in the notes and referred family members to the offerer, who invested a total of $100,000 in the notes. Futhermore, FINRA said that even though Mr. Jackson prepared and provided his firm with an outside business disclosure form disclosing the entity, which stated the nature of its business as wholesaling fixed annuities, the form did not refer to the offerer, the notes, securities, or any investment products other than fixed annuities.
Broker-dealers must establish and implement a reasonable supervisory system to protect customers from broker misconduct. If broker-dealers do not establish and implement a reasonable supervisory system, they may be liable to investors for damages flowing from the misconduct. Therefore, investors who have suffered damages due to Mr. Jackson's selling away activities can bring forth claims to recover losses against PlanMember Securities.
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