The Financial Industry Regulatory Authority (“FINRA”) entered into a Letter of Acceptance, Waiver and Consent (“AWC”) with First Allied Securities, Inc. (CRD #32444, San Diego, California) on August 21, 2017 arising from the firm’s practices with respect to mutual fund sales charges. FINRA censured First Allied and required the firm to provide FINRA with a remediation plan for eligible customers for mutual fund sales-charge waivers. First Allied also agreed in the AWC to pay restitution to eligible customers, which is estimated to total approximately $876,915 (the amount eligible customers were allegedly overcharged, with interest).

FINRA alleged that First Allied disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge. FINRA alleged that these eligible customers were instead steered toward Class B or C fund shares, or Class A shares with a front-end sales charge, resulting in the customers’ paying higher charges than necessary to purchase the shares.

FINRA also alleged that First Allied failed to apply available fee waivers to mutual fund purchases made by eligible customers. Finally, FINRA alleged that First Allied failed to establish and maintain a supervisory system sufficient to accurately determine the applicability of sales-charge waivers.

FINRA estimates that First Allied caused eligible customers to be overcharged by approximately $769,054 for mutual fund purchases as a result of the foregoing issues.

Brokerage firms are required to adequately supervise their personnel to ensure they are complying with FINRA rules while they are registered with the firm. If they fail to do so, the firms can be held responsible for the activities of their representatives and, thus, could be ordered to compensate their clients for losses sustained for the period they were registered with the firm.

Depending on their individual circumstances, investors who believe that they may have been charged excessive fees by a stockbroker or financial advisor may be able to recover losses through FINRA arbitration. Investors may contact the attorneys at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

On November 1, 2017, the Financial Industry Regulatory Authority (“FINRA”) disclosed that registered representative Masood “Mike” Husain Azad (“Mike Azad”) has been barred from the securities industry following a FINRA enforcement proceeding. Specifically, without admitting or denying FINRA’s findings, “[A]zad consented to the sanction and to the entry of findings that he failed to provide FINRA requested documents and information in connection with its investigation into allegations of misconduct by Azad while associated with his member firm… the allegations included that Azad participated in an unapproved private securities transaction by soliciting investments and/or directly investing in an electronic data security company and engaged in outside business activities involving the company….”

Publicly available information through FINRA indicates that Mike Azad (CRD# 4798445) worked in the securities industry from August 2004 – June 2017. During this time frame, Mike Azad was affiliated with the following brokerage firms: Voya Financial Advisors, Inc. (CRD# 2882) (2004-2015) and, most recently, First Allied Securities, Inc. (“First Allied”) (CRD# 32444) (2015-2017). According to FINRA BrokerCheck, Mr. Azad was discharged from his employment with First Allied on May 19, 2017, concerning allegations of violating firm policy “[r]elating to borrowing money from clients, engaging in an unapproved private securities transaction and outside business activity.”

Brokerage firms like First Allied have a duty to ensure that their registered representatives are adequately supervised. In this regard, brokerage firms must take reasonable steps to ensure that their financial advisors follow all applicable securities rules and regulations, in addition to internal policies and procedures. In those instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

“Selling away” occurs when a broker or financial advisor sells an investment to a client that is not included in the client’s account or among the investment products offered by the firm. Selling away is often associated with a broker’s other (“outside”) business activities. Such private securities often include investments in private placements, closely-held private companies, limited partnerships, certain real estate investments, as well as promissory notes.

In the event that a financial advisor wishes to consummate a private securities transaction, then he or she must first provide the firm with prior written notice, detailing the contemplated transaction. Such a transaction must first be approved by the firm. In the event that the transaction is not approved by the firm, then the broker cannot participate in the transaction. If the broker fails to notify the firm, in the first instance, or proceeds with an unauthorized transaction in derogation of the firm’s order, then selling away has occurred, in direct violation of FINRA Rule 3280.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in disputes involving broker misconduct, including selling away, in addition to claims against brokerage firms for their failure to supervise. Investors may be able to recover their losses in FINRA arbitration. Investors who wish to discuss a possible claim may contact a securities arbitration attorney via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

According to the allegations, Luxtera was represented as a late stage equity, which means that it was due for an initial public offering (IPO) within 12-36 months. Additionally, the complaints report that First Allied indicated expected revenues in excess of $300 million, when in reality the company had not achieved sales above $1 million.

This is not the first time stockbroker arbitration lawyers have received complaints regarding First Allied and private equity investments. If you suffered significant losses as a result of doing business with Rami Yahalom or First Allied, or received an unsuitable recommendation of advanced private equities from another stockbroker or financial advisor, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at the Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.