John Sean Kennedy, a former broker at Staten Island, New York based Chelsea Financial Services, submitted a Letter of Acceptance, Waiver and Consent (AWC) in which he consented to, but did not admit to or deny, the entry of the Financial Industry Regulatory Authority's (FINRA) findings that he participated in a private securities transaction without his firm's approval. Mr. Kennedy informed the customer of an opportunity to invest in a promissory note issued by a publicly-traded company and facilitated the customer's signing of a $100,000 promissory note by withdrawing $100,000 from the customer's IRA, without informing his firm of his participation in the transaction. These actions were contrary to his firm's written supervisory procedures (WSPs), which prohibited its associates from participating in private securities transactions without the firm's prior written approval. FINRA's findings stated that Mr. Kennedy, without his firm's knowledge or consent, served as president, officer, and registered agent of a corporation contrary to his firm's prohibition from participating in an outside business activity without prior firm approval. The findings also stated that Mr. Kennedy failed to file federal and state tax returns for four years which, represents unethical conduct and is inconsistent with just and equitable principles of trade. Mr. Kennedy, of Encino, California, was fined $15,000 and suspended from association with any FINRA member in any capacity for eight months. The fine must be paid either immediately upon Mr. Kennedy's re-association with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. The suspension is in effect from June 3, 2013 through February 2, 2014.
Broker-dealers must establish and implement a reasonable supervisory system to protect customers from stockbroker 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 unauthorized outside investment recommendations by their broker can bring forth claims to recover investment losses against broker-dealers like Chelsea Financial Services, which should monitor their brokers' activities in order to prevent the above described illegal conduct.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.